HONG KONG: Hong Kong’s ambitious plan to become a data centre (DC) hub got off to a slow start.
When the government put a site in the remote Sandy Ridge up for auction late last year, after earmarking it as a high-tech DC zone, the initial response was silence.
Local developers had no interest.
Big international DC operators stayed away. Eventually, the auction received only a single bid: a 24 billion Hong Kong dollars (US$3.1bil) investment pledge from Range Intelligent Computing Technology Group Co, a mainland Chinese firm little known outside of its home market.
Bankers in Hong Kong are now weighing up a financing plan for a company few of them had heard of last year, in a sector that has become a byword for the spending frenzy around artificial intelligence (AI).
Range Intelligent told bankers earlier this year it wanted to raise around 20 billion Hong Kong dollars (US$2.6bil) from the loan, according to people familiar with the matter.
That would mark one of the biggest loan financings in the city this year, according to Bloomberg-compiled data.
But some bankers said they had doubts over how the company will repay the money, or how it will develop the site.
The financing is a test case for Hong Kong’s ambitions to become a hotspot for DCs, the sprawling physical infrastructure underpinning the AI services being offered by hyperscalers such as Meta Platforms Inc and Alibaba Group Holding Ltd.
Hyperscalers are technology firms that operate at huge size in cloud computing, storage and network services, among other things.
Range Intelligent is a key player in its domestic market, reaping the benefits of swelling demand by TikTok’s parent ByteDance Ltd and giving its founder Zhou Chaonan a fortune of more than US$10bil earlier this year, according to Bloomberg calculations.
But the firm is only just starting to dip its toes into overseas markets.
Hong Kong’s live DC capacity is expected to roughly double to more than 1,100MW by 2030, requiring at least US$7bil of investment in DCs and related infrastructure, according to estimates from Structure Research.
But North American investors are pulling back, preferring to back DCs housed by big US hyperscalers like Alphabet Inc and Microsoft Corp, said Brian Groen, principal at BGDC Consulting Ltd.
The market increasingly relies on demand from mainland China, particularly from the country’s hyperscalers: Alibaba, Tencent Holdings Ltd and ByteDance.
“Hong Kong is positioning itself to be a super hub for Chinese demand,” said Jason Zhou, a senior analyst at Structure Research.
The proximity to Shenzhen for the upcoming projects including Sandy Ridge means the new builds can target Chinese hyperscalers, said Zhou.
The shifting demand has put the spotlight on DC builders that are both willing and able to serve this wall of Chinese demand.
Range Intelligent didn’t respond to requests for comment.
A representative for Hong Kong’s Innovation, Technology and Industry Bureau said it was closely watching the progress of the Sandy Ridge project, but declined to comment on the financing arrangement or development plan.
In July, a group of executives from Range Intelligent landed in Hong Kong for meetings with bankers, said a person familiar with the matter.
Leading the group was vice general manager Zhang Xian, daughter-in-law of the company’s founder, Zhou Chaonan, the person added.
It was months after the firm had first reached out to banks to get commitments for the loan, and the two sides remained locked in negotiations. Range Intelligent largely focused on the offshore arms of mainland Chinese banks, leveraging the relationships it had built onshore.
Range Intelligent had talks with some bankers about first raising two billion Hong Kong dollars from a “phase one” loan before borrowing the remaining 18 billion Hong Kong dollars later this year, said a source. — Bloomberg
