NextDC shares fell about 40% after community backlash over power poles derailed its Melbourne data centre plans.

Data centre operator NextDC has seen its share price plunge roughly 40 per cent after revealing that its M3 data centre in Melbourne's West Footscray faces significant delays to its expansion, wiping close to $3 billion from the company's market capitalisation.

The collapse was triggered by the company's admission that electricity provider Jemena had suspended work on the installation of high-voltage power poles required to deliver increased grid supply to the facility. The suspension followed fierce opposition from local residents in Melbourne's inner west, who physically blocked work crews by parking their cars and placing rubbish bins at installation sites.

NextDC's stock fell from above $9 per share to $5.69 after exiting a trading halt, before staging a partial 7 per cent recovery.

**Guidance Slashed By A Third**

The company has been forced to slash its net revenue forecast for the current financial year by roughly a third, now projecting between $475 million and $500 million, down from earlier guidance of $615 million to $640 million.

Operating profitability was also revised down to between $245 million and $265 million, from a previous range of $385 million to $410 million.

NextDC attributed the revised estimates to delays to electricity network upgrades by Jemena, which are necessary to increase power supply to the M3 facility. The company confirmed that the next grid supply for West Footscray is not expected until mid-2027, deferring the delivery and billing of contracted capacity.

NextDC Chief Executive Craig Scroggie told investors that Jemena had advised the company it had suspended parts of the network works required for the next increase in grid supply to M3 Melbourne.

"We have taken the affected M3 contracts out of FY27 guidance until we can reliably estimate their contribution," Scroggie said.

**Residents Block Power Pole Installation**

The West Footscray data centre, located just 15 metres from homes, has long been the subject of community opposition over concerns about diesel and noise pollution. The installation of towering power poles to accommodate the facility's electricity needs became a flashpoint earlier this year.

In September, Jemena was forced to halt the installation of 15- to 22-metre-high power poles in Yarraville after meeting resistance from residents. The poles can carry up to 66,000 volts of electricity, approximately 160 times the voltage of previous poles in the area.

Local councils and residents argued they had not been adequately consulted over the upgrades.

Jemena told the local Maribyrnong Council it had paused further development from September 1, a decision the company indicated was made on August 31.

NextDC Group Chief Development Officer Simon Cooper told investors the company was exploring all avenues, including finding alternative locations for the power poles or placing electrical cables underground.

"Undergrounding does take time and there's not an immediate option that we can work on now. But it is something that we are absolutely considering," Cooper said.

**Questions Over Disclosure Timing**

The timeline leading up to the share price collapse has raised pointed questions about NextDC's approach to market disclosure.

Throughout the first half of the year, Scroggie had been loading up on debt. NextDC issued $750 million in subordinated notes in April. A month later, the company secured an agreement for another $1 billion in a draw-down facility. In July, it announced a package of debt facilities totalling $2.3 billion. By August, Scroggie reported $249 million in underlying EBITDA, and the stock sat at a healthy $14 per share.

Warning signs began to emerge in late August and early September. NextDC had sought fast-track approval for M3 under special industry rules, but those efforts were already struggling.

On September 3, Scroggie wrote to Victorian Minister for Industry and Jobs Melissa Horne requesting approval to expand the project. Horne later indicated it was apparent Scroggie was asking her to step in and override the decision of the Planning Minister. Separately, it emerged that Horne was irked to learn Scroggie had apparently used an AI chatbot to draft the letter.

On September 7, the Maribyrnong Council updated its website to reflect that Jemena had paused further development. On September 9, however, NextDC pressed ahead with an audacious financing play, moving to issue $1.1 billion in convertible bonds.

The convertible bonds were structured to last five years and paid a 1.75 per cent annual coupon. They would only be worth swapping for shares if NextDC's stock reached $16.70.

NextDC's adviser team, led by bookrunner UBS with Mallesons as legal adviser, began contacting potential buyers.

The night before the convertible bond announcement, local MP Katie Hall delivered a speech to state parliament focusing on M3's power lines and calling NextDC's behaviour a "shocking example of corporate arrogance in my electorate."

Sources indicate Hall had been working for months to introduce new data centre guidelines that could derail M3's expansion. Those guidelines were subsequently introduced on September 22.

Despite these headwinds, Scroggie's announcement of the convertible bonds on the morning of September 9 framed the move as "proactively enhancing" NextDC's balance sheet.

By September 17, the paperwork was finalised, including for the "delta placement" that allows hedge funds to offload their exposure to the share price. Meanwhile, on September 15, a council meeting confirmed that development of the data centre remained paused.

**Busted Convertible Bonds**

The share price collapse means the $1.1 billion in convertible bonds, which were positioned as cheap financing with a sweetener for investors just a month ago, are now an anchor.

Investors who bought into the convertible bonds face losses, with the instruments down 30 per cent. The $750 million subordinated notes are also down 6 per cent after aggressive selling by Asian funds. Those markets are almost certainly closed to NextDC for the foreseeable future.

Shine Lawyers has begun examining a potential class action on behalf of investors.

From the bankers to the analysts to the bond investors, questions linger over whether any of them were given an indication from NextDC that a probable revenue loss was coming.

**Survival Concerns Surface**

While some analysts point to NextDC's book value as a potential safety net for bargain hunters, with the share price implying a 30 per cent discount to net asset value, others are raising concerns about the company's survival.

The 35 per cent forecast reduction in earnings puts pressure on the company's cash flows and increases the cost and quantum of its financing requirements.

Credit analysts considering NextDC's bonds are focused on the company's available liquidity of $8.7 billion and its anticipated capital expenditure of about $5 billion for 2027 and $7 billion beyond that.

Analysts at Jefferies, one of only three brokers that held a hold rating on the stock before the crash, warned that under some assumptions NextDC will meet its interest coverage ratio by the narrowest of margins this year, and may breach it in 2028 if its power issues are not resolved.

The company must maintain compliance with banking covenants that limit gearing to 60 per cent and require earnings to remain at least 50 per cent larger than its interest bill.

If interest on its hybrids and convertible notes is included, the company's interest bill is estimated at $530 million in 2027 and $670 million in 2028, only just offset by its contracted earnings out to 2030.

NextDC listed at $1 in 2010 with 80 million shares on issue. The share count has expanded almost tenfold since then, far outpacing the five-and-a-half-times gain in the stock price. In aggregate, this is a business that has destroyed capital rather than created wealth.

Every analyst covering the company carried a buy rating on the stock until last month, with a mean price forecast of $20.54. That target has since been cut to $12.24, well above the traded price of $5.64.

**Scroggie's Pay Day Evaporates**

Scroggie and his funding team worked throughout the year to source lower-ranking subordinated capital, which allowed them to unlock more senior bank loans.

The company secured $5 billion from Canadian pension fund La Caisse, alongside the subordinated bond issue, the convertible bond sale and a relatively modest $1.5 billion equity issuance.

Scroggie was motivated in part to limit equity issuance by a lucrative incentive package tied to shareholder returns, which would have been diluted by further share issues. That package now appears out of reach. For Scroggie to earn any of the $112 million bonus he hoped to collect in 2030, the share price must exceed $26.

**Tottenham Gets Rare Win**

Local residents' group, Citi

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