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May 3, 2016

NBN gets a parting gift but can ask for more

The funding arrangement raises an interesting proposition for Labor in this election year.

The government will invest another $8.8 billion in the rollout of the National Broadband Network in 2016-17, bringing the total investment in the project to $29.5 billion.

This brings it to the limit then-communications minister Malcolm Turnbull said NBN would receive from government for the project, despite the company’s own projections stating the network could cost up to $56 billion to build by 2020.

NBN will need to go to market this year to begin raising debt from private markets of between $16.5 billion and $26.5 billion to complete the rollout. Concerns had been raised that if the company ran out of government funding but hadn’t raised any debt, it would delay the rollout. In March, NBN boss Bill Morrow told Crikey that in the event that funding ran out, the government would have the ability to step in and provide loans to ensure the network kept on rolling.

The government has now formally confirmed that “interim funding support” will be available to NBN if required, which could have “positive or negative impacts on the underlying cash balance” depending on how that support was provided. Finance, Treasury and the Department of Communications will also get independent advice on strategies to meet NBN’s funding requirements.

The funding arrangement raises an interesting proposition for Labor in this election year. Currently the opposition’s policy is “more fibre”, but little detail has been provided, save for an additional $29 million for fibre links in Tasmania. It is unclear whether Labor would retain the Coalition’s policy of a cap on government investment in the network.

Under the former Labor government’s original proposal, the whole network was expected to be funded through government equity and paid back over many decades, keeping the network off the budget bottom line.

The budget documents reveal that if NBN contracts were cancelled today the termination liabilities would be $9.4 billion. NBN’s liability to Optus is $50 million, and liability to Telstra is $4.3 billion.

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One thought on “NBN gets a parting gift but can ask for more

  1. Dog's Breakfast

    Well, the $29.5b cap was entirely arbitrary anyway, has no cost/benefit behind it, and if it did the government would be investing the totality of costs.

    If they don’t, I hope my superannuation body will be lining up to throw dollars at it. This will pay off in spades.

    But it was never about investment and agility and future-proofing, was it. The LNP response was always politics, ideology, and a whacking large dose of stupidity.

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