Milbank LLP partner James Orme, a member of the Global Projects, Energy and Infrastructure Finance Group in Singapore, discusses the growth of data center projects in Asia in “Asia's Digital Infrastructure: Dispersed Data Documentation,” an article published by Proximo.
Asia was late to the digital infrastructure party, the article notes, but data centers are driving strong growth in the region.
“The regional banks, especially in Indonesia, Philippines, Malaysia and Japan, are liquid and have been quick learners," says Mr. Orme, and banks that are used to looking at data centers as a real estate financing are now looking at these deals through a different lens and are willing to use customary project financing terms. "There has been an increasing focus on cashflows and offtaker quality, rather than loan-to-value covenants or corporate guarantees, as these projects are implemented," he adds.
Regarding sustainability-linked loans (SLLs), Mr. Orme believes SLLs' language can allow efficiency targets related to the construction and operation of the data center to be implemented by the designers and contractors. "It should be possible to pass these requirements through to contractors, thereby resulting in improved efficiency levels for the project and savings for the project company in the form of margin ratchets,” he says.
Mr. Orme advises clients on the financing and development of complex, large-scale energy and infrastructure projects, many of which involve multi-sourced financing arrangements and multiple tiers of debt. He regularly represents financial institutions, private debt providers, sponsors and investment funds at all levels of the capital structure across a variety of sectors.
Read “Asia's Digital Infrastructure: Dispersed Data Documentation.” (Proximo subscription required)
