Early investors in national broadband plan to be allowed sell stake

Early investors in the State's national broadband plan are to be given a chance to sell up their stake in the near future, an Oireachtas committee will be told tomorrow.

The company awarded the contract for the plan, National Broadband Ireland (NBI), will tell the Public Accounts Committee (PAC) it is likely that some of its early-stage backers "will be replaced with investors who specialise in long-term investments".

NBI has been forced to defend its ownership structure, as well as the returns to investors, in recent weeks, and will give evidence relating to both at the PAC tomorrow.

Peter Hendrick, the chief executive of the company, will tell the committee that the investors who are set to exit "helped turn NBI from an idea into a reality at a point when there was still a lot of unquantifiable risk in the project".

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They are expected to be replaced with investors who “specialise in long-term investments”, the committee will hear. Mr Hendrick will defend the shake-up to the ownership structure, saying it has “always been the plan” and that mechanisms for changes to ownership are permitted in the contract.

“The corporate structure, as it is today or into the future will not change NBI’s contractual commitments or collective goal: delivering the infrastructure that will radically transfor the country’s broadband landscape.”

The shift to new investors, he will say, "will not cost the people of Ireland or the State any additional money and will not impact the day-to-day operations of the business". The company has also been forced to defend recently the use of shareholder loans to fund the bid costs of the project, which are now being repaid. Mr Hendrick will say this is a standard practice "in similar major infrastructure projects across Europe and the US".

Interest, which, he will say, is charged at 12 per cent, “forms part of the overall return on shareholder invested funds and is reflected in the overall financial model for the project which has been agreed with the Minister”. While costs associated with the bid have been reimbursed, the committee will hear that the payments were not made from subsidies paid over by the State, instead coming from “incoming shareholders”, which Mr Hendrick will say were “always forecasted to be reimbursed in the first year of operations”.

Company structure

The bid costs which have been reimbursed relate primarily to a team of about 80-100 people who worked on the bid across a four-year period up to November 2019. The ultimate controller of NBI is Irish-American investor David McCorut, who has voting rights vested across the tiers of a complicated company structure involving a range of subsidiaries and holding vehicles. The company will defend this approach, telling the committee that “this structure would not be unusual in the context of a major infrastructure project with a series of international investors”.

“The corporate structure, as it is today or into the future, will not change NBI’s contractual commitments or collective goal: delivering the infrastructure that will radically transform the country’s broadband landscape.”

The rollout of the plan, which for years has attracted controversy over the cost and bidding process, is behind schedule due to disruption caused by Covid and a number of other factors. Last month, Minister of State Ossian Smyth told the Dáil that the company had to "take responsibility" for the delays.

“There has been an impact from Covid, it has slowed them down, it has taken a few months off, it has made them several months later than they should be but it’s not the entire story; part of the problem is their fault”, Mr Smyth told the Dáil in January.