The tendency is for the booming data center market to increasingly rely on the presence of sovereign wealth funds. Capable of sustaining long-term investments and the ever-increasing costs of these ventures, they can serve to provide an outlet for financial investors who have reinforced their strategy in the sector.
Increasingly robust, data centers dedicated to cloud storage and processing in Brazil have attracted the eyes of large international asset managers, as generative artificial intelligence applications require more and more infrastructure.
ODATA, and Ascenty, three of the largest companies in the sector in Brazil, are currently invested in by a foreign fund.
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These are businesses in the sector called colocationspecialized in building structures for data centers of public cloud technology giants, such as Amazon (), Google () and Microsoft ().
The segment has become the industry’s flagship: as its customers represent a low risk of default and pay in dollars, the main businesses in the sector globally have valued companies at multiples of 25 to 30 times their EBITDA (earnings before interest, taxes, depreciation and amortization).
“Due to the capital-intensive nature and the need for constant contributions, companies colocation they generally operate with negative cash flow, even though they present favorable accounting results”, says the director of the Brazilian Data Center Association (ABDC), Renan Lima Alves. The central point, he says, is long-term, dollarized contracts with high-quality clients.
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No wonder. The combined quarterly capex projections of the main technology companies reach US$70 billion.
Tight capital structure
On the side of the companies themselves, colocationthe logic is that resources are increasingly available to support large projects. “You have to have both capital and debt balanced to continue delivering products. It is a market in which stopping growth is very difficult, with a high demand for capital”, says ODATA’s Latam CEO, Ricardo Alário.
In the case of the company, sold by Pátria Investimentos in 2023, the assessment is that the purchase by Aligned Data Centers, whose Macquarie Asset Management fund holds a majority stake, helped to unlock expansion investments. Recently the .
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“This segment is very interesting because the strategic and the funds mix”, says Isaías Snifer, partner at the M&A consultancy responsible for the sale of ODATA, Seneca Evercore. “Today the perception is that there is risk in this, but the tailwind is so strong that it makes perfect sense to take this risk.”
Sovereign wealth funds
The experts’ assessment is that the result of an offer for data centers that can barely keep up with demand has led funds to move out of fear of being left out of the wave.
What’s more: it is increasingly likely that future divestments will strengthen the position of sovereign wealth funds — those that belong to governments or government bodies — in the sector.
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“These funds are not required to comply with a rigid divestment schedule, as their objective is to expand capital and generate income over the very long term, similar to some investment funds. Real Estate and Infrastructure”, says Lima Alves.
This year, Mubadala, the sovereign wealth fund of the Emirate of Abu Dhabi, made an investment of an undisclosed amount in the English company Yondr. American Equinix, listed on Nasdaq, created a joint venture with the Canadian Pension Fund and the Singapore Sovereign Fund to invest more than $15 billion in data centers.
In other cases, to secure high investments, negotiations have involved two financial investors: in October, alternative asset manager Blue Owl announced the purchase of IPI Partners and its US$10.5 billion portfolio in data centers.
In Brazil, there are approximately 580 megawatts of IT (MW of IT), a unit of measurement for the size of data centers based on energy consumption. The market expectation is to reach 2 GW by 2028. To give you an idea, each MW of IT is equivalent to approximately US$ 10 million in investments, which would take the projection for 2028 to around US$ 20 billion accumulated.
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