The federal government has agreed to loan nbn, the company behind the rollout of Australia’s National Broadband Network (NBN), the $19.5 billion needed to ensure the completion of the project.
The move comes after nbn CEO, Bill Morrow, said the company was searching for private sector backers to make up the shortfall left by the government’s funding cap of $29.5 billion which, according to budget papers, is on track to be tapped by the end of this financial year.
“NBN is fully funded for this entire financial year, and already we are in the process of securing external debt as we speak right now,” said Morrow in August.
In its latest annual corporate plan, nbn said its top peak funding range estimate for the project is $54 billion, with government equity capital topping out at $29.5 billion, leaving the company to search for up to $24.5 billion in funding from non-government sources.
Now, with the government choosing to chip in with the multibillion-dollar loan, nbn will no longer have to immediately go to the private sector to secure the additional funding.
“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,” said Minister for Communications, Mitch Fifield, and Finance Minister, Matthias Cormann, 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.
“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,” the ministers said.
According to the government, nbn has recently obtained strong indicative credit ratings from credit agencies, an outcome, it suggests, that shows that nbn’s business case is “strong”.
The government’s commercial loan terms will be set in line with the credit ratings achieved by nbn.