NBN Co has secured a commercial loan from the federal government for the remaining $19.5 billion it needs to complete its network.
Finance Minister Mathias Cormann and Communications Minister Mitch Fifield delivered the surprise announcement today, which shores up NBN Co’s funding beyond the current financial year.
The government had capped its equity contribution to the project at $29.5 billion; NBN’s corporate plan assumed it would source the remainder from private financiers.
It has been widely reported that the NBN’s equity funding would run dry by the end of the current financial year, adding pressure for it to source a private debt facility as it tries to considerably ramp up the pace of the rollout.
“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,” Minister Cormann said.
“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.
“A government loan on commercial terms represents the most cost effective way to raise the debt and secure funding to complete the rollout of this important national infrastructure project.”
Cormann said that NBN had obtained “strong indicative credit ratings from credit agencies”, which were above indicative ratings shown in assumptions for the latest NBN corporate plan.
“The Commonwealth’s commercial loan terms will be set in line with the credit ratings achieved by NBN,” Cormann said.
NBN Co’s precarious funding position had been laid bare in this year’s federal budget, and the government had raised the prospect at the time of potentially needing to provide “interim funding support” to the project if NBN couldn’t raise private money on “acceptable terms”.
“The Australian Government has committed $29.5 billion in equity to NBN Co Limited, which is expected to be fully utilised by the end of the 2016‑17 financial year,” the government said.
“Consistent with NBN's 2016 corporate plan, NBN is expected to raise debt from external markets of between $16.5 billion and $26.5 billion (with a base case of $19.5 billion) to complete the rollout of the network.”
NBN at the time was “undertaking the necessary preparatory work on the proposed debt raising.” It had remained tight-lipped on its progress with private sources of equity, even during a results briefing last week.