US investment firm, Kohlberg Kravis Roberts & Co, (KKR), will invest S$1.1 billion to pick up a 20 percent stake in Singtel’s regional data centre business.
The investment puts the enterprise value of Singtel’s overall regional data centre business at S$5.5 billion.
KKR will have the option to increase its stake to 25 percent by 2027 at the pre-agreed valuation.
The transaction is expected to be completed by the fourth quarter of 2023, subject to regulatory approvals and customary closing conditions.
The American investment company manages multiple alternative asset classes that include energy, infrastructure and real estate.
Singtel’s regional data centre business is part of the Digital InfraCo unit which was formed in June 2023.
The collaboration is a first between Singtel and KKR, and enables the Singapore telco to tap on KKR’s expertise in investing in data centres and critical telecommunication infrastructure globally in addition to its access to capital, a statement from Singtel said.
This will widen the business’ strategic choices, giving a variety of options to monetise in the future, the company said.
The proceeds from this transaction will be used to accelerate the expansion of the regional data centre business across the ASEAN region, including Singapore, Indonesia and Thailand while exploring markets like Malaysia and others.
The telco has been growing its data centre business, anchored by its expertise in Singapore where it is one of the largest data centre operators.
In addition to 62 MW of existing capacity in Singapore, Singtel is building a new 58 MW data centre at Tuas in Singapore and has also partnered Telkom and Medco Power in Indonesia and GULF and AIS in Thailand to develop data centres in Batam and Bangkok respectively.
The data centre portfolio will deliver a total combined capacity of over 155 MW once the three new projects are operational in 2025, with room to scale up to more than 200 MW, Singtel said.
KKR’s inroads into Asia
KKR is making this investment (in Singtel) as part of its Asia infrastructure strategy, according to KKR’s Head of Asia Pacific Infrastructure, David Luboff.
This transaction marks KKR’s latest investment in Southeast Asia infrastructure and data centre infrastructure globally.
KKR’s infrastructure investments in Southeast Asia have included Pinnacle Towers, a digital infrastructure platform in Asia with a strong focus on the Philippines; First Gen, a leading provider of clean and renewable power in the Philippines; and Aster Renewable Energy, a renewables platform that develops, builds, and operates solar, wind, and energy storage projects in the region, Luboff said.
Worldwide, KKR’s investments in the data centre infrastructure sector have included CyrusOne, a global leader in the development and operation of sustainable, scalable, high-availability and flexible data centre solutions; Global Technical Realty, a build-to-suit and roll-up acquisition data centre platform in Europe; and CoolIT Systems, a leading provider of scalable liquid cooling solutions in Canada.
Southeast Asia’s data centre market is expected to grow by 17 percent over the next five years compared to 12 percent for the rest of the world, with US$9 billion to US$13 billion (S$12 billion to US$18 billion) in investments projected to flow into the region.
While data centre capacity is poised to increase at a compound annual growth rate (CAGR) of 19 percent from 2021 to 20261, demand is expected to outpace supply driven by increased data consumption, enterprises transitioning to the cloud and the rapid rise of AI in the region.
Malaysia, Indonesia and Thailand could see the biggest increase in capacity with Johor, in particular, benefitting from spill-over demand from Singapore due to the island state’s supply constraints. The growing need to handle high-performance computing tasks such as generative AI will also spur significant growth in GPU-powered data centres in the years to come.
Singtel's Digital InfraCo’s CEO, Bill Chang, said, “KKR's investment underscores the quality of our data centre portfolio and confidence in our plans to scale the business by capitalising on the digitalisation and rapid AI adoption that is transforming this region”.
