SoftBank Group has taken a $3.7 billion loss on money it paid in advance for power generation equipment for its US AI data center projects. The charge, 597.2 billion yen for the six months to 30 September, came with the fiscal second-quarter results on 10 November, and CNBC reports that the projects concerned include the PORTS-Pike Technology Campus in Pike County, Ohio. SoftBank says the loss follows changes to its procurement plans for that equipment. For the quarter the group reported a net loss of about 1.12 trillion yen, roughly $7 billion, after a profit of 2.5 trillion yen a year earlier.
What Was Paid And What Comes Back
The orders could not be refunded once they were cancelled, and the cancellations carried fees on top, chief accounting officer Kazuko Kimiwada said according to Reuters. Against that, SoftBank is entitled to rebates of up to $2.1 billion on future purchases. CNBC puts the cumulative payments for generation equipment for the US AI projects at $9.48 billion at the end of September, so the write-off covers only part of what is out with suppliers.
What the reports do not say is just as telling. No supplier is named, nor the type of machine, nor how many megawatts the changed orders covered. Financing costs, the other weight on the result, more than doubled in the quarter to about 462 billion yen, Reuters writes.
Ordered Before The Specification Was Settled
Chief financial officer Yoshimitsu Goto gave the reason plainly. Competition for energy supply and generation equipment was so intense that SoftBank bought before its long-term specifications were fixed, and a plan that looked fine a year or two ago often has to change, he said according to Reuters. He also expects a discussion on how to value assets the group no longer needs. TipRanks reports that Goto ruled out downsizing the Ohio project but said a thorough reassessment is under way, procurement strategy included.
The Ohio site is not small. SoftBank pointed to its 20-year lease with OpenAI for 8 GW of IT capacity at a data center project in the state, and in October PJM filed a study agreement for SoftBank's campus at the former Portsmouth site covering 9.6 GW of load and 10.2 GW of new gas generation, as we reported in our PJM item.
A Production Slot Has A Price
The sequence behind this loss is common across the market now. Machines are reserved while the site layout, the duty and the grid arrangement are still open, because waiting means losing the delivery slot. When the campus plan moves later - more grid supply, a different unit size, a new phasing - the reserved order no longer fits, and the deposit pays for the change. The same happens one level down: switchgear, fuel systems, enclosures and cooling specified around one generator model all have to be looked at again when the model changes. In enquiries for data center power we ask early which parts of the specification are frozen and which still hang on a decision that has not been taken. Here, apparently, a large part was still open.
Sources: CNBC, Reuters (via AOL), TipRanks
