NEXTDC's M3 Melbourne delay catches UBS on A$1.1bn notes

At a glance

• Delayed grid power at NEXTDC's M3 Melbourne campus has hit UBS, the bank behind NEXTDC's A$1.1 billion notes raise in September.

• NEXTDC shares closed at A$5.35 on 21 October 2026, about a third of the A$16.695 price at which the notes turn into shares.

• The delay took about A$140 million of revenue out of FY27, and NEXTDC says later grid works affect billing after FY28.

• Investors in the notes can ask for their money back on 17 September 2029.

• Broker price targets published since the guidance cut run from A$6.70 to A$22.

UBS has been caught in the fall in NEXTDC's share price, the Australian Financial Review's Street Talk column reported on 2 November 2026. The Swiss bank arranged NEXTDC's A$1.1 billion convertible notes in September and, according to five people the AFR spoke to, also took the other side of a hedge NEXTDC bought with them. Six weeks later, a power delay at the NEXTDC M3 campus in West Footscray cut the company's earnings guidance, and the shares fell 42 per cent when trading resumed.

UBS sold shares as NEXTDC hit a nine-year low

NEXTDC priced the notes on 10 September 2026 to fund its pipeline of new data centres in Australia. Investors can swap them for shares at A$16.695, a 32.5 per cent premium to the A$12.60 reference price, set just under the share price at the time. UBS was the sole lead manager.

NEXTDC also bought options from two banks that pay out if its shares rise above that conversion price. The AFR reported that UBS was one of those banks. A bank on that side of the trade holds the company's shares as a hedge and sells them as the price falls, and the AFR said UBS sold as NEXTDC hit a nine-year low on 21 October.

Jemena's paused works took A$140 million out of FY27

NEXTDC entered a trading halt on 19 October 2026 after electricity distributor Jemena suspended parts of its 66kV line works near M3, following resident opposition to taller power poles. Jemena does not expect to restart before February 2027, which moves the next power increase at M3 into FY28.

On 21 October NEXTDC cut its FY27 guidance, removing about A$140 million of revenue from the delayed M3 contracts. Earnings guidance fell to A$245 million to A$265 million, from A$385 million to A$410 million. The M3 capacity remains under contract and construction of the data halls continues.

Brooklyn transformers push more M3 billing past FY28

NEXTDC's 21 October release also sets out delays beyond FY27. M3's later power increases depend on new transformers at Brooklyn Terminal Station in Melbourne's west, and NEXTDC now expects the first of those projects to finish later than planned. It said the delays "affect the timing of capacity expected to convert to billing after FY28". The planning decision on M3 Stages 6 and 7, lodged in February 2026, is now expected in 2027, after the Victorian state election on 28 November 2026.

The M3 contracts also give the customer refunds, known as service level credits, when capacity arrives late, and in some cases the right to terminate. NEXTDC said the credits could take earnings below its revised range, and it is working with the customer on a new power schedule.

Source: NEXTDC ASX releases, 10 September and 21 October 2026.

NEXTDC has A$8.7 billion of funding ahead of 2029

NEXTDC reported A$8.675 billion of available funding at 30 September 2026, mostly undrawn debt facilities, and its earliest scheduled debt repayment falls in December 2029. Unless the shares roughly triple, noteholders gain nothing by swapping into shares, which makes September 2029 the date that counts.

UBS's analysts kept a buy rating with an A$18.50 target, calling M3 "a small wobble in the longer-term structural story of cloud/AI" and saying NEXTDC can fund the M3 work from existing debt, The Motley Fool reported on 30 October. The same report put RBC Capital Markets' target at A$22 and Morgan Stanley's at A$6.70.

What to watch

The 20 November AGM. NEXTDC's board will report its review of capital spending, including any sale of development sites it does not need in the near term.

The M3 power schedule. A revised timetable agreed with the M3 customer will show when the A$140 million removed from FY27 starts to bill.