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Aligned has announced the completion of a $1 billion senior secured credit facility that is the first US data center sustainability-linked financing. The facility is one of the largest private debt raises in data center history, consisting of a $650 million term loan, a $100 million delayed draw term loan and a $250 million revolving credit facility.
“Aligned’s latest sustainability-linked financing accelerates our goal to set a best-in-class example for the data center industry with respect to environmentally and socially sustainable growth,” Anubhav Raj, CFO, Aligned, said. “Sustainable practices and principles permeate every facet of Aligned’s organisation; aligning these initiatives with our financing further demonstrates an industry-leading commitment to environmental stewardship.”
Core environmental objectives
The deal provides Aligned with additional capital to accelerate corporate, customer and community-related sustainability initiatives as well as short and long-term growth objectives. Aligned’s sustainability-linked financing is tied to the Company’s core environmental, social and governance (ESG) objectives, and Key Performance Indicators (KPIs), including renewable energy, sustainability reporting and workplace safety.
Earlier this year, Aligned elevated its commitment to environmental stewardship and sustainability by matching 100% of the IT loads across its data center portfolio with certified renewable energy. The company was also named a 2020 Green Lease Leader by the Department of Energy’s Better Buildings Alliance and the Institute for Market Transformation. Aligned’s Delta3 cooling technology utilizes up to 80 per cent less energy and 85 per cent less water, significantly reducing environmental impact and allowing customers to Expand on Demand without stranding capacity, which also improves sustainability.
“I couldn’t be prouder of our team’s achievements and operational strength, culminating in an ability to continue championing a slew of firsts for the data center industry,” Andrew Schaap, CEO, Aligned, added. “That sentiment is recognized and echoed in this latest and unprecedented round of financing, which provides Aligned the ability to keep expanding our data center portfolio. This includes land acquisition in key U.S. and international regions to address the heightened data center demand of our marquee clients, as well as expediting the expansion of existing data center campuses.”
Discounted rates for sustainability
“What makes this sustainability-linked financing is the fact that a component of the interest rates on this credit facility are directly tied to our environmental, social and governance (ESG) objectives,” Schaap said. “If we deliver on our commitments and perform well on our renewable energy, sustainability reporting and safety KPIs tied to the financing, we benefit from discounted interest rates. If we do not, the rates either stay the same or go up (depending on the actual performance).”
Sustainable finance covers both the financing and the investment activities needed to support the UN Sustainable Development Goals (SDGs), and action to combat climate change. A rapidly changing climate represents a potent, unprecedented, and irreversible threat to habitats, societies, and economies around the globe. In 2015 almost 200 leaders signed the Paris Climate Agreement, committing countries to transition to a lower carbon economy and limit the global average temperature rise to 2 degrees Celsius above pre-industrial times. It is widely accepted that more needs to be done to achieve this global commitment and HSBC is focused on its role in financing the low-carbon transition.
Moving away from carbon intensity
Sustainable finance helps businesses transition from carbon-intensive activities, as well as develop the new energy sources, technology and infrastructure needed for a cleaner future. “The sustainability-linked aspect of the financing is closely tied to the needs of our customers,” Schaap added. “For our marquee set of customers, having an operator that is a good environmental steward that offers sustainable options for power, cooling and growth is table stakes. When it comes to investors, sustainability-linked loans are among, if not the, industry’s fastest growing subset(s).
“With accelerated digital transformation and technology use, the industry has seen unprecedented investor demand. With this being the first-ever financing deal of its kind for a data center company in the U.S., investors are seeing an attractive return on investment, coupled with a powerful and unprecedented impact on championing sustainability in this space. This combined with our innovative cooling technology, sustainable construction methods as well as our renewable power efforts provides our customers a 360-degree approach to sustainability.”
Aligned’s sustainability financing is based on KPIs. According to Raj to meet these Aligned needs a commitment to match 100 per cent of its energy consumption with zero-carbon renewables by 2024 and a transparent ESG reporting leading the industry on workplace safety. “Aligned pays a higher interest rate if it falls short of its sustainability goals or it receives a lower rate if it achieves or exceeds them,” he said. “Being a private company, we do not disclose exact use of the financing, but we plan to leverage approximately ~$750m to refinance existing debt and deliver on current contracts. The rest will be used for further expansion – both in new and existing markets.
“We currently have construction happening across all of our data center campuses in four markets – Dallas (Plano) (expansion), Ashburn, VA (new construction – second data center), Salt Lake City, UT (new construction – second data center) and Phoenix, AZ (expansion).”