[AusNOG] NBN gets another $20 billion. Predictable, predicted

[Mark Newton]

In Sep 2015, when NBN released its Corporate Plan, I did some number crunching based on the Government’s commitment to fund them no further than $29.5 billion, and their cash burn rate, and predicted that the money would run out some time during 2017q1.

The Government at the time was completely insistent on that $29.5 billion limit, and said they expected NBNco to seek private investment to cover any shortfall between that and their total build cost. 

At the time, I predicted that they would be unable to do that, because their rate of return (also in the Corporate Plan) was hovering around 4%, so a private investor would yield lower risks and bigger guaranteed returns by putting their money in AMP’s listed property trust. If someone in the private sector had $20 billion to invest, why on earth would they invest it with NBNco, given the large range of better possibilities?

Based on that, I predicted two possible outcomes:

Either the Government would write the whole thing off and deed it to Telstra, or they’d use their post-election grace period to totally forget all about their pre-election commitment to hold their stake at $29.5 billion, and say, “Y’know what? We’re almost done. Just a little bit more, and it’ll be finished. Great success.”

<insert Iraqi Information Minister GIF>

Turns out they picked the second option, at pretty much bang-on when I said they would :-)

http://www.canberratimes.com.au/business/government-loaning-nbn-20-billion-to-finish-rollout-20161118-gssbag.html <http://www.canberratimes.com.au/business/government-loaning-nbn-20-billion-to-finish-rollout-20161118-gssbag.html>

The Government is about to loan NBNCo an extra $20 billion to finish the job, taking the total Government contribution to about $50 billion (which is at the low end of what they think they need to complete the build)

They say they’re doing it at “commercial rates.” Unless NBNco’s corporate plan has changed significantly, they don’t make enough money to afford commercial rates, so they’re unlikely to ever be able to pay it back.

So when you see “loan,” substitute, “grant,” because the Government will be writing it off.

My guess is that they’ll carry it on their books ’til after the next election, and the NEXT government will write it off, and if that’s Labor the Liberal Party will claim that pissing $20 billion up the wall is another example of ALP spending profligacy. 

(oh look, another prediction. Get back to me in 3 years, yo?)

   - mark


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