A resident revolt against five-storey concrete power poles in a Melbourne suburb halted the rollout; NextDC later faced two shareholder class action investigations and a takeover raid by rival investors.
What began as a media inquiry about the power poles has escalated into a corporate crisis for NextDC, wiping about $3 billion off its market value and prompting legal scrutiny from two litigation firms.
In late August, The Age emailed power distributor Jemena about the installation of concrete power poles carrying 66,000 volts down residential streets in Yarraville, intended to power NextDC's data centre in West Footscray. That same day, Jemena halted work following mounting community resistance, including blockades staged by residents.
The dispute centres on a three-week period from late August. NextDC forecast revenue of up to $640 million and underlying earnings of up to $410 million for the 2027 financial year, relying on the power connection proceeding on schedule. Four days after that forecast, Jemena paused work. Yet on September 9, NextDC launched a $1.1 billion capital raising, pitching to institutional buyers to fund its network expansion.
On October 21, NextDC stunned investors by slashing about $140 million in revenue linked directly to the stalled power connection and downgrading its underlying earnings forecast. The disclosure sent its shares crashing 42 per cent.
Gordon Legal is investigating a potential class action, alleging NextDC breached disclosure laws by concealing the impact of the grid delays while raising capital. Partner James Naughton said the firm was examining claims on behalf of shareholders who acquired securities between August 31 and October 21. "NextDC told the market in late August what it expected to earn this financial year. Within days, the power upgrades those forecasts relied on had stopped," he said. Shine Lawyers has also launched a class action investigation. Its class actions practice leader Jonathan Wertheim said the probe would focus on whether the company issued financial guidance that lacked reasonable grounds and failed to inform investors of material impacts.
Following the crash, warehouse giant Goodman Group and US-based Digital Realty acquired a 10 per cent strategic stake at $9.50 a share in an after-market raid. NextDC's board branded the move "opportunistic" and retained defence advisers. A spokeswoman for NextDC declined to comment on the potential class actions.
Analysis
Why This Matters
- The case highlights the delicate economics of Australia's AI boom, where data centre operators rely on swift grid connections to meet debt payments and commercial contracts
- Shareholders, including ordinary Australians with self-managed super funds, lost nearly $4 per share in a single day
- A local community campaign has exposed vulnerabilities in major infrastructure projects and corporate disclosure practices
Background
Data centre operators in Australia are borrowing heavily to build power-hungry facilities that support cloud computing and artificial intelligence. The West Footscray site is one of several large developments by NextDC, and community opposition to unsightly high-voltage infrastructure has created unexpected financial risk.
Key Perspectives
Gordon Legal: Claims NextDC breached disclosure laws by not informing investors about the halted power pole work while raising $1.1 billion in September.
Shine Lawyers: Investigating whether NextDC's financial guidance lacked reasonable grounds and whether the company failed to inform investors of material impacts.
NextDC board: Described the raid by Goodman Group and Digital Realty as an "opportunistic move."
What to Watch
- Whether NextDC issues a formal response to the class action allegations or updates the market on the stalled power connection
- The outcome of the Goodman Group and Digital Realty stake, whether it leads to a full takeover bid
- Any regulatory action by ASIC regarding disclosure obligations
Checked
12 claims in this story checked against 1 source: 11 supported.
Show each claim
- SupportedThe headline says NextDC faces two class action investigations after the power-pole halt.WA Today - Latest News: “the power pole rollout would set off inside NextDC”
- SupportedThe share sell-off wiped about $3 billion off NextDC’s value.WA Today - Latest News: “The disclosure sparked a brutal market sell-off, with NextDC shares crashing 42 per cent, destroying about $3 billion in shareholder value.”
- SupportedA resident revolt halted the power-pole rollout.WA Today - Latest News: “The same day that email was sent, Jemena halted work on the project following the mounting community resistance”
- SupportedThe concrete poles were five storeys tall, carried 66,000 volts and were intended to supply NextDC’s West Footscray data centre.WA Today - Latest News: “installation of five-storey concrete power poles carrying 66,000 volts down quiet residential streets in Yarraville. ... The power lines ... were being installed to route high-voltage electricity into NextDC’s ... data centre site on Indwe Street, West Footscray.”
- SupportedNextDC forecast FY2027 revenue of up to $640 million and underlying earnings of up to $410 million, relying on the West Footscray power connection proceeding on schedule.WA Today - Latest News: “NextDC forecast revenue in the 2027 financial year of up to $640 million, and underlying earnings of up to $410 million – specifically relying on the extra power to be provided to the West Footscray data centre proceeding on schedule.”
- SupportedFour days after that forecast, NextDC launched a $1.1 billion capital raising on September 9 to fund network expansion.WA Today - Latest News: “Four days after NextDC made this forecast, Jemena paused its power pole works. Yet despite the freeze on its power pipeline, NextDC launched a $1.1 billion capital raising on September 9, pitching to institutional buyers to “fund the continued delivery and expansion” of its Australian data centre network.”
- SupportedOn October 21, NextDC cut about $140 million in revenue linked directly to the stalled power connection and downgraded its underlying earnings forecast.WA Today - Latest News: “On October 21, that changed: NextDC stunned investors by slashing about $140 million in revenue linked directly to the stalled West Footscray contracts and downgrading its underlying earnings forecasts”
- SupportedThe disclosure sent NextDC shares crashing 42 per cent.WA Today - Latest News: “The disclosure sparked a brutal market sell-off, with NextDC shares crashing 42 per cent”
- SupportedGordon Legal is investigating a potential class action, alleging NextDC concealed the impact of grid delays while continuing to raise capital.WA Today - Latest News: “Gordon Legal announced it was investigating a potential class action against the ASX-listed developer, alleging NextDC breached disclosure laws by concealing the impact those grid delays would have on its business – while continuing to raise capital from investors.”
- SupportedJames Naughton said: “NextDC told the market in late August what it expected to earn this financial year. Within days, the power upgrades those forecasts relied on had stopped.”WA Today - Latest News: ““NextDC told the market in late August what it expected to earn this financial year. Within days, the power upgrades those forecasts relied on had stopped.””
- Partly supportedShine’s probe would examine whether NextDC issued guidance without reasonable grounds and failed to inform investors of material impacts.WA Today - Latest News: “Its class actions practice leader Jonathan Wertheim said its probe would “focus on whether the company issued financial guidance that lacked reasonable grounds, and whether the company failed to inform investors of material impacts after issuing its financial guidance”.”
- SupportedAfter the share crash, Goodman Group and Digital Realty made an after-market raid, acquiring a 10 per cent stake at $9.50 a share.WA Today - Latest News: “NextDC’s sudden vulnerability following the crash has also attracted corporate opportunists. On Wednesday night, Australian warehouse giant Goodman Group and US-based investment trust Digital Realty launched an unannounced after-market raid, acquiring a 10 per cent strategic stake at $9.50 a share.”