NextDC Cuts FY27 Guidance on M3 Melbourne Power Delay

A row over power poles in Melbourne’s inner west has wiped billions of dollars off one of Australia’s biggest data centre operators. NextDC told the Australian Securities Exchange on Wednesday that it was cutting its revenue and earnings forecasts for the year to June 2027 because the electricity distributor Jemena has suspended part of the grid work that its M3 Melbourne campus needs to grow.

Investors reacted sharply. NextDC’s shares closed down 41.7%, erasing about A$3 billion of market value in the company’s worst day since it listed in 2010, Reuters reported. CNBC had the stock down 39.5% earlier in the session.

NextDC has taken M3’s contracts out of its forecasts

The numbers come from NextDC’s ASX release. Net revenue for FY27 is now expected at A$475 million to A$500 million, down from A$615 million to A$640 million. Underlying EBITDA guidance falls to A$245 million to A$265 million, from A$385 million to A$410 million. Both figures now exclude the affected customer contracts at M3, which the August guidance had counted at about A$140 million each of revenue and EBITDA. The contracts remain in place, subject to the customer’s rights, but NextDC says it cannot yet estimate what they will contribute this year, and late-delivery credits could push EBITDA below the new range.

Capital spending guidance drops to A$4.5 billion to A$5.0 billion, from A$5.25 billion to A$5.75 billion. NextDC has put all new development projects and land acquisitions on hold “for the foreseeable future”, will consider selling development sites it does not need soon, and plans to report on a full review of its spending by its annual meeting on 20 November. It had A$8.675 billion of liquidity at 30 September and says it complies with its debt covenants.

“We have taken the affected M3 contracts out of FY27 guidance until we can reliably estimate their contribution,” said chief executive Craig Scroggie. “With M3 revenue deferred, we have paused projects not backed by customer contracts and put that capital behind the capacity our customers have already contracted.”

The bottleneck is a 66kV line, not the building

Construction of the data halls at M3, in West Footscray, is continuing. What has stopped is Jemena’s upgrade of the 66kV line that supplies the site. “Jemena has suspended parts of the network works required for the next increase in grid supply to M3 Melbourne,” Scroggie said. “Jemena has attributed the suspension to community and stakeholder opposition to the works and to the absence of local council consent pending further consultation.”

According to NextDC, Jemena halted parts of the work in September, citing safety concerns and lack of access to work sites, and has told the company it does not expect to restart before February 2027. The next increase in grid supply is now expected during the 2028 financial year, which begins in July 2027. A planning decision on the campus’s expansion has also slipped into 2027, because Victoria goes to the polls on 28 November.

The ABC reports that the site sits about 15 metres from homes and has long drawn complaints over diesel and noise, and that residents in nearby Yarraville blocked crews installing 15-metre power poles in September. Simon Cooper, NextDC’s chief development officer, told investors the company was looking at other routes, including burying cables. “Undergrounding does take time and there’s not an immediate option that we can work on now,” he said.

Analysts see a wider lesson. Delays at M3 are “evidence that community concerns around data centre developments present a real risk to the timing of delivery of contracted capacity for data centre owners,” RBC Capital Markets analyst Tom Beadle told Reuters. Macquarie said the later grid supply “delays M3’s final capacity stages by several years”, and Citi warned that the hit could extend beyond FY27, CNBC reported.

Grid connections are a hurdle for other large Australian proposals too, including IREN’s planned 900MW Redbank campus in New South Wales, and the market had already turned cautious after Firmus pulled its ASX listing this month. For NextDC, the next test is likely to come on 20 November, when it reports on the spending review and on whether its customer at M3 is willing to wait.