Its long-planned “Tasman Ring” cable – which will allow compute power from its “AI factory” to be exported offshore – is a key part of making its $5b investment pay off.

The initial Tasman Ring Network design had a 6000km cable linking Invercargill, Hobart, Melbourne, Sydney, Auckland, New Plymouth and Greymouth.

“The full ring – including landings in Greymouth, New Plymouth and Auckland – remains our objective for future phases, though no commitment has yet been signed with suppliers,” Galasso said.

“The remaining balance will be funded alongside the data centre facility. We expect the system to enter service in 2029.”

Galasso said local cable-landing consents had been secured. Australian consents were pending, but he did not anticipate problems given the sites already had cables coming in (submarine fibre-optic cable landings are unobtrusive; people at Auckland’s Takapuna beach are unaware the Southern Cross Cable comes to shore under their feet).

Last week, Galasso announced $53 million in funding from Mercury as the power company took a 12.5% stake in Datagrid. Those funds will be used for initial earthworks, expected to begin next month. Meanwhile, Galasso will embark on a Series B funding round, seeking to raise funds for the data centre proper and the building of the Tasman Ring.

Datagrid’s promotional videos put the project at US$3b ($5b) and a 78,000sq m facility that would consume 280 megawatts initially, rising to 1 gigawatt (for context, a Fitch survey released earlier this week said all of New Zealand’s data centres today consume 172MW, with a further 89.MW was under construction; the Tiwai Point Smelter 570MW – making it, as a single facility, responsible for just under 13% of NZ’s power consumption).

But Galasso told the Herald the final design, including the megawattage, would depend on how much money Datagrid ultimately raised. Much of it would be credit funding, he said. The same is now true, with its revised “phase 1″ design, with no timetable for further phases.

Chorus signed on as Tasman Ring partner, only to pull out last year, citing unexpectedly low customer demand and difficulty securing a cable-laying vessel before 2030.

Datagrid took the project in-house.

Once it gets funded and laid, the Tasman Ring will have a 160 terabit per second capacity (the part Spark-owned Southern Cross says the most recent trans-Pacific cable, Next, has 100tbps capacity.

Cable roots

Galasso knows cable. He was the founder of Hawaiki, whose trans-Pacific cable broke the Southern Cross Cable’s nearly two-decade monopoly when it launched in 2018. The telco exec turned entrepreneur raised around US$300m for that project, from investors including rich listers Malcom Dick and the late Sir Eion Edgar, while Tex Edwards came on board as a director.

In 2021, Hawaiki Cable was sold to Singapore-based BW Group for an undisclosed sum. Galasso joined BW Group, which in turn has become Datagrid’s primary backer.

“Back in 2018, the Hawaiki cable ended an 18-year monopoly held by the Southern Cross Cable, driving a fivefold reduction in internet transit prices in New Zealand, making the country as attractive as Australia in terms of international connectivity pricing,” Galasso said.

Dangling a carrot

The Tasman Ring will be the first cable “to unlock the potential of the South Island and boost its digital economy”, he said.

Crown research agency Reannz took a $65m anchor customer contract with Hawaiki in 2014, which was widely seen as the National-led Government of the day giving Galasso, Edwards and Dick a leg up as they sought to finalise overall funding, and boost price competition for international broadband connectivity.

Would Galasso like to see today’s Government do something similar for the Tasman Ring?

Galasso is dangling a lure – for a limited time.

“We believe the Tasman Ring would be a game changer for South Island universities and research centres, and we have decided to reserve a dedicated fibre pair in our design for public use – even though we have not yet received any confirmation of interest from the Government.

“We will need to decide whether to keep or remove this fibre pair in Q1 2027.”

(If Tasman Ring were a motorway, “pair” could be thought of as a reserved lane. Tasman Ring’s Phase 1 design will have eight pairs.)

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Datagrid initially signed Chorus as its Tasman Ring partner, but after the UFB network operator pulled out, it took the project in-house.

Chorus chief executive Mark Aue earlier told the Herald that anchor customer demand wasn’t as strong as anticipated. There was also a logistical difficulty: cable-laying ships were booked until 2030.

Galasso is confident he can beat that timetable – but he’ll have to finalise funding first.

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.