KUALA LUMPUR (Sept 9): Malaysian data centre operators could turn to the offshore US dollar bond market for funding “quite soon” as local banks become increasingly selective in financing a sector where data centre deals continue to grow in size, according to S&P Global Ratings.
S&P Global Ratings director of financial institutions ratings Nikita Anand said that with data centre exposure accounting for only 1% of total loans currently, Malaysian banks are not yet close to their lending limits.
“Generally, banks are not approaching their sectoral or single counterparty exposure limits yet, but we understand that this could be a constraint, especially for banks which are smaller and have a smaller capital base. It can limit their ability to lend further,” Anand said during S&P Global Ratings’ Spotlight on Emerging Markets webinar on Wednesday.
S&P Global Ratings director of corporate ratings Yijing Ng said the first such deals in Malaysia or the wider Asia-Pacific market are likely to be structured more conservatively as investors become familiar with data centre financing.
“Our expectation is that the first deal that hits Malaysia or the Apac market would likely be a little bit more conservative, a little bit more protected, as investors seek familiarity and comfort at first,” she said.
According to S&P, Malaysia’s data centre industry is expanding rapidly, with capacity projected to exceed 4,500 megawatts (MW) by 2030, driven by strong demand for cloud services and artificial intelligence (AI) workloads, as well as Malaysia’s strategic advantage as a hub close to Singapore.
To achieve this scale, the credit rating agency said the industry could face sizeable funding requirements. This funding is expected to support powered shells, power and cooling infrastructure, and equipment.
S&P had previously estimated that Malaysia’s data centre sector could require more than US$20 billion (RM81.3 billion) in funding over the next three years.
As a result, developers are expected to explore alternative funding sources, including project financing, private credit and offshore US dollar bond markets to bridge the funding gap.
These financing channels will be crucial to sustaining Malaysia’s data centre build-out, ensuring that capacity additions are delivered on time and aligned with the country’s digital agenda.