Data centre's mea culpa is only least it could do

Tesla

26/10/2026 12:00

The author is a Reuters Breakingviews columnist.  The opinions expressed are his own.
By Antony Currie
MELBOURNE, Oct 26 (Reuters Breakingviews) - Trust Elon Musk to kick a rival data centre operator while it's down. On Sunday the CEO of SpaceX SPCX.O and Tesla TSLA.O crowed that debt markets are essentially shut for any of them without "substantial revenue independent of AI". That's the bigger problem beleaguered Australian outfit NextDC NXT.AX faces now that it has done the bare minimum to try to soothe its shareholders after its stock price halved over the past few days.
Community protests against expansion at a key Melbourne facility prompted months-long delays, forcing NextDC last week to slash its EBITDA forecast by more than a third and prompting the stock rout. So on Monday the now-$2.9 billion company said CEO Craig Scroggie would forgo both his short- and long-term bonuses for this financial year. On top of that, Chair Douglas Flynn is stepping down and the entire board is taking a 10% pay cut.
There was a need for such speedy appeasement: NextDC's annual general meeting is in less than four weeks, where there was to be a vote, now withdrawn, on increasing board remuneration by 13%. Worse, at last year's gathering 72% of shareholders voted against the company's executive pay, in large part due to long-term incentives that could bag more than $100 million for Scroggie. If just 25% vote against this year's payout plan, Australian rules allow investors to vote on ousting the whole board.
Sure, the company remains profitable and has, as Scroggie was keen to point out last week, $6.1 billion of liquidity - much of it in untapped credit lines. But data centre builders are in constant need for more debt, which finances up to 90% of construction. And getting hold of it was already tricky: after NextDC baulked at paying 8.5% on new borrowings earlier this year, it sold a $700 million century bond, to La Caisse, whose initial 7.5% rate rises above 9.2% in 2031 - and has to retroactively pay that amount from the get-go if it buys the debt back. That suddenly looks like a good deal: NextDC would have to pay 10.3% if it tried to borrow now, based on where some of its debt is trading, per LSEG.
NextDC has halted work on projects without signed customer contracts and is mulling whether to sell undeveloped land. That, existing liquidity and the lack of any major bond issues maturing until 2031 give Scroggie time to try to show both his debt and equity investors that he has learned his lesson. But in an industry that has pinned its fortunes on hyper-fast growth, that's a hard job for a company that's either slowing or reversing quickly.
Follow Antony Currie on Bluesky and LinkedIn.
         
CONTEXT NEWS 
     Craig Scroggie, CEO of beleaguered data centre builder and operator NextDC, is to forgo his bonus for the 2027 financial year, which runs to the end of June, the company said on October 26. Board directors will take a 10% cut in fees, rather than the 13.6% increase that shareholders were set to vote on at the company's annual meeting next month. 
Chair Douglas Flynn "has reaffirmed his intention to retire from the board once a new chairman is in place, after a short handover period," as was stated in the company release to the stock exchange. The company had not previously confirmed in public that he was leaving.
The company is also now seeking a new independent director as well as a new chair.

(Editing by Una Galani; Production by Aditya Srivastav)
((For previous columns by the author, Reuters customers can click on CURRIE/antony.currie@thomsonreuters.com))