Aligned has completed a historic billion-dollar round of financing specifically linked to sustainability. CEO Andrew Schaap is eyeing the possibilities...
It’s a mark of Andrew Schaap’s modesty that he says of the Covid-19 pandemic, “We’re weathering it well.” While other companies were diving for cover in the second quarter of 2020, Aligned – where Schaap is CEO – “saw a very big uptick in February, March, April, and May”.
“The pandemic has proven to be somewhat of a use case study in capacity planning for our big customers,” he explains. “All of them run analysis on what they can get out of a server, what they can get out of a CPU, what they can get out of a storage device or networking device. But the ones that are really born on web technologies are being pushed to the limit of what they can do. And so, our customers have been able to see just how effective adaptive infrastructure and our Delta3 cooling technology are when it comes to seamlessly addressing those peaks in demand.”
As well as higher headroom capacity, data patterns have changed. Schaap points to a gaming client using Aligned’s data centres which saw its traditional 6pm to 3am peak capacity shift as schools closed and the workforce headed home.
For Aligned’s customers, its modular, dynamic and highly scalable data solutions came into their own. And its finance partners have allowed the Dallas-based company to innovate its supply chain to meet the accelerated delivery needs of customers, specifically in the hyperscale space.
Another sunny day in Aligned’s fair-weathered pandemic came in September, when it closed a billion-dollar sustainability-linked financing led predominantly by ING. This is the first U.S. data center sustainability-linked financing and also one of the largest private debt raises in data center history.
Previously, after joining Aligned in 2017, Schaap struck a deal with Macquarie Infrastructure and Real Assets (MIRA) (“not your traditional private equity”) to recapitalise the business. “This is a capital-intensive business. So, you have to have capital partners that are highly capable of understanding what the business looks like.”
Traditionally, MIRA invests in infrastructure such as roads, bridges and highways. Aligned was the operating group’s first foray into infrastructure of the digital kind. The entity saw a clear understanding that in order to compete with the buying power afforded to publicly traded Fortune 500 data brands, Aligned needs to be able to work the angles. Schaap and his team laser-focused the business, including flipping the traditional data center supply chain / vendor-managed inventory (VMI) on its head.
“We did it essentially to counteract scale. Those [Fortune 500] guys have buying power with scale and they leverage that buying power to get the best outcome out of the suppliers. What we did, essentially, was approach the supply chain differently by deploying capital and committing to capacity.”
“Not everybody can do this. The publicly traded providers have to explain every dollar they spend to Wall Street, and get a return on it within a set period of time – or they get penalised.”
“But because of Macquarie, our other capital partners and our business model, we were able to essentially look at the supply chain and be bullish on where the market is going, where we think the market’s going and have manufacturers hold on to the inventory inside their warehouse or factory before shipping it on a just-in-time basis. We've done very well with that over the years; and it has proven effective during the pandemic. We had a handful of transactions that we were able to win on speed of delivery and our ability to get a customer moved in faster than the competition.”
“We didn’t start the VMI because of the pandemic, but It worked in our favor in a big, big way because we already had that gear forward committed.”
By ordering before equipment was needed, Aligned was able to offer manufacturers flexibility over their throughput. Rather than a lumpy work-to-order production schedule, with workers on triple overtime when demand surges, the company’s pre-ordering allowed manufacturers to allocate manufacturing to quieter periods, keeping productivity stable, and workers off furlough.
“What we try to do is to stabilize the throughput in the factory. Everyone we’ve spoken to has had phenomenal feedback about what we're doing because it solves a big problem for them – removing the lumpiness.”
It’s just one example of Schaap’s approach to partnerships, which revolves around listening to partners, understanding their challenges, and earning their respect. “Sometimes their problem is our problem. So, we have to be mindful of their problem.”
While Macquarie’s financing allows Aligned to game the supply chain, its debt financing with ING has beefed up its efforts to continue pursuing a strategic vision in sustainability.
“On the debt side, we're very pleased with the first sustainability-linked financing done in the United States. And ING really drove that with us and has just been a great partner.”
“We can be sustainable, have great uptime and reliability, and provide great service and support to our customers. We do all three and we do them in a thoughtful, meaningful way. So, we're delighted with it and looking forward to showcasing our sustainability even more. We're doing it because our customers care about it and it’s part of our DNA.”
Schaap gesticulates towards a 40-inch monitor on the wall where he can survey the top line performance metrics in real time. Unsurprisingly, he’s big on data, and Aligned is keen to pass on its data to help clients. “If we sell a customer a megawatt, let's give them the tools to figure out how to use as much of that megawatt as possible because that's the most sustainable thing to do. No stranded capacity; that's the best thing for the environment.”
For someone who is always “skating to where the puck is going to be versus where it is now,” asking Schaap to gaze into his crystal ball is to open a window to a new generation of data technology.
“Everybody is thinking about energy storage right now. How do you get as creative as you possibly can on energy storage? That’s the number one problem with green energy: it's cyclical. The sun, wind, hydro, all those things are somewhat cyclical. And so, you've got to find ways to store the energy. And so, the amount of dollars – or Euros or Yen – that are being put into it is incredibly high because that’s the new gold rush, to figure out how to store energy. And on the data side, we use a lot, so we’re really paying attention to what’s next.”