NextDC loses 42% in a day as power pole dispute exposes community risk to data centre funding

NextDC shares closed down 41.7 per cent on Wednesday, erasing about A$3 billion of market value in the operator's worst trading day since it listed. The company told investors that electricity network delays at M3, its West Footscray site in Melbourne, would push back about A$140 million of contracted customer revenue this financial year. It also shelved all new development projects and land acquisitions for the foreseeable future.

Net revenue guidance for FY27 fell to between $475 million and $500 million, from $615 million to $640 million. Underlying EBITDA guidance dropped to between $245 million and $265 million, from $385 million to $410 million. The revised figures exclude revenue and attributable EBITDA from the affected M3 contracts, and NextDC has not quantified potential service-level credits, which could push underlying EBITDA below the new range. Capital expenditure guidance was lowered to between A$4.5 billion and A$5 billion, from A$5.25 billion to A$5.75 billion, and the board has begun a detailed spending review. The board plans to announce the outcome by its 20 November annual general meeting.

The cause is Jemena's suspension of parts of the work needed to lift M3's grid supply, citing safety concerns, community opposition and pending local council consent. Residents of Yarraville had blocked equipment with cars and bins in September, and the crews filled their holes and left. Jemena does not expect to restart before February 2027, and NextDC now expects the next supply increase during fiscal 2028. A planning decision on the final stages of the campus is expected in 2027, and approvals are also delayed by the Victorian election on 28 November.

The delay reaches beyond earnings. NextDC acknowledged that delayed customer billing could affect its ability to draw on $6.7 billion in available debt facilities, and warned property valuations could also be affected, with the impact unknown. Citi flagged customer termination rights and the potential effect of service credits on a debt covenant as added uncertainty. Macquarie analysts said later grid supply delays M3's final capacity stages by several years.

RBC Capital Markets analyst Tom Beadle said that while the delays were out of the company's control, they were evidence that community concerns present a real risk to the timing of contracted capacity. Citi kept its buy rating and $21.15 target, and RBC kept outperform with a $22 target. Shares rebounded about 7 per cent to $5.70 on Thursday.

The sell-off came less than two weeks after Firmus Technologies withdrew its ASX listing, which would have valued it at about $44 billion. The ABC reported that large investors refused to pay $11 a share, and also cited community opposition among other factors. Luke Laretive of Seneca Financial Solutions said the NEXTDC case likely does not say much about AI demand, but urged caution on how much future growth is priced into valuations. University of Sydney analyst Olivia Shen said not every data centre investor was likely to make their money back, though she did not read the Firmus setback as the end of the boom.