NBN Co Chief Executive Mike Quigley must be feeling a little embattled lately. The company’s rollout schedule is running late and it being subject to intense scrutiny, and the election fever that has gripped the chattering classes has made his company’s performance, and its very future, a political issue. A Liberal Senator, the ever-amusing Bill Heffernan, called him “brain dead” at a Senate Estimates Committee meeting.
Now the company has taken the unusual step of putting out a press release to respond to an article published in the Australian Financial Review that it says misrepresents the accounting treatment of whole NBN project. Quigley says the publication has wrongly reported that NBN Co would not recover its costs by 2040.
“NBN Co continues to expect that it will pay back to the government the amount spent on the network within the timeframe laid down in the updated Corporate Plan issued in 2012. To suggest otherwise is incorrect and misleading,” said Quigley in the statement.
“In the Corporate Plan, NBN Co forecast it would pay back by 2033 the cash paid out. This forecast has not changed. The Australian Financial Review, in quoting from a letter sent to the ACCC by NBN Co, instead referred to the Initial Cost Recovery Account (ICRA), which capitalises the amount spent by NBN Co at a regulated rate agreed with the ACCC.
“Under this calculation, revenue received by NBN Co is counted against the ICRA until it is extinguished. But this does not affect the revenue assumptions that have been made by NBN Co, nor the returns forecast in the Corporate Plan.”
“In its letter to the ACCC, NBN Co noted a number of scenarios in which the ICRA would be extinguished before 2039-40. Other scenarios point out earlier timelines to repay ICRA over the long-term timeframe. The Australian Financial Review however appears to have resorted to an oversimplification by focusing on one scenario only.
“NBN Co appreciates that the regulatory concepts used in its negotiation with the ACCC are complex but it is disappointing that Australia’s daily business newspaper has misrepresented the project’s underlying financial position,” Quigley said.
“The project’s financial underpinnings remain robust. NBN Co is on track to deliver a financial return to the Government over the life of the project while providing all Australians with access to high-speed broadband services.”