Power agreement secured for AI factory near Invercargill
Thursday, 19 March 2026
Confirmation of a power agreement for the planned AI factory near Invercargill means Southland will have two of the hungriest electricity using plants in the country.
Datagrid New Zealand has announced the signing of a 140-megawatt long-term power purchase option agreement with Mercury, saying the agreement secured electricity price certainty for its AI factory.
The company previously said that once the facility was operational it would make Datagrid NZ the country’s second-largest electricity user after the aluminium smelter at Tiwai Point.
Its agreement with Mercury followed Datagrid receiving resource consent for the $4b AI factory earlier in March, Construction was expected to begin in June and take three years to complete.
A press release from Datagrid and Mercury said the 140MW, 1.2 terawatt hours per year power agreement would support advanced artificial intelligence workloads, sovereign cloud services, and high-density computing operations at the AI factory.
The 15-year agreement represented one of the largest single commercial power arrangements dedicated to AI and high-performance computing infrastructure in New Zealand, they added.
1.2 terawatt hours per year was equivalent to 3% of national demand.
Mercury chief executive Stew Hamilton said having guaranteed customers buying a significant amount of generation meant it could continue to invest significantly in new renewable generation for New Zealand, helping meet future demand growth.
Mercury had just completed expansion of its Ngā Tamariki Geothermal Station near Taupō, while stage 2 of its Kaiwera Downs Wind Farm near Gore and Kaiwaikawe Wind Farm near Dargaville were both due to begin generating in 2026, he said.
“Together the three developments represent $1 billion investment in new renewables.”
Datagrid chief executive Rémi Galasso said the agreement enabled it to offer international AI players a competitive platform powered by renewable energy, natural cooling advantages and long-term stability in Southland.
Invercargill mayor Tom Campbell said the electricity supply agreement between Datagrid and Mercury was probably the most important part of the project.
“It does mean the project is moving forward.”
The new renewable electricity projects which would supply the AI factory would be backed up by hydro, and in addition to this, Datagrid was installing a large number of diesel generators which would be fired up if required, Campbell said.
“That’s the backup … but for the vast majority of time they will be supplied from the grid.”
Campbell said he saw no negatives from Southland having two of the biggest electricity users in the country.
Fourteen percent of New Zealand’s exports already came out of Southland, before the AI factory was built, he said.
“We are a major value generating region of New Zealand, and that tends to be in fairly energy intensive areas, but what we are doing is using energy which is nearly all generated in Southland, and creating value in Southland,” Campbell said.
“Not only does that value come back to Southland and stay in Southland, but also a lot of that value goes out to the rest of New Zealand.”