Aligned Data Centers CEO: ‘We have great plans for regional expansion’

Brazilian asset manager Pátria Investimentos’ sale of Odata to US group Aligned Data Centers opened a new chapter for the Latin American company with the injection of fresh funds and the addition of a renowned datacenter team.

For Aligned and its controller, Australian investment fund Macquarie, the deal offers attractive growth and revenue opportunities in one of the world’s fastest-growing datacenter regions.

In this interview, Andrew Schaap (pictured), CEO of Aligned Data Centers, and Ricardo Alário, CEO of Odata, talks with BNamericas about the deal, market trends and upcoming projects – including a first-ever self-generation renewable energy initiative.

BNamericas: When announcing the deal, Aligned mentioned US$1bn in investments [acquisition excluded] to be made in Odata in the coming years. How will this amount be distributed over time and what does it entail? Are we talking about new projects or essentially those that are currently underway?

Schaap: First and foremost, we are incredibly excited about this opportunity to partner with Odata. The investments will specifically cover all the LatAm markets that Odata is serving [Brazil, Colombia, Mexico and Chile], but we are also keeping an eye out for new markets.

One of the things Ricardo [Alário] and I are working very, very closely on in this strategy is to ensure that we capture our market share, that we grow quickly and that we service our incredibly great global clients: main cloud providers, social media, Fortune 2,000 enterprises.

The timeline on the additional capital is going to be subject to the strategy we are currently working on going into those new markets and what our clients are asking us to do, so we can also get ahead of that demand.

BNamericas: When you say new markets, does that mean new nations, regions in countries, or new in-country spots?

Alário: It is both. We see other regions in a country as almost, you know, an expansion area. As an example, we just entered Rio, a completely new region for us. We are delivering the first batch of capacity in the middle of 2023. We are seeing a lot of new projects coming there as well.

And then we are looking at other regions in Brazil, nothing final yet, but we’re looking at the northeast, at the south. Similar in other countries as well. And we are always monitoring new countries.

We are really following our customers. They tell us what markets they are interested in, be it new markets in the regions where we operate, be it markets where we are not even present. Once they start asking about that, that is when we consolidate a lot of the work that we do, we buy the land, we get the licenses, get the energy and so on an so forth.

Schaap: The market will be getting a lot of press out of Odata in the future. We have great plans for regional expansion.

BNamericas: We have seen some movements by players outside the main datacenter hotspots within countries, such as Barranquilla in Colombia, as well as other parts of Brazil, but mostly for edge or datacenters that are not as powerful as hyperscale ones. For Odata, will these projects outside the main metropolitan regions be of smaller scale compared to a traditional hyperscale site?

Alário: Not necessarily. In the northeast of Brazil, one of the regions we are looking at is Fortaleza. The main driver for being there is certainly the submarine cables coming in. 

But we also see that some hyperscalers have an interest in establishing themselves there, because for latency reasons they can service that region from Salvador [Bahia state capital] up all the way. 

Brazil is very large. If you make a parallel to the US, there you have capacity from coast to coast and from north to south. I think as Brazil grows, and Brazil has been ahead of the curve, you will see new [data] regions developing. 

Of course, in the way hyperscalers design their strategies and projects, they do not start with a full availability [cloud] zone, with three availability datacenters. They start smaller, with local zones and things like that, and start growing that and adding maybe one, two, three, datacenters. 

I see Brazil’s northeast having the capability of becoming a second hub sometime in the future.

BNamericas: Aligned’s controller Macquarie has other investments in the digital infra landscape in Latin America, although not in datacenters. For example, for towers with DigitalBridge, which owns Scala Data Centers, a direct competitor to Odata. Is there any conflict of interest on the management side there or do Chinese walls prevent that?

Schaap: The industry is on fire. The digitization of everything that we do around the world is pushing for massive growth in the datacenter space. So obviously different investments are made. Macquarie is the world’s leader in infrastructure investing, which includes bridges, roads, tunnels, airports, ports, solar farms, wind farms, etc. And then for digital infra there is towers, fiber and datacenters.

We [Aligned] have sister companies that are in different geographies. There is one in Europe, that Macquarie is a part of, and one in Asia Pacific, which Macquarie has invested heavily in as well.

What you see is a lot of large investors like Macquarie very keen on getting into this industry and staying in this industry in a big, big way, because the growth potential is just so phenomenal. We are very bullish on the future and we could not be more thrilled of having Macquarie as a capital partner in sustaining and funding our growth.

BNamericas: Were you eyeing an entry into Latin America before? And did you look at other assets in the past years prior to closing with Odata?

Schaap: The Odata team and the Odata portfolio is fantastic. We have looked at many acquisitions over the last six, seven years. And quite frankly we did not see as much synergy, as much opportunity for growth. 

It comes out on the quality of the team, of the assets and market opportunity. We see all three of those as absolute home runs in this partnership with Odata.

In some of the other acquisitions, we just did not see all those boxes being checked.

BNamericas: How about timing? Would you agree you are coming a little bit late to a market that already has some well-established and strong players, such as Ascenty, Scala, and others?

Schaap: People could make this same argument about our growth in the US. 

In the US, there are many, many established players that were here before us. We have been able to carve out a really nice percentage of market share in the US. Quite frankly, we are growing quite a bit faster than some of the folks that have been around a little longer.

We have shown our ability to get into a market, compete well, and also win great business with the target customers. 

Alário: We are in an industry that is very competitive. Even though in the last seven years we [Odata] have been able to grow really fast, I see the future being a lot brighter for us than, say, in the last three years. 

We are going to have access to, first of all, a fantastic partner with a lot of background in technology, [and to] super capacity in the supply chain, which can add speed for us going forward and another gigantic pull of capital.

All those things are like Odata on steroids. We have been performing well, we are winning more than our share in some countries and growing with the industry, and now we are adding more wood to that fire.

BNamericas: How much of Odata’s capacity is currently leased to clients and what is the company’s total available datacenter capacity?

Alário: Odata has around 100MW of capacity signed today and in all our sites we have another 370MW of capacity available. 

So without any additional investment in land or power we could multiply that 3.7 [times]. 

That is a lot of growth capacity and that is one of the reasons that Aligned liked about us. Looking into the future, we are very well-positioned to capture a significant portion of capacity in the four countries that we operate.

BNamericas: How many clients?

Alário: We do not disclose that. But of the 10 largest hyperscalers in the world, we have business discussions with nine of them. Either contracts or orders with almost all of them.

BNamericas: Some LatAm datacenters hotspots, such as Querétaro or São Paulo, are already seeing a certain crunch in power availability to supply all the datacenter projects that are taking place. Because of that, some of your competitors are closing very long-term, cross-country supply deals with multinational power groups. What is Odata’s vision of this strategy and how is the power supply side of the business?

Alário: That is one of the biggest issues we look at when we choose a new site. We are all striving for energy. And that is the same all over the world. In Latin America it is limited, but in Northern Virginia, where most US datacenters are, the power company there is not being able to fulfill their contracts.

Each country is very different. That is why our customers rely on us. That is a little bit of our secret sauce. To really understand where the power constrain is, work with the power companies in each region, understand where they can service us better and work with them to get to the full capacity of each of our campuses. That is a lot of the planning that we do. When we buy land we are looking at energy immediately, energy in the future. 

It is case-by-case, country-by-country. Each country does have its limitations, but it depends a lot on the location. Limitations are much more on the distribution side than on the generation side. 

Brazil does not have a crunch in generation, neither does Chile, although Chile is a little bit worse perhaps on the generation side. 

But distribution is the bottleneck. Where you connect to the grid, how you connect to the grid and how you plan ahead. That is why we have to work very closely, not only with the power companies, but also the regulators, the national agencies, in Chile with the regulator there, in Mexico with Cenace.

Schaap: It is fundamentally not a production challenge, it is a distribution challenge. Everything from the actual distribution wirelines, all the way down to the transformers. With the pandemic we have had some supply chain challenges in the datacenter industry and one of them was transformers. 

Transformers are taking up almost two years from order to manufacture and shipping. One of the things Aligned has done and we hope to accelerate that in Latin America is getting ahead of demand by placing those orders a lot in advance. And then really plan, scale and align with regulators, utility providers. 

In Virginia, particularly, growth is tremendous on the datacenter side and it kind of surprised the utility provider. It is a very sophisticated provider, nonetheless they ran into challenges and they continue to run into challenges that are forcing large customers and ourselves to look at alternative sites, alternative locations, to fill that insatiable demand for data.

BNamericas: How are you working in terms of renewables, which is a major concern and requirement of your customers. And are you planning any green bond issuance?

Schaap: We were the first datacenter operator with green financing. It was a sustainability-linked bond of US$1.75bn, two years ago. And other players followed us on that. We want to put our money where our mouth is when it comes to sustainability. 

We have got bankers and financial institutions that have really loved our story and we have come to put some language in these contracts that we will be bound by, that hold us accountable to really continue driving sustainable construction and operation. 

Alário: As you know, the energy that we have is ours but it is their [the customers] interest. Sometimes they require and we help them with having sustainable sources. So we do sign PPAs [power-purchase agreements] for them. Around 85-90% of our energy is already renewable. 

In Brazil we are about to launch a new initiative. We are probably going to be one of the first datacenter companies on the globe to actually generate its own clean energy. 

We are becoming a self-generator of energy. We are partnering with a generation company and will have a portion of a park in the northeast generating clean energy, wind energy, and we are going to offer that to customers. It is something that we have been working on for almost two years now and we are about to announce it. But we will have more details soon when we disclose that.

BNamericas: Is this similar to what telcos in Brazil are doing to supply their operations?

Alário: Not really. I am not sure they are doing this. The companies that are doing this are the ones that actually use a lot of energy, similar to what Heineken does, Ambev, and Vale. 

They have become self-generators. It is the exact same structure. Very similar to what we are doing. 

Schaap: Going through this process and when we saw what the Odata team was doing with self-generation… we do not know of anybody who is doing anything like that. Not even in the US. 

It is a very innovative and sustainable path Odata is going down. We are just delighted, we are going to continue to invest in this type of project and all the clients are asking for exactly that type of structure. The big hyperscale customers love that structure.

BNamericas: Speaking of energy, which PUE [power usage effectiveness] rate are you targeting for the operations?

Schaap: PUE is a combination of design, engineering and also how the client uses it. If we give them 1MW and they use 10% of that, the PUE is quite poor. 

So it is a combination of not only how we build, but how our clients use it. We obviously have our goals to get as efficient as possible in PUE design, but in addition to that we are trying to work with our clients inside their data halls [so they can] use as much capacity as possible, to be as efficient as possible. 

Aside from that, many of our big clients are after water-free datacenters. Some of the clients today are asking for water-free [cooling] designs, which take a little bit more energy to run. But the benefit is that you can ensure that 100% of the energy is coming from green, renewable sources. That is the trend we are seeing in the US.

Alário: And there is another thing: PUE is also related to the outside temperature. We are in hot and humid regions here in Brazil, so our PUE in Rio will not be as good as, perhaps, Santana do Parnaíba [São Paulo metropolitan region], which is a much cooler ambiance. 

But having said that, we are designing and targeting it as low as possible, our clients demand that. But it is really about operations. Operations can decrease PUE.

And in terms of water, when we created the company in 2015 we never used water in our designs. Today, expect for Colombia, where we do have a very efficient system that uses very little water, we use no water in our buildings.

BNamericas: How is the pipeline of datacenter launches looking for the coming months?

Alário: We are just inaugurating Rio de Janeiro. We delivered our first capacity in Santiago and Querétaro this year, we are already working on expansions in São Paulo, at our Campinas site, among others. 

The pipeline is great, we have a lot of construction work, we are going to turn on, if not the largest one of the largest datacenter sites in South America, in the middle of next year, which is our Santiago 2 site. We are going at full speed ahead.

We have six projects underway today, either adding capacity in existing buildings or new buildings: Rio de Janeiro, São Paulo 2, Querétaro 1 and 2, Santiago 1 and Santiago 2. 

Some of the expansions will follow on into 2024, but all the new sites will go live in 2023.