Tuesday, 21 May 2019

Questions (48)

Timmy Dooley

Question:

48. Deputy Timmy Dooley asked the Minister for Communications, Climate Action and Environment the role of companies (details supplied) in the national broadband plan; the contractual and financial powers of the State with regard to these companies; and if he will make a statement on the matter. [22060/19]

View answer

Oral answers (10 contributions) (Question to Communications)

This question relates to the companies which may be providing the financial backing to the national broadband plan. In response to a parliamentary question tabled by Deputy Cowen, Fianna Fáil received the following answer:

The holding company and Granahan McCourt Dublin (Ireland) Limited will have agreements in place with the ultimate investors, Granahan McCourt Dublin (Ireland) Limited, Tetrad Corporation and McCourt Global LLC., in respect of both corporate governance and equity funding for the project.

However, it was reported in this week's edition of The Sunday Times that McCourt Global is not an investor. I ask the Minister to tell us which is the case.

The national broadband plan is a plan to design, build and operate a network which will make high speed broadband available to every home in rural Ireland within seven years and to continue to operate the service for 35 years. Granahan McCourt relied on the resources of Tetrad Corporation and McCourt Global LLC to demonstrate its economic and financial capacity for the purposes of the pre-qualification process and the requirements for doing so are set out in the project information memorandum, including at section 10.2, and the pre-qualification questionnaire. Tetrad Corporation and McCourt Global LLC provided letters of support as part of that process. Tetrad Corporation and McCourt Global both reiterated their support at final tender and Tetrad Corporation provided a commitment letter in relation to the equity required for the project. The equity commitments will be contractualised in advance of contract award. This means that the Minister will have the right, through those contracts, to enforce the equity commitment on behalf of the project. This committed equity from the bidder will be invested ahead of the Government subsidies, thereby placing this investment at risk first.

The Minister has gone ahead and appointed Granahan McCourt as the preferred bidder for the national broadband plan, yet he has not received basic information on the bidder. What is the full membership of the consortium and who is ultimately financing it? The Minister has confirmed that Granahan McCourt did not even have the €175 million in equity that was needed up front so who is providing the money? I ask the Minister to provide a breakdown of who is involved in that.

In the event of anything going wrong, we have been told in recent days by the Minister and the Taoiseach that Granahan McCourt will be responsible for up to €2.4 billion of funding. However, it did not have €220 million or even €175 million at the start. Who is providing that cover? What instrument will be used to provide that cover? The project information memorandum seems to suggest that all that is required is a letter of comfort and that such will suffice.

I ask the Minister to respond.

That is not enough.

We cannot have further debate. The Deputy's time is up.

The Taoiseach indicated that there was €2.4 billion on the hook but now we are being told that the capital is all that is involved.

The position is that the commitments in relation to equity will be contractualised in advance of contract award. Any committed funding that has not been drawn down by National Broadband Ireland at financial close will require a guarantee in a form that is acceptable to the Department. The Department will have a legally enforceable contract in relation to the equity that has to be provided. That equity will be rolled into the company and all of it must be in the company before any equity could be withdrawn or returns made.

In terms of the €2.4 billion, the Deputy is correct that the company is exposed to the full risk of funding the investment right out to the 25 year period and while the State's commitment is capped, the company has no such capping. The company not only has to provide that initial equity of €175 million and the working capital of €45 million but it is also exposed to the risk that if any of the projections do not materialise, it could have to make additional equity investments.

It is clear now that the only commitment that Granahan McCourt has to make, along with the myriad of companies that sit behind it supporting it and providing it with letters of comfort, is to invest €175 million of equity. It is also clear from the Minister's answer that all of that €175 million may not be in the company by the time the contract is signed. The Government has talked loosely about an additional €2.4 billion of exposure. I ask the Minister to confirm that there will be no encumbrance or lien on any asset of Granahan McCourt or any of its support companies to ensure that the money is available in the event of the performance of the contract not being as expected. I want clarity. Will there be some legal connection or instrument to encumber that €2.4 billion in the event of the contract not performing as expected?

The position is that the contract will provide an enforceable equity commitment on behalf of the project which will cover the equity involved of €175 million. The company will also have to provide all of the working capital. As I indicated in my initial reply, the State will not be making any commitment to make a payment until and as the roll-out is delivered.

In terms of the longer-term prospects of this company, it is operating in a controlled market where it will pay a price that is fixed under the contract, which is at the same price that access to urban broadband will occur. At year 25, it is expected that its total turnover will be of the order of €150 million. That is the size and scale of this operation. The commitment of equity is absolutely secured in the contract and the State will have recourse in respect of that. If at any point the company fails to meet its commitments, as set down at six different milestones, the State can intervene and repossess the assets.