IHS Holding Limited (IHS) Earnings Call Transcript & Summary

Good day, and welcome to the IHS Holding Limited Carbon Reduction Roadmap Call. Please note that today's conference is being webcast and recorded. [Operator Instructions] At this time, I'd like to turn the conference over to Colby Synesael. Please go ahead, sir.

Thank you, operator. Thanks also to everyone for joining the call today. I'm Colby Synesael, the SVP of Communications here at IHS. With me today are Sam Darwish, the Chairman and CEO of IHS; William Saad, COO; and Steve Howden, CFO. This morning, we published a presentation regarding our Carbon Reduction Roadmap and Project Green, the next significant step in our Carbon Reduction Roadmap on the Investor Relations section of our website, and which we are pleased to discuss with you now. However, before doing so, I would like to draw your attention to the disclaimer set out at the beginning of the presentation on Slide 2, which should be read in full along with the cautionary statement regarding forward-looking statements set out in our press release regarding our Carbon Reduction Roadmap, which was also published this morning. In particular, the information to be discussed may contain forward-looking statements, which, by their nature, involve known and unknown risks, uncertainties and other important factors, some of which are beyond our control that are difficult to predict, and other factors which may cause actual results, performance or achievements or industry results to be materially different from any future results, performance or achievements or industry results expressed or implied by such forward-looking statements, including those discussed in the Risk Factors section of our Form 20-F/A filed with the Securities and Exchange Commission and our other filings with the SEC. We'll also refer to non-IFRS measures that we view as important in assessing the performance of our business. We are unable to provide a reconciliation of forward-looking non-IFRS financial measures without unreasonable effort due to the uncertainty regarding and the potential variability of the applicable cost and expenses that may be incurred in the future. Accordingly, investors are cautioned not to place undue reliance on this information. And with that, I'd like to turn the call over to Sam Darwish, our Chairman and CEO.

Thanks, Colby, and welcome, everyone. Starting on Slide 5. We are pleased to discuss our Carbon Reduction Roadmap and Project Green, the next significant step in our Carbon Reduction Roadmap with you today, particularly since this is a topic that I'm very passionate about as many of you likely already know. As we have stated publicly many times, emissions are a key challenge facing our industry and the markets in which we operate, particularly in Nigeria. In many of the places we operate, electricity grid connectivity has been unavailable or unreliable. Thus, in order to provide digital connectivity, a service that is increasingly being regarded as a human right across the globe, we and our MNO customers have historically had to rely on these generators in several of our markets to power our sites. In 2021, the use of diesel at our towers accounted for approximately 25% of our cost of goods sold and represented 86% of our total carbon footprint. And on an annualized basis, we spent nearly $400 million as of last quarter on diesel, and that's excluding the amount spent on diesel generator maintenance. We, at IHS, are committed to reducing the role of diesel and greenhouse gas emissions in our business. However, we want to do it in a way that results in real change and further doing it in a way, well, it's not only about creating real change but also about generating attractive financial returns while doing so. Thus, Project Green makes sense from both an environmental and business perspective. Our team and I have analyzed the various opportunities across the countries we operate in to reduce our consumption of diesel and our greenhouse gas emission by connecting more sites to the grid and/or adding more battery and solar systems. We also engaged EMRC, which provides energy consulting and transaction advisory services, to support the review and validation of Project Green's saving model. Having completed this analysis and began the implementation phase, we are now ready to share with you our Carbon Reduction Roadmap, including our strategy for reducing our carbon emissions intensity as well as provide information on our Project Green expected investment, savings and implied return. Key to our Carbon Reduction Roadmap is that we are introducing our goal of reducing our kilowatt per hour emission intensity by approximately 50% by 2030 as it relates to our Scope 1 and 2 energy-related emissions. And Project Green is the method by which we will achieve a good part of our carbon reduction target, almost half of the target. And we have already begun investing in 2022 and expect to spend $214 million in CapEx specifically devoted to Project Green between 2022 and 2024. We believe that through this investment, IHS will achieve an annual RLFCF savings of $77 million by 2025 and generate a return on investment of 30%. Also, as we have previously stated, we are consequently raising our 2022 CapEx guidance by $100 million to the range of $645 million to $685 million, including $110 million for Project Green as we are also taking this opportunity to narrow our former range based on our actual spend year-to-date. Turning to Slide 6. I want to remind everyone that sustainability broadly has been and will continue to be core to who we are at IHS and to our business model. As we have said repeatedly, we believe that our business model is inherently sustainable that we deliver shared infrastructure solution in emerging markets that promote digital connectivity and inclusion and improve the lives of the communities we serve. This encourages greater access to things like education, health care and financial services, while infrastructure sharing generally reduces the environmental footprint of the telecom landscape in our geographies. That being said, I believe that the true benefits of model mobile connectivity can only be realized if we and our sector continue to develop in a socially and environmentally responsible manner. Now that IHS operates in 11 markets across 3 continents covering 750 million people, we have an even greater responsibility to reduce our environmental impact. Lowering emissions is critical to this. With Project Green, we believe that our drive to reduce the role of diesel in our business will further improve the environmental impact of the communication infrastructure that we operate and upon which our MNO customers and their customers depend. On Slide 7, I want to reiterate the core values that drive everything we do, namely customer focus, innovation, integrity and boldness. And recognizing its importance, today, we are adding sustainability to our core value commitment. As I believe strongly and I've also said repeatedly, in emerging markets, there is no way you can become of scale unless you operate as a long-term sustainable business. You need to be accretive to your environment as the resources around are very limited. While we have been investing in renewable solutions for many years, the scale and scope of Project Green and the investment represents our continued high degree of commitment to focusing on sustainability across our business here at IHS. As you can see on Slide 8, our focus on sustainability is not new at IHS. We are a signatory to the UN Global Compact. And in May this year, we published our fourth sustainability report, which serves as our second communication on progress for our commitment to the United Nations Global Compact. We have, for many years, delivered numerous targeted in-country sustainability program in furtherance of the 4-pillar strategy you see here. As you will learn in greater detail, Project Green is a continuation of our core commitment to sustainability. And I'm extremely pleased that we are embarking upon this important next phase in reducing our emissions and carbon footprint and improving our network for the benefit of our customers and the markets we serve. And with that, I will turn things over to William, our Chief Operating Officer.

Thanks, Sam, and hi, everyone. I'm William Saad, the COO of IHS. I'm also 1 of the 3 IHS founders, who, along with Sam and Mo Darwish, the head of our Nigeria business, started IHS way back in 2001 as the builder of Towers in Nigeria. I'm very excited to be here today to discuss the details of Project Green. As you will hear, the market in which we operate can present some unique challenges in terms of providing power to our sites. As you can see on Slide 9, we employ several methods to power our sites in order to provide the high degree of uptime required by our MNO customer to serve their subscribers. In many of our markets and particularly in Nigeria, because of the electrical grid is either unavailable or unreliable, we have to provide a distributed solution for either primary or backup power, which in Africa particularly has additional demand using these generators. However, battery can be used to provide backup power and/or to reduce the runtime of generator, and solar panel represents an additional renewable solution for this purpose in rural or less urban location where space their solution. What this means is that IHS has a long history of deploying our solution at our towers. Project Green represents the next significant step in the evolution of power management here at IHS, a step that we believe will be accretive to our company, our shareholders and the environment in which we operate. Turning to Slide 10, I want to note that across our entire portfolio of nearly 40,000 towers, 56% of our sites are connected to the grid. However, electricity is not available 24 hours a day and varies from market to market. Consequently, our Project Green initiative is primarily focused on our African markets to get connectivity varies widely. As you can see on the grid side -- on the right side of the slide, in particular, in our largest market, Nigeria, only 4% of our sites are currently connected to the grid, given the historical issues with availability and performance. As Sam mentioned, Project Green makes sense for IHS from both environmental and business standpoint. It's even more compelling though when we take into account the ongoing 4G growth and the incoming 5G technology over the coming years. As you see on Slide 11, as MNOs shift up the technology curve, greater power resources will be required in terms of the need of the government itself and also to the densification of the network required to deliver the benefit of 5G, which utilizes higher frequency spectrum to provide greater bandwidth and lower latency those signals travel shorter distance. As you can see, 4G penetration is expected to grow to 1/3 of the Nigerian market and just under half of our Sub-Saharan market by 2026 as compared to 75% or higher in our LatAm and markets, thus requiring more power over the next 2 years. Furthermore, we are beginning to see 5G deployed in Nigeria as well and South Africa. So now is the time to invest further in alternative energy solutions in order to mitigate the potential emissions impact from the greater power needs of our customer in the future as they seek to better serve their customer and technology. Turning to Slide 12. We have done this before and has significantly experienced -- we have significant experience of deploying alternative energy solutions, including solar and battery solution. In our Nigeria business, we over 9,000 towers to such solution avoiding generator batteries and or solar power between 2016 and 2018. And since then, we have deployed ongoing upgrade on force of business. In 2021, approximately 73% of our site in Africa had access to grid, hybrid and/or solar solutions. Through Project Green, our latest sizable upgrade project, we expect to upgrade over 14,000 sites and believe we can drive this number up to 91% by the end of 2025. Thus, we anticipate that only 9% of our African sites, excluding Egypt and South Africa, will need to rely thoroughly on generator at that point. Our solution will include the latest generation technology for lithium-ion batteries and solar array with high power and energy yields as well as other power-related equipment. With that, I would like to turn the presentation over now to Steve to walk us through the numbers.

Thanks, William. So if we can move on to Slide 13, and here, we lay out the scope of Project Green. As many of you are aware, Nigeria is the market in which we consume the largest amount of diesel. So naturally, it will receive the most attention in terms of CapEx under Project Green relating to adding batteries and solar solutions as well as increasing grid connectivity. However, decreasing emissions across all of our markets is important. As such, we expect through Project Green to accelerate connecting sites to the existing electrical grids in 5 additional markets, including Cameroon, Côte d'Ivoire, Rwanda, Zambia and Kuwait. As you can see on the slide, for now, South Africa is excluded from the scope of Project Green since we just acquired the business a few months ago, and a power upgrade project is already ongoing there. LatAm is similarly excluded, given the extensive grid connectivity and power pass-through dynamics in those markets. And of course, we don't have a material market presence in Egypt yet. But future inclusion of these markets in our power upgrade projects will be assessed going forward. We know we can make a difference in terms of reducing our diesel consumption and emissions in these markets, in part because as William noted, we've done this before. So we're confident in terms of our ability and our plans to improve the environment in which we operate. Where it gets even more exciting, though, is that we believe we can do this while also generating attractive returns on our investments. Between 2022 and 2024, we expect to invest approximately $214 million of CapEx in Project Green and for this to result in $77 million of annual RLFCF savings by 2025, of which approximately 3/4 is expected to be on OpEx savings and the remaining 25% in maintenance CapEx savings. Driving down diesel consumption allows us to reduce maintenance on diesel generators, hence, maintenance savings, too. On Slide 14, you can see we're front-loading the investment into the second half of 2022, given the longer lead times now required to attain certain equipment. Specifically, we expect to spend $110 million of CapEx this year, $82 million of CapEx in 2023 and $23 million of CapEx in 2024 on Project Green. This is expected to result in savings of $22 million next year, $51 million in 2024 and $77 million in 2025, giving an overall IRR of 30%, making Project Green a highly attractive use of our capital. On Slide 15, we look at the impact of diesel on our business and further underscore what we believe are the compelling economics of this investment in Project Green. As you can see, we spent $225 million on diesel in 2021 and consumed 333 million liters in our business, primarily in Nigeria. In the first half of this year, we consumed 178 million liters of diesel, and our diesel spend rose to $170 million in light of the oil and diesel price increases seen globally this year, in part due to the Russia-Ukraine conflict. And as Sam mentioned at the beginning, we spent $94 million or nearly $400 million annualized on diesel just in Q2 of this year. Diesel consumption in our African business continues to increase as we co-locate, as we build or buy more sites and as new technologies such as 5G get rolled out by our MNO customers, all of which require more energy. Hence, the importance of focusing on reducing our diesel consumption while still providing the required energy to our sites through other power solutions. On Slide 16, we provide additional information on our cost of diesel assumptions on Project Green, given it's likely to have the greatest impact on the implied returns we're expecting. While there are many variables that factor into our actual cost of diesel, including where it's sourced and haulage, et cetera, we believe ICE Low Sulphur Gasoil is now the best indicator of the price we pay, which you as an investor can independently track. In the top chart on the page, we have provided the price we've assumed for ICE over the next 5 years in our internal Project Green model. The prices are based on consensus forecasts and show the price coming down in outer years. These same numbers have been factored into the calculation used to derive the estimated returns for Project Green. The table on the bottom of the page then shows the sensitivity to changes in the cost of diesel we assume. And it's important to note here that to the extent the cost of diesel is higher than what we've assumed in our model, that would result in higher savings and a higher return on investment for Project Green. Of course, to the extent the cost of diesel is lower than what we assumed in our model, then that would result in a lower return on investment. You can see then that even if the cost of diesel is 30% lower than what we forecast, we believe we can still achieve a 17% IRR. Conversely, if the cost of diesel is 30% higher than we forecast, we believe we can achieve a 42% IRR, reinforcing the fact that Project Green is expected to be a highly attractive use of capital. Moving on to Slide 17, and I'm not going to spend too much time here, but you can see we've taken several actions to mitigate procurement risk, which is an important element of the project with today's global supply chain. And with that, I'll turn the call over to Colby to walk you through our emissions targets before opening the line to questions.

Thanks, Steve. On Slide 18, we provide a short explanation for the terms Scope 1 and Scope 2 when describing our greenhouse gas or GHG emissions. Scope 1 includes emissions from power and building diesel generators, liquid petroleum gas, natural gas, refrigerants and vehicle diesel, whereas Scope 2 includes emissions from power grid electricity and office electricity consumption. On Slide 19, we show that in 2021, our Scope 1 and Scope 2 footprint generate just over 1 million tons of carbon dioxide equivalent, which over 90% was Scope 1. These figures follow the GHG corporate accounting and reporting standards and were compiled with help from EcoAct, an international climate consultancy and project developer who will also help us develop our carbon reduction target to which I'll speak in a moment. As you can see on Slide 20, over 85% of our Scope 1 and 2 emissions come from diesel consumption at our tower sites. Industrial presents by far the largest opportunity for us to reduce our GHG emissions. In addition, you can see on the page that in 2021, we had a tower emission intensity of 0.9593 kilograms of carbon dioxide equivalent per kilowatt. Tower emissions intensity is calculated as a ratio Scope 1 and Scope 2 tower emissions, excluding refrigerants, divided by the tower energy consumed. To calculate energy consumption, we multiply the average load of a site, which is a measure of the site's power consumption, by the total operating time in a year. So said differently, power kilowatts times, time and hours equals energy in kilowatts. The site load takes into account all power sources and allows us to measure and track the carbon emissions intensity of our tower portfolio. We believe this metric is the most appropriate metric for measuring and tracking the emissions intensity of our tower portfolio as it measures on a unit basis our carbon emissions intensity. As we show on Slide 21, we're committed to reducing our kilowatt emissions intensity of our tower portfolio by 50% by 2030, including all Scope 1 and Scope 2 energy-related emissions. With Project Green, we expect to achieve roughly half or 23% of this goal or projected 0.7336 kilograms of carbon dioxide equivalent per kilowatt-hour by 2026. This is approximately in line with the 5% decrease year-on-year with the remaining reduction coming from subsequent investments. We point out though that this -- that we will review the baseline for this target as we add new markets or as needed to reflect significant changes in our organization. Moving on to our last slide. We intend to provide CapEx and savings updates on our earnings releases so that investors can track our progress, whereas we intend to provide our GHG emissions annually in our sustainability report. Lastly, I want to highlight to investors, there are several key considerations that could impact our expectations, including: number one, assumed revenue growth; two, grid availability and pricing; three, diesel price fluctuations; four, integration of new businesses; and five, FX and interest rates. This brings us to the end of our presentation. We hope you all agree that this project is an exciting one to both reduce the impact of our -- on our business -- excuse me, to reduce the impact of our business on the environment over the long term as well as being an attractive investment opportunity. Before opening the line to questions, given we have concluded the third quarter but have not yet announced our results, we kindly ask all questions please focus on today's announcement as we will be unable to answer questions on any other topics. With that, operator?

[Operator Instructions] Your first question comes from the line of Philip Cusick from JPMorgan.

A couple if I can. First of all, what of your CapEx looking backward has been for investments similar to Project Green? Are you able to give us some idea of that?

Yes. I can tell that. Do you want to rattle off the questions and then we'll take them?

Okay. So that was number one. And then can you give us some examples of what subsets of towers might look like today in terms of their power infrastructure and what they might look like after this investment? Just sort of simple examples. And then finally on Slide 16, these diesel price forecasts. I assume that these are the -- this is the forward curve. I see a press today of about $1,000 a ton. And what have you done to prebuy or lock in diesel prices near to medium term? Those are my 3.

Okay. I will take the first and the third one and then maybe Colby or William can jump in on the shape of the solution. So in terms of CapEx historically, we have invested significant sums over the years, something in the order of $500 million over a number of years when we first started bulking up, particularly the African portfolio, from 2014 onwards. That $500 million was a multi-multiyear investment program. So this program is not as extensive as that one, albeit a lot of good power-related investment we've made over the course of that time where we managed to significantly drop diesel by up to 50% on certain sites. So it is something that we've done before. The types of solutions are similar in headline names in terms of solar, batteries, et cetera, but the type of technology has really evolved and how we combine the different types of technology has really evolved. So that's really what we're benefiting from in terms of tech in rolling out this latest power upgrade program. So that's on the history. On the forward diesel assumptions, yes, that's a curve. That's something we've taken from consensus in terms of the ICE price, and we expect to see that come down over time. But as I mentioned, as it relates specifically to this project, if that curve doesn't come down over time, then actually the savings on this will go up, given diesel imputed into the model would be a higher cost. And therefore, the savings that we're taking would be greater. Colby or William, do you want to take the other one?

Sure. Just going to your other question, Phil. If you go to Page 12 of the presentation, we actually do give a sense of what our tower portfolio could look like in 2025 after Project Green. Of the over 14,000 towers that are going to be upgraded that William referenced in his prepared remarks, approximately 5,000 of them are going to be connected to the grid for the first time. So that gives you a sense of where you could see the most meaningful change in that chart again on Page 12. The remaining towers are going to really involve a combination of either solar or battery-type solutions. But really, Page 12 is probably the best place to point you.

And your next question comes from the line of Greg Williams from Cowen.

Just off that last answer, Colby, of those towers that are getting upgraded, 5,000 of them, how many are Nigeria? Or said another way, it looks like 4% of your towers are connected to the grid in Nigeria today. I'm just curious what that sort of looks like by the end of this project. And the second question is just on your IRR calculations at 30%. Just so we can have a comparison, what is your typical IRR when you're building a tower in, say, Nigeria, so I can compare that?

Sure. I'll take the IRR. Do you want to take the first one?

Yes. So as it relates...

I'll take the IRR one. So 30% IRR. In terms of returns that we've disclosed historically and haven't gone into country-by-country detail but across the group, we typically said that a 1-tenant site is a 10% to 12% return, a 2-tenant site is sort of a low to mid 20% returns. So you can see that stacking up against BTS, this is a pretty good returning project.

As it relates to the other question, so there's 6 countries in total that Project Green is encompassing. As was mentioned earlier, Nigeria is the overwhelming source of focus, just given the size of it relative to our overall business. I would point out that we also mentioned on one of the pages in the footnotes that for all the other 5 countries other than Nigeria, the focus is going to be on connecting sites to the grid, less so on battery and solar solutions. The battery and solar solution is really going to be only focused on Nigeria in addition to connecting sites to the grid. Putting all that together, you could assume that the overwhelming majority, although not all of the project, will be on Nigeria.

Your next question comes from the line of Jon Atkin from RBC.

So I've got 3 questions I wanted to ask. One is anything to keep in mind around top line impacts in terms of the nature of the tower element of how your customer contracts might be structured or changed by this? And then on the cost side, anything to keep in mind around things like maybe ground lease or other sorts of OpEx that this introduces? You talked about the OpEx avoidance and the maintenance CapEx avoidance, but anything around OpEx increases that this brings with it? And then finally on supply chain and the availability of your solution and anything to keep in mind around the velocity of which you roll that out, you gave a multiyear CapEx forecast. I'm wondering how supply chain impacts that or could impact that phasing.

Sure. John, so I'll take those questions. On top line impact, nothing significant to impact our top line, as you know. In our African markets, in particular, and Nigeria, certainly, we have a lot of the power cost for ourselves. So to the extent that we're generating savings here, that is for us to keep. In terms of other OpEx, ground lease, other things that may come against some of those savings, that's all been factored into the numbers that we give you. There isn't very much, to be honest. So in terms of things like taking more space on the ground, which is I think we are driving out in terms of ground lease increases, there isn't much of that. The solutions that we are putting on are really specked for each site. There's a huge amount of work that goes into specking each individual, one of the 14-odd thousand sites that we're talking about in this program. So that's been done from a bespoke fashion. So nothing significant in other OpEx. But anything there is already contained within the numbers we've given you. And then velocity of rollout. I mean, I think you're absolutely right to point that out. We've given you our profile as we expect to spend that CapEx here. We will obviously have to keep you all updated on the pace of that spend, particularly into next year and the year after. The shorter term, we have a better view on, obviously. But given supply chain, we're trying to order equipment as early as possible. We've put in significant orders already to try and get ahead of that investment curve. But we'll keep you updated as we get into the second part of next year and 2024 for the outer part of the rollout. But certainly, the nearer parts, we're reasonably confident.

Your next question comes from the line of Michael Rollins from Citi.

Two questions. First, how do you think that these investments will affect your share of co-location in the markets in the future? Do you think this gives you a significant edge? And is there some historical reference points where you could say when you offer the hybrid or greener portfolio, you can get some kind of benefit to the sales results? And then just secondly, in the longer term, you mentioned the math that you're doing around the mechanics of consumption versus energy and estimating the cost benefit. In the future, if you think years out and you have these hybrid platforms, does it just make it more complicated for you and for customers to be on the same page with the monetization model for how they should pay you for power? Or does this make it easier?

Mike, this is Sam. In terms of the first question, I think I don't think it makes a concrete difference but it does make a difference in general. All our customers have committed themselves to becoming better in terms of greenhouse emissions, and that definitely helps them kind of like advance their own targets and goals along those directions. It's also definitely encouraged, seen positively by our environment in general, regulators, markets, banks, et cetera, et cetera. But I wouldn't say it will generate a concrete uptick in sales. Now in terms of the second question, the complexity, to the contrary, I mean, this is -- this simplified our operation, diesel and then the logistics of the supply and monitor of the diesel component is a very complex process. I mean, aside or besides the point that it generates bad emissions into the atmosphere, it is a complex operation. You have to buy it, you have to store it, you have to peddle it, you have to put it in tanks, you have to monitor it. It gets stolen, et cetera, et cetera. So the more we simplify that process, the better for our operations, the better from our customer point of view in terms of uptime, downtime. So net-net-net, at every level, this is a better thing, not a worst thing.

And your next question comes from the line of Brett Feldman from Goldman Sachs.

Just a couple. First, if I just sort of think about this, one of the key reasons you've said in the past while you have not made heavy use of the grid, particularly in markets like Nigeria, is because it just hasn't really been available or reliable. And so I'm curious whether something has changed. What gives you confidence that if you connect more sites to the grid, you'll actually get a significant uplift in your uptime and therefore, a lot less use of diesel? The second is I'm just curious about the accounting, and I apologize if you said this, but the CapEx that's specifically associated with Project Green, is that going to be treated as a discretionary capital investment, meaning it would not be within your RLFCF or FCF calculation? And then the last one is, obviously, a chunk of your discretionary capital will obviously be going towards this project through its duration. Should we expect that there may be less focus on engaging M&A as you're investing in Project Green?

Thanks. I'll take the first one and maybe Steve can take the second one. It's not only the availability of power versus the unavailability of power. It has to do also with 2 things: one, we have to invest to get to the grid at our size because we don't have transformers. Transmission sometimes at the last mile is also an issue. But clearly, that aspect of the business, of the cycle which needs to happen, which was somehow prohibitive before. The reason it became less prohibitive because Nigeria has moved to privatize its distribution, and it's now in the hands of private These guys took some time to stabilize their operations. Many of them are still doing so-so. I wouldn't say that they're strong financially or they're kind of like stable, but at least now operationally, in the hands of private management, which allows a better engagement between us and them, allowing us to basically being able to go to them and say, "You know what, let us do part of that last-mile investment and then agree because that generates revenue to them." That is the fact that has unlocked this more than the actual availability/nonavailability of electricity to those sites. Steve, second question?

Yes, you're right. So this will form part of discretionary CapEx so it won't go into RLFCF until the equipment gets maintained in future years. So that's the first one. And in terms of propensity to M&A, I think we're trying to highlight that we think this is a really good use of capital. And obviously, that sets a bar in terms of return on that investment. So this is something we want to direct some capital towards because we think it's good for reducing our emissions as well as good for returns. I don't think it has a direct impact on M&A beyond where the current world is, which, as we know, is a higher cost of financing type world right now. So no direct correlation, but clearly, this is a capital allocation decision we wanted to make, and we're looking forward to deploying capital to this.

[Operator Instructions] Your next question comes from the line of Stella Cridge from Barclays.

I just also ask 2 questions, please. The first one was just what you were thinking in terms of the best funding option for the spending, just to get a sense of the potential impact on liquidity or debt. The second question is about South Africa. And so I understand that at the moment, South Africa is not included in the perimeter. But I'm aware of bringing large kind of coal-linked emissions potentially into Scope 2. I was just wondering, based on the work that you've done so far, what you thought the potential opportunities were there in South Africa when those emissions do come on the balance sheet, how you may set up that would be great.

Sure. I'll take the first one, at least. From a funding perspective, we're looking at funding this through internally generated cash, given a lot of that cash getting deployed in different countries, albeit a chunk of it in Nigeria. We're looking to use internal resources for this, so not expecting to raise certainly significant amounts of debt and nothing envisaged at this point in time. We will continue to assess green financing to the extent that we think that is commercially viable from a price/cost timing perspective. But at the moment, it's -- we're assuming it's cash generated. And then in terms of South Africa, Colby, do you want to?

Sure. I'd just point out for those on the call who may not be familiar, the grid in South Africa is predominantly powered by coal as the origin resource. So the question is then how does that potentially impact our Scope 1 and Scope 2 and what's our thoughts on that broadly. So just as a reminder, right now, we are in the process of moving over those bills to pays directly to the utility company, Eskom to us. Once that happens, then those costs will effectively become part of our Scope 2. Once that does happen, we are overwhelmingly dependent then on the grid and therefore, that coal-generated power. But what I would also tell you though is that really we're focusing on with MTN is also providing a backup battery-powered solution. So that's really where our investments right now when we reference that there's already an upgrade going on are occurring. We will have to go and rebase our Scope 1 and Scope 2 to include South Africa. That is something that we'll do next year. But in terms of what that impact will be on what our Scope 1 and 2 looks like, it's too early to comment on that right now.

And Stella, this is Sam. As you may know, South Africa is also going through a period of load shedding. I mean, it's probably going to be in that situation for a few more years to come. So most of the carriers are now going through the backup solution, this backup solution that Colby referenced. We were, I think, the first, or if not among the first, who provided the power as a service as a solution to MTN through the M&A deal we've done with them last year. We provide that aspect of backup on all their sites. And that -- the level of that offering could deepen over time. We're looking also at providing similar solution to the other carriers in South Africa. We will make relevant announcements at the relevant time on that topic. But that's an area definitely we're looking at to find solutions and expand our solution offerings.

And there are no further questions at this time. This does conclude today's conference call. Thank you for your participation. You may now disconnect.