Chinese data center services company Shanghai Athub has agreed a large contract with Alibaba to build five custom hyperscale data centers, and then run them on behalf of the cloud giant, at a cost of up to 8.28 billion yuan ($1.3 billion), including power bills, over a ten-year operation period. The opening date is not decided, but Athub says it will deliver the facilities within 18 months from the start of the project.

Athub (sometimes styled @hub) would be paid 4.044 billion yan ($633 million) for the actual construction and management of the five sites, according to a letter of intent published by the Shanghai Stock Exchange, and linked by Reuters.The final bill to Athub could be more than doubled, if Alibaba purchases electricity through the company instead of paying the utilities directly.

Plans for growth

The letter of intent gives no details of the location of the planned data centers, but the five code names - ZH13, GH13, JN13, NW13 and HB41 - may give clues. The letter also says nothing about the size or capacity of the sites, and we can’t make a guess, as it is not clear whether all the costs are covered in the service fee.

Under the proposed deal, Athub would manage the construction project on behalf of Alibaba, installing and operating data center infrastructure including diesel generators, cooling systems, uninterruptible power supplies and cabinets. Athub would apparently own this equipment and provide a cloud data center hosting service for Alibaba.

Athub is not expecting any revenue from this deal in 2018, the letter of intent says, and can’t be too specific about when the project will be happening: “Profits will be staged during the 10-year operating period based on project delivery time and progress.” There are two options for Alibaba - Settlement Model I where Alibaba pays the utility itself, and the cost is estimated at around 4.044 billion yuan ($633m); or Settlement Model II where Athub sources electricity for Alibaba, and the total service fee is approximately RMB 8.280 billion, based on projected costs at the different locations during the course of the lifecycle.

”As the electricity service fee settles revenue at the actual cost incurred… there is no difference in the number of business profits generated in the two service models,” says the letter.

The deal is a big one for Athub - according to the letter, it alone could potentially give the company more revenue each year than its total income in 2017, which, the document says, “was approximately 520 million yuan, of which more than 99 percent of the revenue was using Settlement Model II.” 

The deal underlines just how fast China’s data center sector is growing, as businesses adopt digital services. The amount of data in China has been predicted to reach eight Zettabytes, by 2020 - 20 percent of the global total at that point.