Data Center InvestmentsChallenges and Opportunities

Martin Paev, CFA

Chairman

SORTIS GROUP

Budapest

17-18 February 2011

Data Centres Central & Eastern Europe 2011

2

About SORTIS GROUP

Investment Banking

Boutique

Financial advisory

services to companies

and fund managers:

Private equity and

venture capital

Corporate finance

Mergers and

acquisitions

Fundraising for fund

managers

Real Estate Investment

Management Company

Sources and structures

individual and collective

investment schemes:

RE investment advisory

RE portfolio

management

Property fund

management

Mezzanine RE

financing

Active in all major real

estate sectors

Credit and Leasing

Advisory Company

Advisory services to

companies and

individuals:

Mortgage loans

Investment loans

Consumer loans

Leasing

Partnership agreements

with the leading banks,

non-banking and leasing

financial institutions in

Bulgaria

3

Data Sentry Sofia 1 Project

Scalable data center

ca. 7,000 sq.m. white space

6 floors of white space

Tier 3 (TIA-942) or Level 3+ (IBM)

14 MW fully redundant power supply

General IT load – 4 kW/rack

High-density areas (20+ kW/rack)

Targeted PUE < 1.3

4

Data Sentry Sofia 1 Location

A growing business district in the area of Sofia Airport

Next to Air Traffic Service Authority, hosting its own Data Centre

Site complies with TIA-942 standards

5

Why Bulgaria?

Security? EU Member state

NATO Member state

Stability? Stable political environment

Currency pegged to the EURO since 1997

Low budget deficit

Low level of government debt

Costs? Electricity – 41% cheaper than EU average

Leading exporter of electricity for SEE region

Cheap and fast international connectivity

Lowest construction costs in the EU

Skilled low-cost IT labor

Taxation? 10% corporate profit tax – lowest in EU

10% flat personal income tax

Incentives? Government incentive schemes

EU grant funding available

Clients? Offices of blue-chip IT companies

6

Then Bulgaria is your place !!!

Do Power Savings Matter?

Source: Europe’s Energy Portal

Data Sentry Sofia 1 - Potential Annual Power SavingsPower Consumption (MW)

Number of hours in Year

City Sofia Frankfurt/Main Paris London Amsterdam Madrid

Country Bulgaria Germany France UK Netherlands Spain

Electricity Price (EUR/MW, excl. VAT) 45 132 67 113 99 84

Electricity bill (EUR, excl. VAT) 5 518 800 16 188 480 8 216 880 13 858 320 12 141 360 10 301 760

Annual Savings (EUR) 10 669 680 2 698 080 8 339 520 6 622 560 4 782 960

14

8 760

7

Opportunity

Significant investor interest

Growing market

Stable customer base

Low churn rates – recurring revenues ca. 95%

Profitability

high EBITDA margins – 25% to 35%

high IRRs >30%

High barriers to entry

8

Growing market

Source: Euro-IX

As Internet traffic grows exponentially, demand for data center

space is expected to keep increasing

9

Data Center Returns

10

Challenges

Capital intensive

Phased build-outs – “Pay as you grow”

Long development cycle

Clients require short time to market

Difficult to time it right

Operators have to predict future demand

Need pre-lets to get project financing

Chicken and the egg problem

Business model changes

Blade servers => high density

Virtualisation

Cloud

Older data centers need upgrade

Retrofitting

11

Valuation

EBITDA multiples

easiest to comprehend

Free Cash Flow (EBITDA – Capex)

more appropriate for data centers

ROTNOA (Return on Tangible Net Operating Assets)

shows how well the company utilizes its assets

ROTNOA is more favorable for companies that emphasize on

managed hosting and cloud services

Mr. Martin Paev, CFAChairman

E-mail: paev@sortis.bg

Cell: +359 88 50 50 200

www.sortis.bg12

CONTACTS