Parliamentary Library finds NBN equity shortfall

$5.5 billion missing from government estimates required to meet NBN Implementation Study recommendations

The Australian Parliament House (APH) Parliamentary Library has found a $5.5 billion shortfall in the equity injection amount required for the rollout of the National Broadband Network during the first five years of the project.

In a paper entitled Identified National Broadband Network (NBN) funding sources and allocations, Parliamentary Library economic analyst, Brian Dalzell, identified $16.842 billion of funding allocated to the Labor Government’s National Broadband Network (NBN) from 2009 and 2010 budget papers, including the sale of government securities, the contingency reserve account and the Building Australia Fund (BAF).

“To date, the total expected funding costs of the NBN, while uncertain, do not match the identified funding allocation in the budget measures,” Dalzell’s report reads.

Though Dalzell says that other funding is likely to be found in forthcoming budget papers, the government is yet to allocate $5.558 billion of funding required to meet the NBN Implementation Study’s recommendation for government equity injection of $22.4 billion to the fifth year of the project, in 2014.

Though the Implementation Study did not provide a cost-benefit analysis, it recommended the Government stick to a peak equity injection of $26 billion.

NBN Co chief executive officer, Mike Quigley, told attendees at an AIIA conference that he expected equity injection to be “south of $30 billion”, after which the NBN would be funded from debt markets.

However, Dalzell said the Federal Government was yet to disclose how this would be spent, including the $312 million of funding already allocated from the BAF, an Infrastructure Australia fund the Labor Government set up under former Prime Minister Kevin Rudd as part of stimulus measure in the 2008/2009 Federal budget.

To date, it is known that the Quigley earned $2 million for his first year in the job while government affairs head, Mike Kaiser, garnered a $450,000 salary. Other salaries remain under wraps.

Quigley also revealed recently that the company had finished the rollout of the NBN at stage 1 Tasmanian sites for five to ten per cent under the assigned $37 million budget. Further rollouts in Tasmania will cost in excess of $100 million, though the cost of rollouts across the mainland have not yet been disclosed.

The non-binding Financial Heads of Agreement between Telstra and NBN Co will also see the wholesaler progressively hand over $9 billion to the telco.

Budget papers indicate funds provided to NBN Co from the BAF will escalate in coming years, with more than $2 billion allocated to the company for the 2010/2011 financial year. Forward estimates point to an additional $568 million in funding from the fund.

Other funding sources, such as a temporary contingency reserve and government securities such as Aussie Infrastructure Bonds will provide an additional $13.9 billion in funding to the 2013/2014 financial year, for a total allocation of $16.842 billion.

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