This site uses cookies to improve your experience and to provide services and advertising. By continuing to browse, you agree to the use of cookies described in our Cookies Policy. You may change your settings at any time but this may impact on the functionality of the site. To learn more see our Cookies Policy.
OK
Dublin: 10 °C Thursday 23 May, 2019
Advertisement

National Broadband system could be sold on in years to come, say TDs as it's confirmed bidder to invest initial €220m

National Broadband Ireland – set up by investors Granahan McCourt – said this initial investment is “at risk first”.

Minister Richard Bruton will address an Oireachtas committee today
Minister Richard Bruton will address an Oireachtas committee today
Image: Leah Farrell/Rollingnews.ie

Updated May 14th 2019, 6:30 PM

THE OIREACHTAS COMMUNICATIONS Committee will meet again later this week to decide whether to launch an investigation into the National Broadband Plan. 

Fianna Fáil’s Communications spokesperson Timmy Dooley said he will be “pushing strongly” for an inquiry into the project in order to “get to bottom of what has gone on here”.

The move comes after it was confirmed today that the firm designated as the preferred bidder for the National Broadband Plan will invest an initial €220 million in equity and working capital to help fund the project. 

The figure was confirmed by the Taoiseach today during Leaders’ Questions, with Leo Varadkar stating that the €220 million upfront investment is €175 million equity and €45m in working capital.

The announcement of the €220 million figure from the preferred bidder today incited fury among the opposition today, who’ve already expressed outrage at the high cost of the plan and the timing of the announcement just before the local and European elections.

Both Fianna Fáil and Labour raised concerns about the long-term plan of the bidder. 

Flipped 

Fianna Fáil’s Michael McGrath said he is concerned about the consortium flipping the company in a few years from now.

“It seems to me that Granahan McCourt are going to be relying on revenue raised by consumers in order to meet their commitments. And there is a real concern here that because of the nature of the consortium, in essence it is an investment firm that is bringing in some expertise, but it’s not a firm of itself that has expertise in this area.

“You may well see a scenario where this contract is flipped on, that this contract is sold on within a period of time and indeed those who are waiting too long for broadband will be left high and dry, so the nature and the tone of the advice from the Department of Public Expenditure and Reform was quite striking, and was incredibly strong and forceful and was repeated and sustained.

“This was not one letter, it was not one memo, it was the internal spending watchdog within Government flashing the red lights and shouting stop, you should not proceed and so we will continue to ask questions and piece together all the information we have here,” said McGrath.

Appearing before an Oireachtas committee today, Communications Minister Richard Bruton said it is likely the company will only make €10 million in revenue in first year of operation. He estimated this to rise to €150 million annually in future years.

When asked how much the service user will pay, the minister said homeowners will pay €30 per month for the 150Mbs fibre broadband service, even in the remotest rural areas.

In relation to the ESB rolling out the network, Bruton said the government looked at the option, stating that the government cannot just hand a new tender contract to the ESB, stating a new tender would have to be issued, where all could re-apply and it could take up to 36 months to complete. 

Last week, Cabinet signed off on the National Broadband Plan despite warnings from senior civil servants at the Department of Public Expenditure and Reform who “strongly recommended against” the decision

The plan aims to lay down fibre cables capable of delivering high-speed internet to more than 540,000 homes, farms and businesses across rural Ireland. 

While the plan could cost as much as €2.97 billion to the State, the government will not actually own the network when it is finished despite its larger investment. 

Leaders’ Questions dominated by NBP

Varadkar appealed to the opposition not rule out the NBP before they have listened to all the hearings on the matter. He said the contract has not yet been signed, and it is unlikely it will be signed by September or October. 

The Taoiseach said alternatives were looked at by government, but “there isn’t a better option”.

If the government does not proceed with this contract, it will be many years before another plan is put forward and it will be “back to square one”, said Varadkar.

“I don’t agree that it is unprecedented,’ the Taoiseach said today when asked about a reference in the documents released last week that the risk to the taxpayer is “unprecedented”.

Varadkar said the investment is not unprecedented, stating that €8 billion was found to fund Ireland’s motorways. Sinn Féin’s Mary Lou McDonald said a serious question mark hangs over the consortium and its capacity to deliver the project. 

The Taoiseach said the company has the capacity to deliver, adding that the cost-benefit-analysis “stacks up” and is “conservative” as it doesn’t take in the societal benefits.

Labour’s Brendan Howlin asked the Taoiseach about why the State will not end up owning the network. He raised concerns about the network being sold on after eight years, stating that vulture funds will buy it up.

“It will be milked” for all its assets are worth, he said. 

A State-owned broadband company could put up the same cash, generate the same revenue, and end up returning a dividend to the Irish public, he argued, stating that private investors are borrowing today on the back of the premise of getting revenue in the years to come. 

Howlin admitted that the selling off of Eircom was a “disaster” but urged the Taoiseach not to make the same mistake with the roll out of broadband. 

Varakar said the NBP is a plan that the Labour Party can be “proud of”, stating that it initially began under two Labour ministers.

In a statement today, National Broadband Ireland (NBI) – the entity set up by Granahan McCourt to deliver the plan – said it will be required to meet financial obligations of €2.4 billion in the delivery of the project over the next 25 years.

With Granahan McCourt the investors behind the project, NBI said today this initial tranche of €220 million is invested ahead of the government subsidies, “thereby placing this investment at risk first”.

NBI also said in a statement today that it is at risk in the event that commercial take-up of broadband is lower than expected.

“A return will only be generated if the project is delivered on time, and within budget – with any overrun costs borne by NBI,” it said. It also said that the State has clawback mechanisms in the event that there is over performance.

The company added that it was currently negotiating contracts with over 40 specialist subcontractors to help deliver the project and wouldn’t be disclosing “commercially sensitive information” which could “prejudice these negotiations”. 

With additional reporting by Christina Finn

  • Share on Facebook
  • Email this article
  •  

About the author:

Sean Murray

Read next:

COMMENTS (127)

This is YOUR comments community. Stay civil, stay constructive, stay on topic. Please familiarise yourself with our comments policy here before taking part.
write a comment

    Leave a commentcancel