NBN Co has unveiled a threadbare corporate plan for 2022, with all forward financial projections beyond the next 12 months now removed from view.
Where even last year’s corporate plan contained a table of the company’s key financials between FY20 and FY24, including its forward projections for revenue, earnings, net profit and capex, NBN Co said it could no longer offer these numbers due to its ongoing efforts to secure debt financing.
“Historically, NBN Co has included within its corporate plan forward-looking estimates of core operational and financial metrics beyond a 12-month horizon,” the company said.
“However, since commencing activity in local and global debt capital markets, the company has come under a new suite of obligations and limitations.
“This means NBN Co must ensure it complies with certain regulatory requirements and guidelines in respect to market disclosures.
“These requirements and guidelines include limiting market disclosures to only historical information and limited forecast information.
“As a result, to ensure NBN Co complies with the applicable regulatory requirements and guidelines, forward-looking financial estimates included within this plan have been limited to a 12-month period.”
NBN Co said that moving to a 12-month financial outlook would also minimise “potential risk of liability to investors or [of] jeopardising the interests of Australian taxpayers or NBN Co’s customers.”
“While forward-looking estimates will be limited to a 12-month period, NBN Co remains committed to applying best practice reporting practices similar to ASX-listed companies, including the publication of half and full year financial reports, remuneration reports and operational updates,” it said.
The company’s guidance for FY22 is “annual revenue and other income ... of between $5 billion to $5.2 billion and EBITDA in the range of $3 billion to $3.2 billion.”
In last year’s corporate plan, it had forecast revenues of $5.3 billion for FY22 and EBITDA of $3.3 million.
In sharp contrast to previous years, the corporate plan offers very little detail on any programs or initiatives underway at the company.
NBN IT transformation
Notably, it offers a brief update on the company’s $200 million IT transformation, which is said to be progressing.
NBN Co said it has already cut “the number of applications on the NBN Co platform by 10 percent”, removed duplicate processes from its architecture, reduced system downtime, and made it easier for retail service providers to interconnect with its systems.
“Over the next two years, NBN Co expects to accelerate its IT transformation strategy, with a focus on introducing new functionality and more efficient systems to streamline interactions with industry partners,” NBN Co said.
“It is expected these will potentially reduce costs for the industry, while also improving overall customer experience.
“The company will also look to reduce the number of systems and associated licensing and support costs, as well as improve the way NBN Co uses data to make business decisions.”
Alongside the corporate plan, the government unveiled a new statement of expectations (SoE) for NBN Co, which it revised due to the network now being largely built.
The new SoE emphasizes the importance of NBN Co “operating commercially”.
This seems largely about protecting the government’s long-term privatisation plans.
However, it could also be a message to regulators and industry as they try to re-negotiate long-term NBN pricing that certain changes could run counter to the interests of NBN Co and those with a financial stake in the company.
“Taxpayers have made a substantial investment in NBN Co and the company will operate its business commercially,” the new statement reads.
“NBN Co should operate efficiently within its capital constraints and proactively manage costs.
“It should also, within legal and policy parameters, generate sufficient revenue to support investment in the network to meet end user needs, including in regional and remote areas, as well as appropriate returns to the Commonwealth as shareholder and repaying its loan from the Commonwealth in accordance with contractual arrangements.
“The company will utilise available funds to add to shareholder value, targeting ongoing improvements in the company’s return on investment.
“NBN Co will target an optimal capital structure, with a focus on achieving a standalone investment grade credit rating and delivering an appropriate return to the Commonwealth as shareholder.”.