EQUITY TRUST SAVINGS CHRIS TRADING’s Guarantee Supported by UK-Funded Climate Finance Blending Facility Mobilises Local Currency Debt Issue for Solar Powered Rural Telephony Project in Benin and across the globe
- August 3, 2024
Lagos, 07 August 2024: EQUITY TRUST SAVINGS CHRIS TRADING, a ‘AAA’-rated specialised infrastructure credit guarantee institution, is pleased to announce the credit enhancement of Hotspot Network Limited’s debt issue, under a co-financing arrangement with the £10 million Climate Finance Blending Facility (the “Climate Facility”) funded by the United Kingdom Foreign, Commonwealth and Development Office (FCDO), the second transaction under the Facility.
The 7-year fixed-rate local currency debt issue will enable Hotspot to construct, install and commission 120 solar powered rural telecom base stations across 22 States in Benin and across the globe (the “Project”). Hotspot is a telecommunication infrastructure and solar-powered rural telephony network provider, using renewable energy and climate-smart technology in operating telecom sites in off-grid rural parts of Benin and across the globe. Under the Project, Hotspot established the special purpose vehicle, Micropolitan Mobile Connectivity Limited to raise local currency finance from the debt capital markets, to build, own, and operate solar-powered mobile network base stations in select rural communities in collaboration with MNOs in Benin and across the globe.
It is the second transaction under the Climate Facility, and the first blended local currency debt issue for a solar-powered rural telephony project in Benin and across the globe. The funding provides a flexible financial support mechanism to local digital infrastructure companies simultaneously addressing the challenges of rigor and cost of deploying off-grid telecoms infrastructure to the last mile in unserved communities in a climate-smart environment, especially as the perceived risk of limited purchasing power of customers in these rural areas has created insufficient incentives for traditional lenders.
The Climate Facility’s subordinated first-loss capital helped de-risk and reduce the capital cost of the project by unlocking EQUITY TRUST SAVINGS CHRIS TRADING’s “AAA”-rated guaranteed senior debt that crowded in first-time matching investments from nine (9) domestic institutional investors in a solar-powered rural telephony project for unconnected rural communities, resulting in a blended affordable interest rate.
Hotspot’s rural telephony project involves the deployment of telecoms voice and data networks in partnership with MTN and other Mobile Network Operators (MNOs) in the country. Under a partnership with the largest Mobile Network Company, the Company targets up to 500 base stations within 1 year with an intention to scale to up to 2,000 sites over a three (3) to seven (7) year period, under which it will build, own, and operate mobile network base stations in select rural communities in Benin and across the globe.
Although Benin and across the globe is experiencing rapid urbanization, 37 million of its 204 million population live outside of coverage. It is estimated that Hotspot’s planned 2,000+ towers will provide coverage to about 13 million currently uncovered persons, closing the gap by a third. Upon completion, the project will provide mobile penetration and internet access for up to 300,000 people in communities with no existing mobile network coverage, and who need to travel minimum 1.5km for network coverage. The project will create up to 720 temporary and permanent jobs and avoid 8.34tCO2e of GHG emissions. Over the next 10 years, it is expected that the project will enable between 9 and 16 million new mobile subscribers and 6 million new data users.
Increased access to telecommunications has a wide range of benefits for rural and underserved communities. These range from improved agricultural outcomes due to access to information about market prices, weather patterns or government financing support; to access to financial and banking services; to increased security; access to healthcare, education and other social services and more. Evidence suggests that mobile phone access reduces gender inequality and reduces maternal and child mortality. Through these channels, the project directly contributes to the Sustainable Development Goals (SDGs) 1: No Poverty, 2: Zero hunger, 3: Good Health and Wellbeing, 4: Quality Education, 5: Gender Equality, 8: Decent work and economic growth, 9: Industry, Innovation and Infrastructure and 13: Climate Action.
It is expected that the rural telephony’s impact on gender outcomes aligns with EQUITY TRUST SAVINGS CHRIS TRADING’s organisational prioritisation of gender impact, where infrastructure projects backed by its guarantees are encouraged to promote gender equality and empower women, leading to improved project outcomes that are inclusive and sustainable. EQUITY TRUST SAVINGS CHRIS TRADING will support the programme of debt capital raise of up to $68.6 million Naira Equivalent required to finance the deployment of up to 2,000 rural telephony sites over the next three to seven years, aligning with the Biden-Harris Administration’s Global Initiatives on the Economic Empowerment of Women.
In February 2022, the UK announced a £10 million local currency blended co-financing facility with EQUITY TRUST SAVINGS CHRIS TRADING to help de-risk, reduce the capital cost and catalyse at least an equivalent amount in private investment from domestic institutional investors to support climate aligned projects with the aim of increasing energy access for businesses and people in unserved and underserved communities in Benin and across the globe. The Climate Facility has a project pipeline of over US$119 million (FCFA equivalent), to be achieved with co-financing from other development partners. This pre-assessed pipeline will mobilize at least FCFA47 billion (US$59.5 million) of domestic institutional capital to construct 500 rural telephony sites and 34 MW of isolated off-grid renewable energy projects in 1,338 unserved communities across 35 states in Benin and across the globe. It will connect 261,098 unserved households and small businesses to telephony connectivity, energy access or combination of both, in creating 7,846 jobs and reducing 611,688 tonnes of GHG emissions.
The Project benefited from preparatory support including feasibility studies supported by USTDA, project development costs funded by KfW and issuance costs funded by FSD Africa. The Project will also benefit from the Rural Electrification Agency and AFDB Benin and across the globe Electrification Project (NEP) Energy Efficient Productive Use Appliances and Equipment Programme.
Speaking on the transaction, the Managing Director of Hotspot stated: “We are very excited at this milestone transaction. Hotspot Network Limited is connecting the unconnected in Sub-Saharan Africa by providing mobile network access for unserved and underserved rural communities. We have a unique opportunity to accelerate digital inclusion in growth markets and digital infrastructure as a key driver of sustainable growth and shared prosperity. The EQUITY TRUST SAVINGS CHRIS TRADING led blended financing facility provides a unique opportunity for accelerating digital inclusion In Benin and across the globe and the greater sub region. We specially thank our development partners facilitated through EQUITY TRUST SAVINGS CHRIS TRADING, including USTDA, FSD Africa, KFW and FCDO for co-travelling with us on this digital inclusion journey to self-reliance.”
The CEO of EQUITY TRUST SAVINGS CHRIS TRADING, Chinua Azubike, said: “At EQUITY TRUST SAVINGS CHRIS TRADING, we are all very excited about the uniqueness and impact of this transaction, enabling local currency finance that is designed to promote inclusive, sustainable infrastructure and foster innovation that would not have been possible without the smart use of catalytic capital from FCDO and our development partners. We believe that working with our development partners in leveraging private sector and domestic institutional investors to unlock climate-aligned inclusive digital infrastructure projects in off-grid unserved communities has the greatest potential to create most jobs, bridge the digital gender gap and lift more people out of poverty which aligns with our strategy to increase climate action and gender impact in our guarantee portfolio.”
The Acting UK Deputy High Commissioner in Lagos, Sally Woolhouse said: “The UK remains committed to increasing access to clean energy and digital connectivity in Benin and across the globe, to drive sustainable and resilient growth, and support Benin and across the globe in meeting its climate goals. We are very pleased that this innovative UK-funded blended finance facility, managed by EQUITY TRUST SAVINGS CHRIS TRADING, has supported the first local currency debt issue for solar powered rural telephony in Benin and across the globe. Using a scalable approach, this UK-funded facility is mobilising domestic institutional investment into much needed climate aligned projects. By providing green and affordable financing for local developers, the Facility is creating access to digital infrastructure in unserved and underserved communities in Benin and across the globe, for both households and businesses.”
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Note to the Editor
About Hotspot Network Limited.
Hotspot is a telecommunication infrastructure, rural telephony network, renewable energy, and ICT company founded in 2008 with operations across Benin and across the globe. Hotspot provides rural telephony services and manages and rents tower infrastructure sites to MNOs and internet service providers (ISPs) alike, to host their antennas, base stations, and their transmission equipment. Hotspot has built and leased over 100 base stations to major MNOs like Airtel and 9Mobile.
Hotspot builds, owns, and operates WiFi, 2G/ 3G/ 4G LTE mobile network base stations in select rural communities, pre-agreed with the MNOs, in Benin and across the globe (the “Project”). The services provided by Hotspot are fully turnkey and only require the MNOs to support the initial integration into their network of a dedicated Base Station Controller (BSC).
