From Oil to AI: How a 2019 Acquisition Sparked CSE Global's Amazon Journey

Back in 2019, CSE Global's subsidiary in the US, CSE W-Industries, acquired Volta, LLC for US$25.1 million. 


It enhanced CSE's positioning and ability to secure projects in the midstream oil and gas markets, though the acquired capabilities have since been crucial for CSE's shift into the data center (hyperscaler) electrification market.

Its engagement with Amazon began around 2021 with initial design work.

Initially, working with such a large corporation meant that CSE had to essentially follow its lead—ie “just do what Amazon tells you”.

Later, to improve on prototypes, CSE’s high-level engineering and design input led to multiple iterations with positive outcomes -- and contracts running into tens of millions of dollars a year.

The biggest is about to happen -- not a one-off deal but a commitment stretching over five years totalling US$1.5 billion.

The Mega-Commitment and the Warrants

The big news on 10 November: CSE signed an agreement with Amazon which makes it the biggest data centre customer CSE has.

The agreement is a two-way street.

On the one hand,  Amazon is targeting to give CSE up to US$1.5 billion of orders over the next five years.

The work will gradually increase rather than evenly split across the five years. It may even be accelerated if Amazon wants to.

CGS says it conservatively anticipates that CSE will secure a US$100m-150m contract by end-2025 for delivery in FY26.

On the other hand, there’s the financial component: warrants.

As a reciprocal part of the deal, CSE allows Amazon to purchase 8% of CSE on a diluted basis via the exercise of warrants with the price set at S$0.7671.

The vesting of warrants is conditional on Amazon fulfilling its US$1.5 billion order target.

The Nuts and Bolts: What CSE is Building

What exactly is CSE supplying? 

Source: CSECSE’s work falls primarily under its electrification segment in the US.

The core scope of work involves supplying the electrical distribution centre, which are "huge, complex switchboards" -- so large they fit into 40-foot containers, several of which are interconnected.

These are far more expensive and complex than typical switchboards because the throughput for a data centre is immense.

A crucial challenge the switchboards handle is managing electrical surges — the sudden spikes in power requirements that occur when servers are executing heavy computation especially in AI.

CSE's expertise comes from its long history in producing similar products for petrochemical complexes and refineries, which also exhibit huge fluctuations and throughput requirements.

CSE's Big Expansion Plan for the US Data Centre Boom

CFO Eddie FooThe US is experiencing a massive growth trajectory in data centres owing to the AI boom and in supporting critical industries such as healthcare, government, and transport, which cannot afford downtime.

The shift towards GPU chips for AI compute (which demand up to 10 times the power of a CPU chip) only intensifies the need for systems that can handle power surges and high volume.

To prepare for the anticipated US$1.5 billion in orders and future clients-- CSE is in the qualification phase with more hyperscaler clients -- CSE is rapidly scaling up its operations.

1. Leasing Space: In October, CSE leased 241,000 square feet of industrial space in the US.
   
   This facility is expected to be ready by Q1 next year.
   
   
2. Land Purchase for Future Growth: To cater to prospective clients, CSE bought 70 acres (ie 3 million sq ft) of land in Houston, Texas, for US$12 million in October.
   
   
3. Manpower and Machines: The ramp-up for the new facility means hiring about 100 people, mostly technicians and production workers, as well as increasing inventory, which will increase overheads in Q4, which is why analysts have trimmed their FY25 earnings forecasts of CSE.
   

→ CSE's 3Q Powerpoint deck is here.  

→ See also: CSE: Company's US electrification segment is booming. Analyst flies there, returns with on-the-ground insights