NBN loaned AU$20b by government to complete rollout

NBN has been loaned AU$19.5 billion by the Australian government to complete its rollout, rather than having to secure funding privately.
Written by Corinne Reichert, Contributor

The Australian government has announced that it will be providing the extra AU$19.5 billion needed for the National Broadband Network (NBN) company to complete its rollout of high-speed broadband across the nation.

NBN was originally given AU$29.5 billion in equity by the government, with the remaining AU$19.5 billion to be sourced through private debt funding by NBN itself once the government's funding ran dry.

However, under the surprise decision by the federal government, NBN will not need to go to market to fund the remainder of the fixed-line broadband project.

"To help ensure that NBN can fully focus on the remaining rollout as it significantly ramps up, the government has decided to provide the remaining funding required to complete that rollout through a government loan to NBN Co Ltd on commercial terms," Finance Minister Mathias Cormann and Communications Minister Mitch Fifield said in a joint statement.

"In anticipation of a future privatisation of NBN as provided for in the NBN Companies Act 2011, it is expected that this loan will be re-financed by NBN on external markets in 2020-21."

According to the ministers, the government loan on commercial terms is the most cost-efficient way for NBN to raise debt and secure funding without impacting the time frame of the NBN rollout.

NBN CEO Bill Morrow last week said during NBN's financial results presentation that the company had obtained strong credit ratings from independent credit agencies, indicating a "strong business case".

Morrow on Friday said the government's decision to provide the remaining equity needed for the project will allow NBN to focus solely on the rollout.

"NBN has been advised the government will loan the remaining AU$19.5 billion required for the total AU$49 billion base case peak funding forecast. This allows the NBN executive to fully focus on building and operating the network, to bring fast broadband to all Australians by 2020," Morrow said in a statement to ZDNet.

"NBN welcomes the decision which is in the best interest of the Australian taxpayer. With security of funding in place, we are focused on the job at hand of building the network and providing fast broadband access and universal connectivity to all Australians by 2020."

The decision comes despite the government saying in May during the announcement of its Budget 2017 that having to provide additional equity contributions if NBN failed to raise debt privately would impact Australia's financial position.

"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 in its Budget papers.

"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."

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