MDIPS
Creating hybrid investment structure for power and land development E3’ s business model combines two traditionally separate investment frameworks: merchant land development and power generation. This structure reflects the absence of traditional utility capacity letters that would have simplified land development in previous decades.
Spencer argues that fewer than 50 data centre developers currently possess the capability to develop a 1,000-megawatt campus worldwide. Yet thousands of industrial users require 5 to 15 megawatts of power capacity.
WHY COMMUNITY ENGAGEMENT IS KEY
Spencer spoke at the Data Centre World Power Conference recently about community engagement for digital infrastructure development. The scale of current data centre projects impacts municipal general plans developed over decades in ways few have anticipated.
“ We are impacting those municipal plans to such a significant degree today with what we are contemplating developing, that we really have to reach out and become partners with the community, helping them understand how this impacts their community, and how we can deploy in a sustainable way,” Spencer says.
All face the same interconnection queue constraints.
“ The land developer, or somebody within this ecosystem, has to take on multiple business models, at least one of which they haven’ t traditionally had to take on,” Spencer says.“ For E3 and for the MDIPs, we’ re taking on the land development business model, which is generally lower cheque size, but also relatively quicker turnaround from an investment time horizon. Plus, we’ re having to take on the municipal services or the utilities development business models.”
The land development component offers higher returns with higher risk and shorter time horizons. The utility services component provides stable returns over longer periods with different capital requirements. These distinct characteristics allow E3 to structure investments in separate buckets that align with different investor profiles.“ Bringing those together really solves a very significant solution, and the numbers at scale are so large, you can articulate those from a financials perspective without having to do some super novel technology,” Spencer says.
The company spent considerable time developing frameworks that allow clear articulation to investors about where they enter the development process, how they achieve returns and when they exit. This work involved what Spencer describes as numerous rabbit holes to develop understanding and communicate it effectively to different investor types.
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