TIDMDGI9
RNS Number : 9142N
Digital 9 Infrastructure PLC
28 September 2023
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT MAY
CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE UK'S MARKET
ABUSE REGULATION. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, SUCH
INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC
DOMAIN.
28 September 2023
DIGITAL 9 INFRASTRUCTURE PLC
("D9", the "Company" or, together with its subsidiaries, the
"Group")
Update on Syndication and Q2 2023 Dividend
Initiation of Shareholder Consultation
The Board of Digital 9 Infrastructure plc (ticker: DGI9), a
leading investor in the infrastructure of the internet, and the
Company's Investment Manager, Triple Point Investment Management
LLP ("Triple Point"), today provide a Company update.
Syndication Update
As announced on 9 March 2023, there is an ongoing competitive
process to syndicate a stake in the Verne Global group of
companies, including its operating sites in Iceland, Finland, and
the United Kingdom (together, "Verne Global") to a strategic
capital partner (the "Syndication").
The Company is pleased to announce it has significantly
progressed the Syndication and is in receipt of several non-binding
offers at, or around the USD net asset value of Verne Global as at
31 December 2022.
These offers, which are currently under review, comprise
proposed transaction structures for both a co-controlling and
majority stake sale, and funding solutions for the significant
capital expenditure commitment for Verne Global's platform. Due to
the sustained and accelerated customer demand for its facilities,
from both new and existing customers, the growth capital
expenditure pipeline for the Verne Global companies of GBP493
million reported in January 2023 has increased to GBP610
million.
Cash proceeds (net of costs) from the Syndication will enable D9
to pay down a significant portion of the Group's drawn revolving
credit facility ("RCF") and cancel part of it, thereby reducing
costs. As at 30 June 2023, GBP356 million was drawn under the
Group's GBP375 million RCF.
In the medium term, upon Syndication completion, the incoming
investor is expected to support Verne Global's growth capital
expenditure pipeline which will help scale the platform's capacity
to over 100 MW through pro-rata equity injections and an additional
funding facility. By maintaining a direct interest in Verne Global,
D9 will continue to benefit from the data centre platform's
anticipated earnings growth.
Executed terms for the Syndication are now expected to be
announced in Q4 2023.
Operating Cash Flow
Operating cash flow ("OCF") dividend cover reflects the
Company's ability to cover its dividends from the operational cash
flow generated by its Investee Companies, after deducting Investee
Companies' maintenance capex and interest costs.
The forecast OCF from Investee Companies remains materially
unchanged since 31 December 2022, save that the launch of EMIC-1,
and therefore the receipt of cash, has been delayed by up to 6
months to Q2 2025 due to deployment restrictions in the Red Sea.
The Board and Investment Manager expect operating cash flow
dividend cover to be substantially achieved by 31 December 2024 as
Investee Companies' operations mature. This is primarily due
to:
-- Verne Global Iceland, Verne Global London, and Verne Global
Finland have presold existing data centre capacity, the take up of
which will ramp up over time. Actual ramp up is ahead of the
expected ramp up profile disclosed in the Company's 2022 Annual
Report. In the 2022 Annual Report, it was reported that an
additional 4.2 MW was due to be fully ramped by December 2023. Due
to additional contracts signed during the year, 6.6 MW will be
fully ramped by December 2023. Of the 8.6MW which was previously
reported to be ramped by December 2024, 11.5 MW is now forecast to
be ramped by the same date. It is expected that all remaining
contracted capacity reported at 31 December 2022 to be fully ramped
by the end of 2026.
-- As announced on 21 June 2023, Arqiva Group entered into an inflation collar on its existing inflation-linked swaps which applies to 100% of the Retail Price Index ("RPI") exposure of the swaps and caps the impact of RPI from 2024 at c.6.0% until the swaps' expiry in 2027. This significantly limits the downside risk of inflation for Arqiva Group and D9's exposure to it. The Company expects inflation to fall significantly by March 2024, and therefore expects the Arqiva Group OCF for the period to June 2024 to materially increase.
-- The launch of EMIC-1, the Group's 10,000km fibre system from Europe to India.
The Investment Manager continues to evaluate other strategic
portfolio management initiatives and other complementary sources of
growth capital, including other partial disposals, to accelerate
the receipt of cash by D9 from the Investee Companies.
Q2 2023 Dividend Update
The Board has elected to not declare the Q2 2023 dividend.
Since the Company Update in July 2023, and notwithstanding the
strong operating performance of Investee Companies in line with
management expectations, the persistently higher interest rate
environment in which the Company trades has continued to impact the
Company's liquidity and sustainable balance sheet management.
At 30 June 2023, the Group had c.GBP47 million of unrestricted
cash available and GBP18.8 million remaining undrawn from the
GBP375 million RCF, excluding the accordion tranche of up to GBP125
million. As at 27 September 2023, the Group had c.GBP30 million of
unrestricted cash available with GBP11.3 million remaining on the
RCF.
While the Board and Investment Manager expect operating cash
flow dividend cover to be substantially achieved by 31 December
2024, further increases in net interest costs, related to the RCF
and the Group's reinvestment into its growth capital expenditure
pipeline reduce actual cash available for distribution.
Additionally, the Arqiva Group Vendor Loan Note ("VLN"), and the
Company's share of the Arqiva Group accretion payment on its
inflation-linked swaps, which expire in 2027, continue to restrict
the Company's access to OCF to support the Company's dividend
policy in the medium term.
The Investment Manager believes a more conservative approach to
capital allocation is required in order to enhance the Company's
medium-term liquidity and further accelerate the deleveraging of
its balance sheet in the current high interest rate
environment.
The Board has therefore elected to not declare the Q2 2023
dividend and withdraw its target dividend of 6.0 pence per Ordinary
Share for the year ending 31 December 2023.
Initiation of Shareholder Consultation
In light of the above, the Board will start a formal
consultation with its shareholders, starting on 2 October 2023, to
determine the optimal future dividend policy and discuss the future
direction of the Company, acknowledging the diverging views among
the Company's shareholders regarding the Company's capital
allocation policy. This shareholder engagement will be led by the
Chair and Board of Directors in conjunction with the Investment
Manager and the Company's Joint Corporate Brokers, J.P. Morgan
Cazenove and Peel Hunt.
The Company will provide a further update following the
conclusion of the shareholder consultation.
S.
FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:
Triple Point Investment Management
LLP
(Investment Manager)
Diego Massidda
Ben Beaton +44 (0)20 7201 8989
J.P. Morgan Cazenove (Joint Corporate
Broker)
William Simmonds
Jérémie Birnbaum +44 (0)20 7742 4000
Peel Hunt (Joint Corporate Broker)
Luke Simpson
Huw Jeremy +44 (0) 20 7418 8900
FTI Consulting (Communications Adviser) dgi9@fticonsulting.com
Ed Berry +44 (0)7703 330 199
Mitch Barltrop +44 (0)7807 296 032
Maxime Lopes +44 (0) 7890 896 777
LEI: 213800OQLX64UNS38U92
For the purposes of UK MAR, the identity of the person making
this notification is Luke Cheshire.
About Digital 9 Infrastructure plc:
Digital 9 Infrastructure plc (DGI9) is an investment trust
listed on the London Stock Exchange and a constitutent of the FTSE
250, with ticker DGI9. The Company invests in the infrastructure of
the internet that underpins the world's digital economy: digital
infrastructure.
The Investment Manager is Triple Point Investment Management LLP
(" Triple Point ") which is authorised and regulated by the
Financial Conduct Authority, with extensive experience in
infrastructure, real estate and private credit, while keeping ESG
principles central to its business mission. Triple Point's Digital
Infrastructure team has over $300 billion in digital infrastructure
transaction experience and in-depth relationships across global
tech and global telecoms companies.
The number 9 in Digital 9 Infrastructure comes from the UN
Sustainable Development Goal 9, which focuses the fund on
investments that increase connectivity globally and improve the
sustainability of digital infrastructure. The assets DGI9 invests
in typically comprise scalable platforms and technologies including
(but not limited to) subsea fibre, data centres, terrestrial fibre
and wireless networks.
From its IPO in March 2021 and subsequent capital raises, DGI9
has raised total equity of GBP905 million and a revolving credit
facility of GBP375 million, invested into the following data
centres, subsea fibre, terrestrial fibre and wireless networks:
-- Aqua Comms , a leading owner and operator of 20,000km of the
most modern subsea fibre systems - the backbone of the internet -
with a customer base comprising global tech and global
telecommunications carriers (April 2021);
-- Verne Global Iceland , the leading Icelandic data centre
platform, with 40MW of high intensity computing solutions in
operation or development, powered by 100% baseload renewable power
(September 2021);
-- EMIC-1 , a partnership with Meta on a 10,000km fibre system from Europe to India (July 2021);
-- SeaEdge UK1 , a data centre and landing station for the North
Sea Connect subsea cable, part of the North Atlantic Loop subsea
network, improving connectivity between the UK, Ireland,
Scandinavia and North America (December 2021);
-- Elio Networks (previously Host Ireland) a leading enterprise
broadband provider that owns and operates Fixed Wireless Access
networks (April 2022);
-- Verne Global London (previously Volta), a premier data centre
based in central London, providing 6MW retail co-location services
(April 2022);
-- Verne Global Finland (previously Ficolo), a leading Finnish
data centre and cloud infrastructure platform, with c.23MW of data
centre capacity, powered by 100% renewable power and distributing
surplus heat to district heating networks (July 2022) and
-- Arqiva , the only UK national terrestrial television and
radio broadcasting network in the United Kingdom - providing data,
network and communications services, as well as a national IoT
connectivity platform (October 2022).
The Company's Ordinary Shares were admitted to trading on the
Specialist Fund Segment of the Main Market of the London Stock
Exchange on 31 March 2021. It was admitted to the premium listing
segment of the Official List of the Financial Conduct Authority and
migrated to trading on the premium segment of the Main Market on 30
August 2022.
For more information on the Investment Manager please visit
www.triplepoint.co.uk. For more information, please visit
www.d9infrastructure.com.
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END
UPDEAFNXAESDEAA
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September 28, 2023 02:00 ET (06:00 GMT)
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