Southland AI factory reaches grid interconnection deal with Transpower (New Zealand).

Datagrid has reached an agreement with Transpower to purchase components for a substation that will connect its Southland "AI data factory" to the national grid. The Singapore-backed company has framed the deal as a "pre-purchase agreement"—not because funding remains uncertain for the broader project, but because Datagrid must secure long-lead electrical equipment now to meet its construction timeline, given the global supply chain pressures from the data centre boom.

"With electrification occurring at an accelerating pace around the globe, procurement of critical electrical equipment such as transformers has become highly competitive, often resulting in long lead times," according to a person close to the deal. "Pre-purchase agreements are a standard process whereby a customer commits to securing this equipment in order to help minimise potential schedule pressures down the line and meet their timelines."

Datagrid targets late 2027 for substation commissioning and 2028 for the initial stage of its data centre. A Transpower spokesman said: "The value of the agreement is commercially sensitive. However, the amount has been fully paid upfront by the customer and does not require additional capital raising."

Funding the broader project remains a focus. Mercury Energy recently acquired a 12.5% stake in Datagrid for $53 million. Founder and executive chairman Remi Galasso says initial earthworks will begin next month, while he seeks Series B funding for a build budgeted at up to $5 billion. The initial 280MW design could expand to 1GW, though final plans depend on capital raised.

For the substation, Datagrid has purchased four high-voltage power transformers, associated bushings, and other long-lead items from Elsewedy Electric, an Egyptian firm. Trade sources indicate the transformers could cost north of US$10 million each. The substation will connect to existing 220,000-volt transmission lines linking Manapōuri Power Station to Tiwai Point, delivering up to 360 million volt amperes of renewable electricity.

"To ensure the highest levels of reliability and resilience, the substation will be built to an N-1 configuration, with one of the four transformers serving as a dedicated backup so that full capacity can be maintained in the event a unit is taken offline," Datagrid said.

Transpower chief executive James Kilty noted: "While detailed design for the substation is ongoing, procuring these transformers which are long-lead items helps Datagrid meet its planned timeline, which is targeting substation commissioning in late 2027."

Last month, Datagrid signed contractors for the Tasman Ring Network cable to export its AI compute power to Australia and beyond, though in a scaled design with only the marine survey element initially funded.