Speaker 1: 0:16

So, Elaya, how long has Elaya been operating? From a day-to-day perspective.

Speaker 2: 0:22

So I always get pushback from my CEO about it, because whenever he says that LA was founded in 2018, I always go and well, officially, la opened when it opens its sales department. That's true, that's when I arrived, that's when I arrived, but no, officially it's 2018. La was born by an acquisition of five data centers from a chapter 11 incumbent that was going through a chapter 11 in Brazil. Alessandro Lombardi, who is the founder and the CEO of the company, bought those five data centers to start with in 2018.

Speaker 1: 0:54

And so now nine data centers. So you've obviously, are you building, are you buying more data centers and I know you've got a lot of capital that you bring, yes, so what's the plan?

Speaker 2: 1:03

So we started with those five initial data centers. We ended up buying another one in Rio de Janeiro, a second one in Porto Alegre and, most recently last month, we just closed deal with two extra data centers in Sao Paulo as well New builds or existing data centers. So the reason why and all of them are existing data centers, but the last acquisitions that we did, which were those two data centers in Sao Paulo the thing with it is that we acquired a facility that exists, but we acquired a land bank as well Okay, so you can expand and a substation that has 100 megawatts of power available. Okay, so that's to address a topic that we will probably talk a little bit about up front. But yeah, that's one of the reasons why we bought it in that way so I mean we'll pivot quickly, like on that topic.

Speaker 1: 1:51

What we're seeing globally is this well, maybe even more like more pressure in the us is this sort of insatiable demand for ai and all these gpus, which has really been driven by sort of these hyperscalers. The challenge at the moment and and well, first I'm curious as to whether that's playing out in Brazil, but also expanding on the challenge that the rest of the world seem to have, particularly in the US, is they can't access power. So as much of the land that you want, that's fine, but they can't get access to power. What I found fascinating is you guys are 100% renewable energy A and B. How's that playing out in Brazil?

Speaker 2: 2:25

Yeah, that's the good thing about Brazil. If you look into the energy matrix of Brazil, almost 90% of it comes from renewable sources. Amazing, that's massive. What is that? What's driving that? Is it like hydro? I mean, hydro is a big chunk of it, 45% to 50% of it is still hydro. Yeah, but every year Brazil adds four gigawatts of power to its matrix, and from those four gigawatts of power, 95% of it comes from renewable sources and all of it is solar and wind. So we are not adding hydro too much anymore. So eventually the balance between hydro and wind and solar will surpass, so hydro always becomes base load, yeah.

Speaker 1: 3:04

and then you've got all these additional renewables coming through yeah so as of now, 90 percent.

Speaker 2: 3:09

Uh, I think until 2030.

Speaker 1: 3:11

We almost reached 95 percent of renewable in brazil and that's massive, a lesson for the rest of the world yeah, but and if you compare that in the region, uh, argentina is 30 renewable, chile 30 renewables, that's amazing.

Speaker 2: 3:23

mexico 15% to 20% renewable, us 20% renewable, yeah yeah. And the price of the power is also cheap. I mean six cents of a dollar. It's very reasonable for 100% renewable right, so you don't pay extra taxes or anything to get renewable power in Brazil. I mean, I feel like we have a good solution. It's working In the very short term. If you need power, you can come to Brazil easily.

Speaker 1: 3:48

So does that attract a global investment? When it comes to sort of hey, we're a cloud provider, we want to put more GPUs there, so how does the cloud provider playing out? And then how does that play out with GPUs?

Speaker 2: 4:02

I mean it certainly attracts investors worldwide. I mean, digital Bridge is invested in the country, digital Rarity is invested in the country, equinix is invested in the country. So all those big players are there as well. We, although we are a Brazilian company, founded by an Italian, but he lives in Brazil for multiple years now, but we are a Brazilian company as well. Though Goldman Sachs is a partner with the organization, they have a minority stake in the business.

Speaker 2: 4:32

Of course, there is a lot of demand, mainly because of the local population and Brazil is not a small country. You have almost 240 million people. So the local demand by itself already drives a lot of the usage of the cloud. But with the AI story, I mean there is a lot of conversations around hey, I need AI places or AI pods as fast as possible and I'm not being able to access that in the speed that I want in the US. Where can I go? So this conversation I have been having this conversation for at least one year, if not more, with all the usual suspects, all the hyperscalers, everybody discussing about the possibility of coming into the continent.

Speaker 2: 5:16

Some of them made a move already in other countries, mainly cloud pops. There are zero AI pops in Brazil from those big hyperscalers. There is small artificial intelligence deployment in uruguay, but very small, nothing as you compare to what you see in the uf um. But there is a lot of conversations about let's set up ai over there and how we ship gpus, and that's probably the the only challenge that we still have a little bit of work to do, which is shipping equipment into Brazil. People tend to think about it and say, well, that's too expensive, a little tricky yeah it is, and it isn't. There are ways to go around those things and figuring out how to bring equipment into the country in the cheapest way possible. I'm not saying that it would be cheap, but it's way cheaper than what everybody's saying out there.

Speaker 2: 6:11

So, if you have a transparent and open conversation with a local player, like we are, for example, and there are ways of reducing our importation taxes into the country, so that could potentially come back into your business case and say, hey, brazil was a problem, but now I'm thinking differently about how I bring the equipment in. That could be the last barrier to actually move into that direction.

Speaker 1: 6:38

Got it. That's awesome. And so with your customers. What are the majority of your data centers? Are they broken down between hyperscaler and sort of colo customers? What does that look like?

Speaker 2: 6:48

So we have nine facilities, 20 megawatts operational spreaded across those nine data centers. And which cities are they in? So Sao Paulo, of course, rio de Janeiro, brasilia, which is a federal district in Brazil, and then Curitiba in Porto Alegre, which is further south towards Argentina. So roughly 150 customers, a good mix in terms of financial providers, so banks, schools, universities, enterprise, segment, federal we have a couple of federal branches, so it's a very good mix, a very good blend, and also, of course, the international customers as well. So I would say that we are very well spread. There is no one vertical that stands out. So if you're looking into it, you can see why Megaport looked at it and said well, this looks like a good platform. That's mainly the reason why we are very spread across multiple verticals, yes, and also touching the cities where you have access to the cloud nodes yes, that's what you need, right.

Speaker 1: 7:57

And so that customer base. Are you seeing them expand their on-premise data centers, a mix of cloud, on-premise how is that playing out?

Speaker 2: 8:04

So in Brazil there is a number. This is probably five years ago, the numbers should have changed a little bit but 80% of the Brazilian market for uh data center.

Speaker 1: 8:19

Um, if you look into into the uh numbers are in-house on like an unprimised yes, um and that, and so that was race. How long?

Speaker 2: 8:31

five years ago. Yeah, but that's, that's brazil as a whole, right? If you you take Sao Paulo and Rio out of that equation, because those are the most well-developed data center markets, right? So in those cities probably there is a different number, right? But if you take those two cities out and you go Porto Alegre, curitiba, brasilia, where we are operating, those numbers are even higher because there was a lack of a data center, a multi-tenant, carrier-neutral data center provider, on those cities hence you say 95, like say 95 of that reason up inside their offices, yeah, not even in colo.

Speaker 1: 9:06

No, so it's not cloud, it's not colo, they're actually still on on their own premises, okay and and again.

Speaker 2: 9:14

There are multiple reasons why this was the case Lack of a multi-tenant data center in that city. So latency was an issue. So I can't move my workload, everything, into Sao Paulo. I mean rough numbers, Sao Paulo. From Porto Alegre to Sao Paulo you can reach almost 25, up to 30 milliseconds of latency. It's a long distance. You can't move 100% of your workload to the cloud, right. So that's another reason why and I show in the application you need the application closer to you, so you need to put that where you're going to put it. I'm going to put it in my office and because they don't have another option in the city Interesting.

Speaker 2: 9:52

So when we joined with those data centers in those cities I give you Porto Alegre, for example Porto Alegre went through a huge flood last year, almost like a Katrina version of Brazil. It was horrible and we have been talking with the local enterprises about moving into our own data center, right. But when the flood hit, there were a lot of data centers that went underwater because they were in lower places. I mean, they weren't prepared for it. We had equipments coming into our data center by boat and we had to set up very fast. We had to set up pops of those old data centers moving into our facility.

Speaker 2: 10:36

Eventually, the market understood why there is a need for a data center, a person that only does that. So that's one way of showing and explaining to them hey, there is a reason why you should come to a multi-tenant data center. This is just what we do. We know what we're using. Not to say that you cannot do it by yourself. I mean, I'm not calling anybody stupid. Of course you can do by yourself, but there are efficiencies in scale that me, as a data center operator, can achieve that you can't Absolutely, Just because I'm bigger and I'm serving and resiliency, there you go, so forth, flooding evidently.

Speaker 2: 11:13

So you have to cover a lot of aspects. Certification, for example. We just got our iraq certification for uh renewable, so all our facilities got iraq certified, showing to everybody that 100 of our energy is which is crazy 100 renewable.

Speaker 2: 11:31

Yes, uh, it is that is part also of our sustainability link bond. We were the first company in the Americas region to actually release a sustainability-linked bond, which means that I have certain targets that I have to achieve. Behold that PUEs, wes, percentage of renewable usage and women in leadership as well. If I don't reach those borders, I get a higher interest rate in my no way in my dad. So that's how big we are invested in this thesis of hey, this is only one country, one planet. We need to figure out a way to live together with everybody else. Let's do something about it. And we took a dab into it. Uh, that's an awesome story. We have this keen in the game well, and that's the.

Speaker 1: 12:15

the other piece that most people don't know is what's Brazil in terms of renewable energy in general? If I just plug into the grid, what's the renewable rate for the country? So, 90%, 9-0.

Speaker 2: 12:27

9-0. And again compare that with Chile, Argentina, Mexico, US they are all sub-30% Everywhere.

Speaker 1: 12:36

Yeah, the whole world needs to learn.

Speaker 2: 12:37

And again, we are not surcharging you because we are using renewable energy. You can come into Brazil and pay $0.06 of a dollar. That's a very reasonable balance of power, right? Of course, brazil has the advantage of having the Amazon basin, we have a lot of rivers and et cetera. We don't have a shortage of water, but yeah, that's.

Speaker 1: 12:59

And the unique thing, one of the challenges for most renewables is wind, solar and even tidal in a few of these other generations. The challenge is they don't get base load, whereas hydro always has a base load, it's a natural base load, and so the issue is you're constantly trying to fill everything with a battery, or then you're going to have to offset with coal or gas or whatever else, which is unique in that you've got base load of hydro, which means you can then just go and put all the other renewables in there. So it's actually a good, it's a cool story for the country actually it is.

Speaker 2: 13:33

I totally agree. Right now, we are in a very good position in terms of getting access to power. Power actually is. There are two problems with power right. One is generation. We'll discuss it a little bit. The other one is capillarity. How do you transfer that power that is being generated in that particular place?

Speaker 2: 13:54

And distribute it to your data center, because my data center is not in the Amazon base? Yeah, of course it's in Rio, sao Paulo, brazil. So how do you bring everything? And Brazil has an interesting aspect with it, which is in Brazil you can build your power line, your power grid, and later on donate that to the utility company. Oh, that's unique. So that means you can expedite things. Wow, yeah, you don't have to wait for the government to put transmission. Of course there are some limitations about it. I can have access to 500 kilovolt lines. I can only have access to 138 kV, but again, it's a way to expedite things a little bit. You move those 138 kV to your facility, build that from the 138, 2,000 amps, you can pull almost one gigawatt of power already. Yeah, wow, I mean, it's a good starting point.

Speaker 1: 14:42

Yeah, that is. Yeah. Actually, a lot of data centers in the US can't move because of distribution. In some cases, it's not the actual power itself, it's the distribution that's the issue, and then that becomes a 10-year journey or what have you? Okay, cool On the connectivity side. So what are you seeing trend-wise play out in Brazil, Like I'd say, like what you're saying is, if 90-something percent are on-premise, then they're first moving to a colo. Yeah, there's going to be some cloud component and then there's going to be the connectivity between that. How's that all sort of shuffling together?

Speaker 2: 15:17

So the first line that we discussed is I was in my previous company that I used to work with. When you look into the situations of those on-prem guys, they were right in the middle of the cloud boom. Cloud in Brazil arrives between 2014, 15, whatever. So they were assessing the possibility of jumping the cycle and, instead of going co-location in a facility and then going to the cloud, they go straight to the cloud. A lot of companies did that, but they did that without the current preparation, so their application wasn't ready for that, and now we're facing repatriation of everything that's going to the cloud. Now it's moving back to the co-location, and is that cost-related?

Speaker 1: 15:56

A lot of it is cost-related. They've just gone. Whoa just got sticker shock when they added it.

Speaker 2: 16:01

So what I'm seeing now is that they are more conservative around. Let's go to the cloud. No, let's move it into a data center and let's let's prepare ourselves for a potential next move. Um, and then we figure that out. Yeah, and this is another thing that elea has to offer to the market that no other provider might could offer, because we have the flexibility of having data centers in five different cities. Yeah, so if the company signs a deal with me, I can be as flexible as having an umbrella agreement that he signs, say 10 cabinets, for example. That's 10 cabinets in the country you put whatever you want to. Yeah, so if you move your workload to me, saying Porto Alegre, for example, to start with, but later on you go know whatito, I feel like we figured out our applications have. If you are a national company, you have access to multiple markets. You have users in multiple markets. All of a sudden, with this kind of platform, I can give you something that nobody else in the market can give you.

Speaker 1: 17:21

That's awesome. And so then the partnership between us. I mean, our vision is always choice offer like instantaneous 60 seconds, provisioning for choice and ideally also an ability to expand globally. So obviously our reach. We're in 26 different countries. We're finally in Brazil Thanks Matty's over there. Thank you, matty, but we're excited to land there. But we connect, obviously, to every cloud on ramp pretty much on the planet and all these different locations, and everything's either delivered in 60 seconds or provisioned by a code. How do you think the NAS market, which is what we have, I mean, when you enter Brazil, how do you think that'll play out? How do you think that'll be received by customers?

Speaker 2: 18:00

I'm dying to see that offer play in Brazil. I mean, being in the industry for a while now almost 15 years I can see the benefits that a platform like that might bring into the country. Again, we are a Brazilian company the core model behind the company. Of course we are not a non-profit. Of course we are for-profit. We are here to make money as well, but, being a 100% Brazilian company, we are always looking to the possibility or the opportunity to help develop the country and develop areas that didn't have access to what we are bringing. Yes, so if you look into the situation of the connectivity within Brazil, although we do have very good fiber providers, they are not automated.

Speaker 1: 18:44

No, it's always a long provision. Yes, they are not automated.

Speaker 2: 18:47

No, it's always a long provision. Yes, so if a customer of mine wants a transport system between CDA and CDB, I mean if they have access to a platform like yours, for example, where they can actually get into, establish that connection, go up and down with that VC as fast as you are able to deliver, definitely there is a space to do it. Yes, and there is nobody doing that in the market. Yeah, I mean you as first entrants. I'm sure that you drive a lot of things into you.

Speaker 1: 19:15

Yeah, I mean our vision is always to do cloud-like services to any customer, but as a network, and so we should always be the lowest cost, the fastest to deliver and more resilient than what you could get before, and so usually it's very rare to have a product that delivers all three. Typically you get one or two, so we always see it as a no-brainer for our customers. But it's exciting to land in a country where I don't think we've seen a lot of NAS, and so we're pumped. So thank you for being the first launch partner with us there. Yeah, really exciting. By all means, it's a pleasure.

Speaker 2: 19:50

I mean, I've been talking with you guys for what? Three years Since I arrived. We're late. I mean we are very excited for this partnership because, again, it touches from our standpoint. It touches multiple aspects of our strategy and our values. Yes, as I was telling in the beginning, we value developing the digitalization in the country as well. Of course, you're starting your pop in Sao Paulo already, looking into Rio, planning expansions in all the other cities. Yeah, we want to operate. Yeah, we, as ourselves, we are also planning expansions in the country. There are opportunities to put data centers in places that don't exist yet, so there is always a way that we can grow. You can follow as well. Put your platform over there and we all benefit from it as a community, as a country, as a data center platform, you guys, is a nice solution as well. I feel like it's a win-win scenario. Glad you were able to see it, as we are seeing as well. It would be a blast.

Speaker 1: 20:55

For someone who's not familiar with Brazil. Talk us through the cities that A you've invested in, b you're investing in, and why like. How does that play out?

Speaker 2: 21:04

So the main hub of Brazil is of course São Paulo. Sao Paulo alone represents 40% of the market share of Latin America. It's gigantic, it is big. But quick parenthesis here, as we say in Portuguese how big is the market in Australia, in?

Speaker 1: 21:23

terms of people, in terms of power, oh power.

Speaker 2: 21:25

I don't actually know so rough numbers one gigawatt of power across, oh power, I didn't actually know so rough numbers. One gigawatt of power across the whole country. Is that what it is? Yeah, in Australia, in Australia as well. That's it the whole thing. How big is it in terms of population?

Speaker 1: 21:38

We've got 30, maybe 27 million people or something.

Speaker 2: 21:41

So we almost 10x you, yes, and we have half the power that you guys have. Oh, I'm so glad. Clearly there is an opportunity.

Speaker 1: 21:50

Listen, Jay, we're burning a lot of power, these Australians. What are they? You're burning a lot of coal. You know what they're doing. They're brewing a lot of beer. Oh, they're Making a lot of meat pies.

Speaker 2: 21:56

That's a good way of looking at it.

Speaker 1: 22:02

I never talk about it.

Speaker 2: 22:02

I mean, there Might be cooking a lot of coals, so my point here is we are a big country, there is a big local demand and there is a lack of data centers operators that are looking into that opportunity. Everybody is 100% focused in Sao Paulo. So the thing that ILEA does is actually drives digitalization outside of Sao Paulo. Yes, we have three data centers in Sao Paulo. That's not to say that we are not operating there. Of course we are, but there are other opportunities in the country. So we got the country to the further south again Curitiba, Porto Alegre. That's fairly covert. But if you go north, we only have Brasília, which is the federal district of Brazil, right in the middle of the country. Then you have all the northern region. There are zero data centers there. When I say data center, don't get me wrong. There are small ISP pops and all sorts of things, but a real data center 5 megawatt, multi-tenant, care, neutral, whatever we don't have Interesting.

Speaker 2: 22:59

You have to go in Fortaleza. Yes, there is a little bit of development there, mainly because of the submarine cable systems that are arriving or coming from the US or arriving from Africa. Everything connects there. So Fortaleza is a very important hub for interconnection and there is a little bit of co-location there as well. But again, Brazil is a big country. Latency from Fortaleza down to Sao Paulo is almost 45 milliseconds, so again you need to be present locally to have a little bit of your application responding to a local traffic or local demand there. So, even though all the clouds are sitting in Sao Paulo, some of them you can access through here, but the majority of them are in Sao Paulo. So you need that connectivity piece to bring your customers securely from those points of the city into Sao Paulo, to connect them there.

Speaker 1: 23:50

And all the clouds are in Sao Paulo.

Speaker 2: 23:52

Yeah. All the cloud nodes are in Sao Paulo. There are one or two that you can access via Rio de Janeiro, but the majority of them are in Sao Paulo. So if you look into that topology, there isn't a real need for connectivity touching from all different sides of the country, bringing that thing into the cloud that sits in sao paulo.

Speaker 2: 24:13

We ourselves try to do it. So we have interconnect. All our data centers are interconnected, yeah, as of today. So a customer from porto alegre, for example, can reach the cloud. Yes, via my data center, my interconnection, they can reach Sao Paulo and reach the cloud. But there are more efficient ways to do it by using your platform, attached with our geographic dispersion. So that portfolio of giving my customer a local ability to have local applications responding locally for them, uh, their users over there, and also giving him a secure access, uh, layer two access, or even layer three, directly to the cloud, without going through any VPN to the internet, whatever.

Speaker 2: 25:01

So security, resilience, um, and and cost effective, that's definitely much higher speed, yeah yeah that's definitely a definitely a win-win scenario, and I feel like the customers will have a lot to take out of this partnership.

Speaker 1: 25:16

It was perfect. Perfect way of landing there. Yeah, great choice. Thank you Awesome. Did you get it Good? Thank you Awesome.