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What is the latest news in digital infrastructure? Ropes & Gray lawyers gained insights into this question at TMT Finance USA in New York on October 7-8. We heard from senior dealmakers leading acquisitions, financings, and investments in data centers, fiber, telecoms, towers, and cloud businesses across North America.
Here are some key takeaways:
As data center energy consumption rises, developers are increasingly taking on the responsibility—and risk—of funding and building new capacity directly. The allocation of costs for substations and interconnections has shifted, with developers now expected to shoulder a larger share of these expenses and deploy at-risk capital. Community sentiment is also playing a greater role, as seen in recent pushback over power and water usage, highlighting the need for cooperative approaches to cost and impact allocation.
New classes of equity investors, including developers and real estate funds, are entering the data center space. These new entrants reflect the sector's growing appeal as a distinct asset class. Joint ventures between financial sponsors and strategic partners are emerging as a compelling model for growth, leveraging complementary strengths.
Balancing sustainability goals with the need for rapid power delivery is an ongoing challenge. Hyperscalers are advocating for sustainability measures even as they push for faster access to power, often pursuing transitional strategies that include natural gas while investing in upgrades to support alternative energy sources. Developers are making progress on efficiency and sustainability, including improvements in power usage effectiveness (PUE) and advanced facility designs.
Fiber optic networks remain foundational to digital infrastructure, especially as data center connectivity and AI workloads drive demand for robust networking solutions. The role of fiber is only growing as cloud and compute needs expand, and government initiatives continue to allocate capital to bridge the digital divide and expand connectivity. Ropes & Gray continues to advise on innovative deals in the fiber optics space, including a recent deal for Altice USA on a first-of-a-kind $1 billion asset-backed term loan facility. This deal marked a milestone in infrastructure-backed financing by securitizing the receivables generated by the company's Bronx and Brooklyn service area and the related hybrid-fiber coaxial (HFC) network assets.
The convergence of fixed and mobile networks is accelerating M&A activity, joint ventures, and substantial investment in fiber-to-the-premises projects. This is reshaping the competitive landscape for telecommunications companies, who are increasingly focused on regional consolidation and divestiture of international assets in response to deglobalization trends.
Supply chain constraints for critical infrastructure equipment are extending project timelines and increasing capital requirements. Suppliers are leveraging tight market conditions to command higher prices and require substantial upfront payments, sometimes as much as 100% deposits. Developers must plan earlier, lock in procurement sooner, and budget for elevated carrying costs to maintain schedule certainty.
Long-term infrastructure vehicles are emerging as a preferred approach for holding AI assets. Panelists highlighted the critical need to align asset life, lease tenor and capital duration to mitigate financing stress. Illustrating this trend, Ropes & Gray recently advised GI Partners on a single-asset continuation vehicle and a strategic investment by GI Data Infrastructure in Flexential, a leading provider of secure and flexible data center solutions.
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