Budget 2016: NBN planning for debt raising but government on hook if it fails

Should the company responsible for the NBN fail to raise enough debt to complete its rollout, the government has said it would pick up the slack.
Written by Chris Duckett, Contributor

While the Australian government has capped its equity contribution for the rollout of the National Broadband Network at AU$$29.5 billion, it has admitted that should the planned raising of debt by NBN fail, it would have to step in.

"Consistent with NBN's 2016 Corporate Plan, NBN is expected to raise debt from external markets of between AU$16.5 billion and AU$26.5 billion (with a base case of AU$19.5 billion) to complete the rollout of the network," the government said in its Budget papers on Tuesday.

"NBN is currently undertaking the necessary preparatory work on the proposed debt raising."

The Budget papers said the Department of Finance, along with the Department of Communications, and Treasury, were seeking independent advice on strategies to meet NBN's funding requirements.

"In the event that NBN is initially unable to raise the necessary debt on acceptable terms, interim funding support may be required," the government said.

"Were it required, additional government financial support for NBN would have implications for the fiscal position, for example by increasing assets and liabilities on the balance sheet and, depending on the nature of support, could have positive or negative impacts on the underlying cash balance."

The government said in the papers that its 2016-17 NBN equity payment of AU$8.8 billion comprised almost 20 percent of its AU$45.2 billion capital budget. The government made an equity payment of AU$7.5 billion last year.

Should the NBN be shut down, the government said its current termination liabilities at February 29 were estimated to be AU$9.4 billion.

The government's AU$26.5 billion NBN funding cap was brought in following the Coalition's election at the end of 2013. Under changes brought down by then-Communications Minister Malcolm Turnbull, NBN moved away from Labor's full fibre-to-the-premises (FttP) rollout to the present so-called multi-technology mix, which proposes to cover 20 percent of the population with FttP; 38 percent with FttN, fibre to the building (FttB), and fibre to the distribution point (FttDP); 34 percent with hybrid fibre-coaxial (HFC); 5 percent with fixed wireless; and 3 percent with satellite services.

Last week, Labor announced plans for a "fibre link" to connect parts of Western Tasmania including Queenstown, Rosebery, and Zeehan.

Shadow Communications Minister Jason Clare did not state in the announcement whether the area would receive FttP, FttN, FttB, or FttDP.

Communication Minister Mitch Fifield retorted there is already a provision for fibre under NBN's technology choice program.

However, NBN has recently revealed it has made just three individual FttP connections, and has not proceeded with a single area switch under technology choice.

Today's Budget papers also said Comcare would continue to monitor asbestos-related remediation activities around the NBN rollout and would begin full cost recovery from the start of July.

"Under the asbestos safety assurance model, Comcare inspectors verify that companies and contractors involved in the NBN rollout comply with the relevant work health and safety standards," the Budget papers said.

"The expenditure for this measure is not for publication due to ongoing consultation with industry."

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