Datagrid New Zealand has signed a long-term 140MW Power Purchase Option Agreement (PPOA) with Mercury, securing electricity pricing for its planned hyperscale AI campus in Southland and marking one of the largest dedicated power arrangements for AI infrastructure in the country to date. The 15-year agreement, equivalent to around 1.2TWh per year or roughly 3% of New Zealand’s national electricity demand, is positioned as a cornerstone for the company’s 280MW “AI factory” development, which recently received resource consent approval and is targeting construction from mid-2026.
The deal provides Datagrid with long-term price certainty as it looks to attract global AI and cloud workloads to the South Island, where renewable energy availability and cooler ambient temperatures are central to its design assumptions. New Zealand already generates around 85-90 % of its electricity from renewable sources, with the South Island operating on fully renewable generation, a factor Datagrid is leveraging to position the project as a low-carbon destination for high-density compute.
Datagrid New Zealand CEO Rémi Galasso said the agreement underpins the commercial viability of the project. “This 140MW agreement with Mercury is a cornerstone for Datagrid New Zealand. It enables us to offer international AI players a competitive platform powered by renewable energy, natural cooling advantages, and long-term stability in Southland,” he said. “In a world of increasing global uncertainty, we see New Zealand evolving into a secure and trusted hub for AI infrastructure.”
Mercury, a major renewable generator in New Zealand, framed the deal as part of a broader investment cycle in generation capacity. “It’s exciting to support New Zealand’s first AI Factory,” said CEO Stew Hamilton. “Data centres represent a NZD 70 billion economic growth opportunity for New Zealand… Having guaranteed customers buying a significant amount of generation means we can continue to invest significantly in new renewable generation.”
The agreement reflects a model increasingly used to unlock new power infrastructure, where hyperscale or high-load customers act as anchor offtakers to support financing of renewable projects. Mercury recently completed expansion of its Ngā Tamariki geothermal station, with additional wind projects at Kaiwera Downs and Kaiwaikawe due online in 2026, alongside a broader pipeline of investment including planned hydro refurbishments.
Build-out by 2028
For Datagrid, the power arrangement sits alongside a broader infrastructure strategy that integrates energy, compute, and connectivity. The Southland campus is designed to reach 280MW at full build-out by 2028, with a targeted power usage effectiveness (PUE) below 1.1, significantly below the global average of around 1.5. The project is expected to create more than 1,200 construction jobs, with modelling suggesting wider economic impacts including billions in GDP contribution during the build phase.
A key component of the development is the proposed Tasman Ring Network, a subsea cable system that would provide the first direct international connectivity landing in New Zealand’s South Island. The cable is intended to reduce latency to Australia and introduce geographic diversity to the country’s connectivity infrastructure, which is currently concentrated in the North Island.
Datagrid has argued that its approach differs from some international markets where data centre growth has placed pressure on existing grids. The company’s model is based on long-term contracted power agreements and dedicated grid connections, with the intention of enabling new renewable generation rather than competing with existing supply. It is also exploring load flexibility and potential integration with battery storage to align demand with grid conditions.
The scale of the project places it among the largest single electricity users in New Zealand once operational, second only to the Tiwai Point aluminium smelter, according to the companies. However, large industrial loads have historically played a role in underpinning major generation assets in the country, and Datagrid is positioning its development within that precedent.