Turnbull defends NBN cost blowout

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Turnbull defends NBN cost blowout

New corporate plan shows billions in additional costs.

Communications Minister Malcolm Turnbull has said a government-owned startup was the wrong model for the NBN after its latest corporate plan showed the network will exhaust government equity funding by 2017.

According to the three-year plan, the NBN will now have a peak funding requirement of between $46 billion and $56 billion by 2018, compared to the previous $41 billion.

The plan shows the NBN will exhaust its federal government equity funding of $29.5 billion in financial year 2017, meaning it will be required to go to the financial markets to secure bonds and other debt funding. 

As a result of this shortfall, the NBN will need to borrow $100 million in FY2017, and an additional $9.8 billion during FY2018. 

The network is also anticipated to be complete sometime between 2026 and 2028, with the first free cashflow appearing around financial year 2022.

Cashflow losses will blow out from $4.8 billion in financial year 2015 to $9.7 billion in financial year 2018, while EBIDTA losses will grow from $1.5 billion to $2.9 billion over the same period. 

Capital expenditure is set to grow from $3.3 billion in financial year 2015 to $5.4 billion in 2017, before stabilising at $5 billion per year. 

Despite the blowout, Turnbull defended the total cost, claiming building the entire NBN using a fibre-to-the-premises model would cost significantly more. 

"This is around $30 billion less than the route the Labor party set its party on. The $30 billion differential is still there," Turnbull said. 

"At the end of 2013, the company's cost accounting systems were so [inadequate] they did not know how much it cost to connect even one premises. 

"The reality is that under the previous Labor government, neither the company nor the government knew what it would cost or how long it would take to do the project." 

While the federal government's equity funding will soon run out, Turnbull downplayed the possibility of the network being split up as a means of raising additional capital. 

"It is an option but my view is the NBN shouldn't be focused on corporate finance, it should focus on getting the job done," Turnbull said. 

NBN predicts a total of 11.9 million NBN services will be connected to the network by the end of 2018. 

Of that total, 2.4 million end users will be on fibre to the premises, 4.5 million will be on fibre to the node or basement, 4 million will be on HFC, 600,000 on fixed wireless and 400,000 on satellite. 

Late last year, the federal government said the change to the multi-technology mix model made revenue figures and rollout targets too uncertain for NBN to make forecasts beyond the end of the financial year

At the time, shadow Communications Minister Jason Clare said the limited corporate plan was a result of the government's focus on "pointless political reviews".  

Today he said NBN had now revealed the third cost blowout in less than two years.

 
 

"And that doesn't include the cost of upgrading the NBN when the old copper network can't cope in the future," he said.

"It's two years since this government has been elected. They can't blame this on anyone else. This has happened because they haven't been able to keep their promises and because they got their assumptions on the NBN wrong." 

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