Shanghai Baosight Software, the software business unit of China’s iron and steel giant Baosteel, plans to raise 1.18 billion CNY (US$188.8 million) to build Phase III of its Baozhiyun data center site by issuing new shares, according to news reports.

The whole project - including two already planned phases - will add a new facility converted from an abandoned industrial building. It involves upgrading and renovating the building, and purchasing power, cooling, fire detection and suppression, security and monitoring systems, all of which are aimed to set up a highly available data centre environment for customers’ IT equipment.

After renovation, it is estimated that the facility will bring online about 9500 racks, providing IT equipment hosting and  outsourcing services to customers.

Nearly 1000 racks

The project is planned in 3 stages, which will be completed within 25 months. In stage 1, about 1000 racks will be put into use by June 30th, 2015;  in stage 2, about 6500 racks will be brought online by December 31st, 2015; and in stage 3, about 2000 racks will be online by December 31st 2016.

It is estimated that the facility will run 60 percent of its workload in stage 1, followed by 95% pecent of its workload in stage 2, and then 100 percent in the final stage and after.

Baosight said it is financing through a private placement of shares in order to move quickly and seize a share of the data centre market, and in time contribute more to the overall revenue of the Baosteel Group. In addition, it will help the company to increase the size of its total assets, decrease debt/asset ratio, and reduce financial risk.

Baosight will ussue 36.852 million shares at 32.02CNY/share (US$5.1232/share) in private placement, according to Shanghai Securities News. Baosteel, the controlling shareholder of Baosight Software, will buy 20.454m shares, accounting for 55.5 percent of the total shares issued by Baosight. This percentage is the same as that of Q3 2014, when

Baosteel took 202m shares of the company, as revealed by Baosight’s financial report for the quarter.

The 1.18bn CNY raised by this private placement will be wholly used for developing Phase III of Baozhiyun facility. However, before the raised money is ready, Baosight Software will firstly use its own capital or make loans from banks to construct the facility, and such expenditures will be replaced by the raised money at a later stage.

Before the launch of Phase III, Baosight has invested 520 m CNY (or $83.2m) to develop Phase II of the facility. This is a custom-made data center of 3,800 racks for China Mobile. According to the 2.5~2.6bn CNY(or $400~416m) contract signed between the two parties in June 2014, Baosight will firstly build the facility with its own money, and the Shanghai subsidiary of China Mobile will pay Baosight for hosting services and power rates on a yearly basis over 10 years.

In 2013, Baosight Software raised money by issuing A-shares in a private placement for constructing Phase I of Baozhiyun IDC facility, which has been delivered to Shanghai subsidiary of Shanghai Telecom.

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