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Equinix inks $1bn GIC joint venture in hyperscale drive

Charles Meyers - CEO Equinix.jpg

Equinix has signed a joint venture deal initially worth over $1 billion with sovereign wealth fund GIC to develop and operate hyperscale data centres in Europe.

The JV with Singapore’s GIC was signed on Thursday last week and has been arranged in the form of a limited liability partnership. It will see the global interconnection and data centre provider develop and operate xScale facilities in Europe to help meet the unique needs of hyperscale companies.

Under the terms of the agreement, GIC will own an 80% equity interest in the joint venture and Equinix will own the remaining 20% equity interest. The joint venture is expected to close in Q3 2019, pending regulatory approval and other closing conditions.

"It has been a long journey to reach this point, but we are tremendously excited to announce the formation of our first xScale data centres joint venture. Partnering with a world-class investment partner like GIC will provide the opportunity to make significant capital investments in order to capture targeted large-footprint deployments while continuing to optimise our capital structure,” said Charles Meyers, president and CEO of Equinix (pictured).

“The JV structure will enable us to extend our cloud leadership while providing significant value to a critical set of hyperscale customers. We look forward to launching similar JVs in other operating regions and believe that these efforts will continue to further differentiate Equinix as the trusted centre of a cloud-first world."

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Hyperscale businesses are planning ahead for a world that is going increasingly digital and Equinix's plans with this JV and xScale data centres will help to facilitate these plans. In March, figures by Synergy Research Group highlighted how hyperscale operators have become the fastest growing customer category for colocation providers. Revenue in 2018, for both wholesale and retail colocation, grew much faster than revenues from other service provider customers and from enterprises. The overall colocation market grew by 10% in 2018, while hyperscale operators grew by 24% in the wholesale segment of the market and by 16% in the retail segment.

This significant investment forms part of Equinix’s ongoing strategy to be at the centre of a cloud-first world and also to meet customer demand from hyperscalers, which includes the world’s largest cloud companies such as AWS, Azure, Google, IBM, Oracle and Salesforce, amongst other key technology companies such as Facebook.

In May, data from Synergy Research Group shows that hyperscale operator capital expenditure (Capex) totalled just over $26 billion in Q1 of 2019.

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Meyers told Capacity in its June/July magazine issue that the “strategy means that we can be more aggressive in the hyperscale capacity arena without straining our balance sheet by using third-party capital”.

Thank you @JasonMcGeeAbe for this great write up in #capacitymedia! We are excited to ride the digital wave as our global #interconnection platform continues to support the #DigitalTransformation agenda for our customers. https://t.co/lywPG5XHfa https://t.co/d1eJKuBURD — Charles Meyers (@CharlesMeyers) 28 June 2019


International Business Exchange (IBX) data centres

The facilities, on or proximate to some of Equinix's existing IBX campuses, will allow these key enablers of digital transformation to streamline their continued growth, while strengthening Equinix's leadership position in the cloud ecosystem, as enterprises increasingly embrace hybrid multi-cloud as the IT architecture of choice.

For years, hyperscale operators, including Alibaba Cloud, Amazon Web Services, Microsoft Azure, Oracle Cloud Infrastructure and Google Cloud, have partnered with Equinix to leverage its global platform of 200 IBX data centres to directly connect to its strategic business partners and customers.

Equinix revealed in its Q1 2019 earnings call that it will spend nearly $2 billion to open 12 new IBX data centres and expand 23 existing facilities this year.

xScale data centres

With xScale data centres, hyperscale companies will now be able to add core deployments at Equinix to their existing access point footprints, enabling their growth on a single platform that spans more than 50 global metros and offers direct interconnection—within a vibrant set of ecosystems—to their customers and strategic business partners.

xScale data centres will provide hyperscale companies with a differentiated value proposition from existing wholesale data centre operators in a few different ways:

  • They will offer access to Equinix's comprehensive suite of interconnection and edge services. These services will tie into the hyperscale companies' existing access points at Equinix, thereby increasing the speed of connectivity to their existing and future enterprise customers;

  • They will be engineered to meet the technical and operational requirements and price points of core hyperscale workload deployments. This enables hyperscale companies to consolidate core and access point deployments into one global provider to streamline and simplify their rapid growth; and

  • They will be managed and staffed by Equinix while ensuring seamless connectivity to the Equinix global platform, providing a consistent experience for the hyperscale companies.

Further details of the joint venture

As part of the JV with GIC, Singapore’s sovereign wealth fund, Equinix will oversee the development and operation of six xScale data centres in key markets in Europe including London, Paris, Amsterdam and Frankfurt. This deployment of core hyperscale infrastructure will serve as a magnet, attracting additional partners, application developers and other hyperscale vendors to Equinix’s business ecosystem, while increasing innovation opportunities.

Equinix will sell both its London LD10 (retaining part of that business under a lease back) and Paris PA8 IBX data centres and the associated leases, as well as certain other development interests, to the JV. A significant portion of London LD10 and ParisPA8 are already leased. Under the terms of this JV, additional new xScale data centres are expected to be developed in Amsterdam, Frankfurt (two sites) and London. These initial six facilities, when fully built out, will provide approximately 155MW of power capacity.

Upon closing of this initial JV, GIC is expected to have contributed cash to fund its 80% equity interest in the JV, and Equinix is expected to have transferred its LD10 and PA8 IBX assets and certain development investments in return for net cash proceeds and a 20% equity interest in the JV. At a future date, pending the delivery of certain contractual milestones related to the four development sites, Equinix will receive additional cash funded through additional equity contributions.

"As hyperscale companies expand around the world, they will increasingly look to partners to provide both broad global scale and deep local knowledge when deploying data centre space,” added Kelly Morgan, vice president of data centre infrastructure and services at 451 Research.

“Equinix, with its track record of operational reliability, along with expertise in financing, permitting and building data centres globally, is an example of a partner that can provide a platform for top hyperscale companies to scale core workload operations as well as interconnected access points within an ecosystem of partners and customers. By increasing the number of hyperscale facilities in the EMEA region, the joint venture between Equinix and GIC aims to accelerate the adoption of hybrid and multi-cloud as the IT architecture of choice by companies throughout the region."

The JV has received financing commitments for €850 million of secured credit facilities, consisting of a €200 million secured term loan facility that will be used to fund a portion of the consideration paid to Equinix for the sale to the joint venture of the LD10 and PA8 IBX data centres and other development investments; a €610 million secured delayed draw term loan facility that will be used to fund a portion of the planned development and construction costs for the new xScale data centers in Amsterdam, Frankfurt and London; and a €40 million secured revolving credit facility that will be used to fund working capital needs and other general corporate purposes of the joint venture.

The news showcases Equinix’s continued investment in cloud and the role the data centre industry has to play in the ongoing era of digital transformation.

To read the full interview with Charles Meyers, CEO of Equinix, from our June/July issue of Capacity magazine, CLICK HERE