The company behind the project, Datagrid, has bought a 43-hectare site in North Makarewa near Invercargill, where it plans to begin construction of a huge cloud computing facility later this year.

Singaporean shipping giant BW Group has at the same time invested in Datagrid, agreeing to acquire a 37.5 per cent shareholding in its holding company previously held by CallPlus founder Malcolm Dick.

BW Group chairman Andreas Sohmen-Pao said Datagrid would allow “New Zealand’s renewable power to be applied towards sustainable digital infrastructure and connectivity for the country”.

BW previously agreed – subject to Overseas Investment Office approval – to buy all of subsea cable company Hawaiki, which was founded and is chaired by Datagrid chief executive Remi Galasso.

Hawaiki already owns a $445m fibre-optic cable connecting the North Island to the United States and Australia, and announced in November that it would build another 22,000-kilometre subsea internet cable network – Hawaiki Nui – connecting New Zealand’s South Island, Australia, Singapore, Indonesia and the US.

In December, Hawaiki was selected by the Chilean government to advance its proposed Humboldt cable between Chile and Australia, that could run via Invercargill and potentially also connect Antarctica.

One of the goals of Hawaiki Nui is to connect the Datagrid data centre to customers in Australia, so major computer companies can dish up applications to Australians using the region’s cheap, ‘green’ power.

Galasso confirmed the total investment in Hawaiki Nui and the Datagrid data centre would exceed $1b.

Datagrid had begun discussions with Southland District Council over resource consent for the data centre on the site it had purchased between Flora Road East and Taylor Road in North Makarewa, he said.

The consent, which Datagrid expects to apply for early this year, would be for a facility of up to 10 modules, each of 6500 square metres, which if all built would cover an area of about nine rugby pitches.

Galasso said between 800 and 1200 workers would be needed to build and kit-out the data centre during peak construction.

“We expect to start construction as soon as we get resource consent from Southland District Council, hopefully in the second half of this year,” he said.

The initial build would probably be for one module, costing more than $100m, which should be complete by the end of next year, he said.

The resource consent application would allow the data centre to consume up to 150 megawatts of power, which is more than a quarter of the power currently used by Southland’s Tiwai Point aluminium smelter.

Southland District Council mayor Gary Tong said he was stoked the technology venture was proceeding.

“With everything that’s going on with Covid, any development is great, and certainly the data centre concept has been front of mind since Rio Tinto announced they were going to be closing Tiwai,” he said.

“Once I am fully briefed, I’ll be doing my damndest to make sure the right processes are in place to make sure it goes through smoothly.”

Meridian Energy’s general manager of development, Guy Waipara, said it could supply Datagrid with up to 100MW of electricity whether or not the smelter remained open beyond the end of 2024 or Meridian facilitated the construction of a ‘green hydrogen’ facility in the region.

“Will we find a way – absolutely,” he said.

Galasso has suggested the South Island could replicate Iceland’s success in the international data centre industry.

“We are quite advanced with a few anchor customers, and we expect to make further announcements,” he said.

One advantage of locating data centres in Southland is that the region’s cool climate means they can be at least 15 per cent more power efficient than similar facilities in Auckland, Melbourne or Sydney, Galasso said.

The reduced requirement for cooling would generate millions of dollars of cost savings for Datagrid’s customers, he said.

“From a global perspective, it’s also ‘megawatts’ of power production that could be used for other industrial requirements.”

The data centre is only expected to require between 25 and 70 staff to operate once complete, but Galasso hoped it would boost the digital development of the region, “not only in Invercargill but also in Dunedin, Christchurch and Queenstown”.

Steve Canny, strategic projects manager at Southland’s regional development agency Great South, said it had been working on a policy to promote “weightless exports” for some time, and Datagrid felt like a fruition of that.

The Hawaiki Nui subsea cable network would be particularly beneficial for Southland, providing tech businesses with a low latency connection to eastern Australia and the US west coast, he said.

Great South was also looking at business opportunities to harness the waste heat that would be generated by the data centre, he said.

Galasso would not comment on how much Datagrid had paid for the North Makarewa site.

“We’ve been looking at a few options and it was really not easy to find the perfect location,” he said.

Country & Co property agent Pip Ryan, who facilitated the land sale, said it wasn’t the largest property deal in Southland, but had been one of the most interesting, and there had been some guessing in the local community about where the facility would go.

Dairy pasture in North Makarewa typically fetches about $30,000 a hectare and while Ryan could not comment on the premium Datagrid had paid for the site, the existing owners had “done well out of it”, he said.