Australia’s Joint Committee on the National Broadband Network (NBN) is urging NBN Co, the public private partnership (PPP) tasked with providing universal broadband services across the country, to make progress on encouraging private equity and debt…
Australia’s Joint Committee on the National Broadband Network (NBN) is urging NBN Co, the public private partnership (PPP) tasked with providing universal broadband services across the country, to make progress on encouraging private equity and debt funding for the project.
In its third report, published at the end of June, the committee said that “given the significance of debt financing arrangements to its future funding mix, NBN Co should progress consideration of this matter as a priority.”
Government funding is capped at A$27.5bn (US$28.3bn), of which A$2.5bn (US$2.57bn) has already been provided, and another A$13.4bn (US$13.7bn) is expected to come from debt funding from 2015. But according to the committee, NBN Co has not had any discussions on debt financing yet.
Therefore, “it would appear to be critical for NBN Co to start considering its debt financing arrangements as soon as possible, given: the fast-approaching timeframe of 2015 for the commencement of debt financing; that debt financing is projected to constitute 33% of total NBN Co funding required over the period FY2011-FY2021; that if actual debt raised at the time is lower than projected, then equity funding by government might need to be increased,” wrote the committee.
The report also highlights the importance of considering private equity financing for the NBN project. “While the existing legislative framework for the BN suggests that there are ‘very limited options for bring forward private investment in NBN Co,’ this need not slow progress now in exploring the cost/benefit of different capital structures for the NBN.”
The committee concluded that it “remains interested in examining the points of entry for private investment in the NBN – both in the form of equity and debt funding – to ensure a maximum return on the government’s investment is secured on behalf of Australian taxpayers.”
NBN Co plans to invest A$36bn (US$37bn) in a fibre network expected to provide up to 100 Mbps to 93% of homes and businesses. The remaining premises are to be serviced by wireless and satellite technologies providing a minimum speed of at least 12 Mbps.
To that effect, two satellites are scheduled to be launched in 2015 to provide high-speed broadband coverage to approximately 3% of Australian premises.
In the meantime, an interim satellite service has been put up in place. The PPP said in June last year that it signed contracts with both Optus and IPstar for satellite services and satellite capacity to provide download speeds of up to 6Mbps until 2015.
