NBN Co to get three more years to repay $19.5bn govt loan

The government is set to give NBN Co an extra three years to repay and refinance a $19.5 billion loan of public funds to complete the build.

The extension is revealed in the latest NBN corporate plan, released today, with the new loan arrangement's approval listed in financial assumptions.

The government somewhat controversially loaned NBN Co $19.5 billion at an interest rate of 3.96 percent in late 2016 to finish the project.

One of the conditions of the loan was that it be re-financed by NBN Co on external markets in 2020-21 following the expected future privatisation of the network builder and operator.

“The Commonwealth has agreed to extend the tenor of its loan by three years (from 30 June 2021 to 30 June 2024),” the new NBN corporate plan states.

“The terms of the amended and restated Commonwealth loan … are subject to the approval of the Commonwealth.

“This plan assumes Commonwealth approval ... is provided.”

The extension coincides with NBN Co needing to look to fresh debt to raise a $2 billion cost increase in the build, which was also disclosed today.

NBN Co said in its corporate plan that it had sought permission from its government shareholders to allow the company “to access up to $2 billion of private sector debt” - and that it had assumed this would occur successfully in the numbers it presented today.

The extra $2 billion is to cover a cost blowout caused by the company’s HFC sales freeze and remediation and costly congestion issues on its fixed wireless network.

That NBN Co is being forced to seek the extra money from private sources is interesting, insofar as it was long rumoured that the $19.5 billion loan was handed to NBN Co in part because the company had no luck securing the funds from other financiers.

Doubts have also previously been raised about whether NBN Co will ever been in a financial position to repay or refinance the loan.

The latest blowout, together with expected flow-on delays to earnings through FY20, mean that will continue to be a concern.

NBN Co's first attempt at private finance should have been the refinancing of the $19.5 billion loan, rather than for additional funds on top of that amount.

The network builder was putting a positive spin on the fact it was having to look for $2 billion privately.

"The government commitment does not increase," Rue said.

"It's our obligation to go to the market and I think that's a great vote of confidence in the company that we will be doing that."