Datagrid New Zealand has signed a 15-year, 140MW Power Purchase Option Agreement (PPOA) with Mercury, a New Zealand-based power producer, to power its planned hyperscale AI campus in Southland, New Zealand.

The agreement will see Mercury provide approximately 1.2TWh of power annually to the data center, which is expected to underpin the first phase of its proposed 280MW “AI factory” data center.

Datagrid acquired approval to develop the campus earlier this month, which is set to be located on a 78,000 sqm (840,000 sq ft) plot in Invercargill on the country’s South Island. The company is targeting construction from mid-2026. The project is designed to reach 280MW by 2028, targeting a power usage effectiveness (PUE) below 1.1.

According to the company, its deal with Mercury will provide it with price certainty as it seeks to attract global AI and cloud workloads, leveraging the South Island’s fully renewable power mix and cooler climate to position the site as a low-carbon compute location.

Datagrid is also planning the Tasman Ring Network, a subsea cable system aimed at improving South Island connectivity and reducing reliance on North Island landing points. Plans for the Tasman Ring Network were announced in late 2024. The 6,000km (3,728 miles) cable will connect Auckland, New Plymouth, Greymouth, and Invercargill in New Zealand to Sydney and Melbourne in Australia. The system is set to offer 540 Tbps and go live in 2027.

“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,” said CEO Rémi Galasso. “In a world of increasing global uncertainty, we see New Zealand evolving into a secure and trusted hub for AI infrastructure.”

Mercury said that the agreement will support further investment in generation capacity, with hyperscale demand acting as an anchor for new projects. The company is a major renewable generator in the country, operating nine river hydro stations, five geothermal plants, and several wind farms.

“It’s exciting to support New Zealand’s first AI Factory,” said Mercury CEO Stew Hamilton. “Data centers represent a NZD 70 billion ($40.6bn) 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.”