Budget 2016: NBN approaches limit of government funding

NBN prepares to raise debt

Barring disaster, this year’s federal budget will mark the final government injection of capital into NBN, with $8.8 billion earmarked for the National Broadband Network rollout.

The government has previously capped its contribution to the rollout at $29.5 billion, and NBN is expected to hit that cap by the end of the 2016-17 financial year.

That leaves NBN with a funding gap expected to be between $16.5 billion and $26 billion.

NBN’s 2015 corporate plan revealed that the costs of the ‘multi-technology mix’ network rollout had turned out to be higher than expected, with NBN estimating the total cost to be between $46 billion and $56 billion. (NBN’s management is aiming for $49 billion.)

The corporate plan projects debt funding beginning in FY17 at $100 million and growing to $9.8 billion in FY18.

Budget documents state that NBN is “currently undertaking the necessary preparatory work on the proposed debt raising”.

“In the event that nbn is initially unable to raise the necessary debt on acceptable terms, interim funding support may be required,” the documents state.

“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.”

NBN’s chief financial officer, Stephen Rue, said during a February results briefing that the [[artnd:593464|company had engaged in “preliminary discussions” with potential sources of funding]].

“We’re very confident that the trajectory of the business, the growth profile, the fact that we have set out targets for the last six quarters and we’ve hit those targets, ingrains a lot of confidence in the fact that we’ll be able to go and borrow that money, with a strong revenue profile coming and strong profitability in the future,” the CFO said.

“The Government has tasked the Department of Finance, in consultation with the Department of Communications and the Arts and the Department of the Treasury, to seek independent expert advice on strategies to meet NBN Co Limited’s future funding requirements,” budget documents state.

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