N0r5ke Fibre will be joining Submarine Networks EMEA in London for the first time next month. Ahead of the event, Total Telecom caught up with Anders Vik, Co-Founder of N0r5ke Fibre to learn more about the growth of the Nordics as a connectivity hub as well as to hear about the N0r5ke Viking Cable project.
N0r5ke Fibre secured funding for its N0r5ke Viking cable project last autumn. Please can you tell us more about the system??
Yes, it was a busy autumn for us last year. Firstly, we raised NOK 40m from management and existing investors during the summer. Then, we initiated a process with Arctic Securities where we structured a financing package for new investors consisting of a NOK 150m Nordic bond and a NOK 40m equity issue to fully finance the project. The equity was committed subject to a signed customer contract (serving as a proof-of-concept for the prospective investors), and once that was signed we launched the bond issue which was substantially oversubscribed with very strong support from institutional investors in the Nordics, UK, Continental Europe and USA.?
The structure of the financing is based on pre-funding both a debt service account for interest payments during the construction phase and a construction account that will be used to finance the project capex. We are allowed to draw on the construction account to pay invoices for construction-related costs and an agreed budget with a third-party consultant to finance the project, which has worked well for us so far. This way we were able to give the bond investors the required comfort on their investment, while not putting too many unnecessary restrictions on our day-to-day operations to complete the project (on budget and in time for onboarding the first customer in December this year).? ?
The Nordics have become a hub of activity for the global submarine cable market. What will the N0r5ke Viking cable mean for connectivity in the region?
Indeed, much of this activity can be linked to the growing interest in establishing green data centers and submarine networks, which are key for connectivity. Even though Norway has abundant production and supply of cheap hydro power, the data center build-out has been significantly slower than our neighbours’, mainly due to the lack of available and diverse connectivity. We expect this to change as several new submarine cables are now RFS connecting Norway directly to Denmark, UK, Ireland and the US. The N0r5ke Viking cable provides significantly improved diversity and is the missing link in a national fiber network ring with a new direct connection between the 2nd and 3rd largest cities Bergen and Trondheim. Along the cable route we have landing sites and ILA huts in areas with hydropower production output of combined 50 Twh.?
In the current market, what are the biggest challenges that a cable owner needs to overcome in order to launch a new project??
Apart from all the detailed planning and permitting needed, we would say that there needs to be a real commercial interest justifying the capex. For most companies this translates into the actual signing of an IRU type customer contract prior to initiation of the build out.? ?
What are your predictions for the submarine cable market in the next 12-18 months?
We expect continued good activity in terms of new submarine cable projects. There are basically four factors that we think will drive these investments:?
1. Low fibre count cables built during the early internet days reaching end of life, some of these will need replacement.?
2. The low interest rate environment and continued expanding digital economy has fuelled a tremendous increase in the allocation of institutional money to digital infrastructure funds, cementing digital infrastructure as an asset class of its own. Submarine cable networks characterised by long stable cash flows, low opex and strong underlying demand for data transport, provide an attractive investment for these funds. With generally high levels of dry powder available combined with a strong focus on ESG, we believe digital infrastructure funds will take a larger portion of the needed capex.?
3. ESG targets set by investors in the form of reducing digital infrastructure related emissions and improve diverse connectivity to areas with high and stable production output of cheap green energy e.g. Norwegian hydropower.?
4. Strengthen submarine cable network diversity and interconnectivity.? ?Recent developments and escalation in geopolitical tensions, if not reversed, could become a relevant source for rethinking the business rational for new subsea networks that would have made sense to build only a few years ago. This could favour cable projects a more decentralized model business cases as globalisation and cross continental interconnectivity.
What are you most looking forward to about attending Submarine Networks EMEA in May??
This is our first time at Submarine Networks EMEA, so we’re looking forward to meet, interact and present details of our 810km submarine cable build-out along the Norwegian coast to the international submarine cable community.
Submarine Networks EMEA, the region’s leading subsea conference, will return to London on 17th and 18th May. For more information on how to join N0r5ke Fibre and 600 more industry leaders, head to the event website.