NBP: Contract, NBI: Corporate Structure, Funding, and Management Fees.

clohamon

Continuing questions about ownership model, governance of the NBP contract, and whether NBI's current owners are too much about the money.

The Currency ran a three day critique of NBI's ultimate corporate structure, equity commitment and the application of fees/interest. Amongst other work it highlighted the seeming mismatch between the Chairman's words and deeds; reporter Thomas Hubert's stylish understatement can be sampled here. 

( @heavydawson informs that a €5 trial subscription to the Currency will cover all three pieces.)

Mr Hubert says he will be seeking release of the un-redacted NBP contract under the Freedom of Information Act. Meanwhile Gavin Sheridan awaits the release of the un-redacted enet/MANS contract he FOI'd 6 years ago.

Ruairí Ó Murchú, TD (SF) and member of the Oireachtas committee on Communications, compared Granahan McCourt to the operation of the fictional Gordon Gekko from "Wall Street". Two of Mr Gekko's finest moments here - “Greed is good”, “How much is enough”

The Department is seeking in-house legal advice on the NBP from two people/roles for at least the next four years - estimated value €1,375,000. Luckily for the candidates understanding the NBP is not that important.

2021-12-12 - The Business Post reports (written source unknown) that minister Ossian Smyth intends a review of NBP contract commitments. @heavydawson relays SBP nugget that Eircom and NBI Chairmen and CEOs are to meet on Monday 13th December to smooth the roll-out issues.

2021-12-13 - The Irish Times reports that Ministers Ryan/Smyth have ordered EY and William Fry to review Granahan McCourt's funding commitments/performance in the contract. But it looks like they might be reviewing their own work to some extent.

"William Fry and EY had been engaged “on an ongoing basis to assist in the oversight of the NBP contract requirements since 2020”, the department said."

Other questions:

Whether interest on investor loans may be offset against future profits in relation to corporation tax and the profits claw-back condition.

Whether NBI deployment operations are receiving sufficient and timely working capital to meet deployment targets.

How estimated bidder costs increased from c.€4M in early 2017 to SBP report of €32.73M by 2020.

Whether in comparison SIRO received bid compensation following their withdrawal after the project scope changed in April 2017.

clohamon

Thomas Hubert of The Currency tweets official Government statement on EY/William Fry review.

Dept of Communications confirms to me it has found no deviation from the NBP contract. So the secretive ownership and investment structure, slow-release funding through 12% compound interest five-year loans and €38m fees in year 1 were all accepted by government from the start.

heavydawson

https://www.businesspost.ie/infrastructure/nbi-investors-can-provide-99-of-funding-through-high-cost-loans-987e1138

clohamon

Lightnet's complaint about being mapped as amber in the NBP has been adjourned for the 13th time until 08/03/2022.

LIGHTHOUSE NETWORKS LTD -V- MINISTER FOR COMMUNICATIONS CLIMATE ACTION AND 2020/133

joe123

https://www.boards.ie/discussion/comment/118331469#Comment_118331469

Surely they dont have a case? WISP vs FTTH is not even up for debate when properly compared.

clohamon

https://www.boards.ie/discussion/comment/118337948#Comment_118337948

I'm not a lawyer but it seems to be about fair process under the criteria set by DCCAE rather than which technology is better.

heavydawson

https://www.businesspost.ie/infrastructure/revealed-mccourt-firm-owns-less-than-3-per-cent-of-national-broadband-ireland-13d563f2

https://www.businesspost.ie/infrastructure/revealed-the-multiple-firms-at-the-centre-of-nbis-financial-labyrinth-5fe9f2b6

clohamon

https://www.boards.ie/discussion/comment/118345823#Comment_118345823

POD seems to have it in for McCourt. He's busier than ever after The Currency stole his thunder last week.

heavydawson

https://www.boards.ie/discussion/comment/118346604#Comment_118346604

Yes, there's some friction there. That said, it's been an enlightening few weeks thanks to both journalists. One interesting tidbit from the BP's coverage today is the Peter Hendricks himself is investing in NBI:

Among these is Yakida Ltd, a company registered in the Isle of Man. Documents from Isle of Man Companies Registry accessed by this newspaper reveal Yakida to be an investment vehicle of Peter Hendrick, the chief executive at NBI.

His total investment in the project is €3 million, making him NBI’s smallest investor.

listermint

There's an irrationality to some of his coverage though. I'd assume he enters all his work from his 1gb EIR connection no doubt.

clohamon

Looks like that's a 'No' on whether they'll be publishing more contract information.

The NBP contract is a complex and detailed document which sets out the specific contract terms with NBI in respect of the rollout of the new high speed broadband network under the State led intervention. 

The publication of commercial contracts of this nature would not be commonplace but, recognising the public interest and level of State subsidy involved, and in accordance with commitments given at the time of contract signing, a suitably redacted version of the contract has been published. This followed considerable engagement between the Department and NBI and both sets of advisors to ensure that only those elements of the contract which could be demonstrated as commercially sensitive or potentially impacting the ability of the Department or NBI to fulfil their requirements under the contract were redacted. 

I am mindful that publication of commercially sensitive information which has the potential to impact the programme would create a precedent which could have consequences for the State’s ability to contract with commercial third parties in the future. However, as indicated in my responses to Parliamentary Questions on 14 December 2021, I have asked my officials to review the current published version of the contract to ensure that the maximum disclosures permissible have been made.

clohamon

NBI's website now includes the board of directors with potted biographies.

• David McCourt
• Mike Adams
• Hamid Akhavan
• Bernie Gray - Government appointee
• Paul Haran
• Aidan McCullen
• Don McAuley
• W. David Scott
• Musa Soenmez

clohamon

NBI have put up some new documents on their website.

Corporate Structure

https://nbi.ie/governance-structure/

NBP Contract Summary (pdf)

https://nbi.ie/wp-content/uploads/2022/01/Contract-Summary.pdf

heavydawson

https://thecurrency.news/articles/74433/nbi-responds-the-shareholders-the-loans-and-the-profit-sharing-behind-irelands-e3bn-broadband-plan/

Good move by NBI. They invited the Currency to ask them direct questions about the shareholding.

clohamon

https://www.boards.ie/discussion/comment/118652273#Comment_118652273

Questions I wanted answered.

Is Peter Hendrick (or any other executive shareholder) a seller in the forthcoming shareholder re-structure ?

Do the shareholder loans change hands along with the shareholding?

Is the shareholder loan interest offsetable against corporation tax?

Is the shareholder loan interest offsetable against contract clawback?

Who decides when is the correct time to re-structure/repay shareholder loans.

heavydawson

https://www.boards.ie/discussion/comment/118655532#Comment_118655532

You should reach out to Tom Hubert on Twitter and see if he can get answers to those questions. You can be sure that reporting on the NBP will run for years (at least until the final home is passed in 2026-ish)

heavydawson

Another good article by The Currency on the NBP. More of an opinion piece rather than material disclosure of new facts, it's nonetheless an excellent piece with some very good points made re. transparency:

https://twitter.com/thecurrency/status/1496389601061130240

clohamon

https://www.boards.ie/discussion/comment/118678601#Comment_118678601

Did they withdraw the initial claim?

NBI uncovered – Part 1: How a hedge fund quietly took over the National Broadband Plan

It looks like The Currency are being rewarded for the original inaccuracy.

National Broadband Ireland (NBI) set aside a full day to show me around its business and made five members of its senior management team available to answer any of my questions, including chief executive Peter Hendrick. They also invited Fergal Mulligan, who heads up the Department of Communications’ unit tasked with overseeing the National Broadband Plan (NBP) contract.

clohamon

EY, the consultants, have been given some more taxpayers money to write a report. This time they've concluded that the 2019 cost benefit analysis underestimated the overall benefits of the NBP - mostly by not forecasting the increase in home working.

https://www.gov.ie/en/publication/70cc2-national-broadband-plan-benefits-of-high-speed-broadband/

heavydawson

The central assumption in the 2019 analysis was that 20% of employees worked remotely. Based on new evidence, a revised central assumption that 50% of employees will work remotely was modelled, generating significantly higher benefits for households largely through time and cost savings from less commuting

So the cost benefit ratio went from 1.43 -> 1.92, which is great.

But there's not a single mention of any change to the cost figure (which seems to be set around 3.07 billion for the calculations above).

I'm assuming inflation is hitting the project as it would hit any other project? Is the NBP is covered in the NDP projects?

https://www.irishtimes.com/news/politics/government-to-pay-up-to-70-of-builders-inflation-related-construction-costs-1.4874685

heavydawson

https://www.independent.ie/business/technology/majority-share-in-national-broadband-plan-sold-to-spanish-investment-firm-41833320.html

London-based Oak Hill Advisors and US investor Twin Point Capital, which own close to 80pc of the equity in National Broadband Ireland (NBI) between them, have agreed to sell to Madrid-based Asterion Industrial Partners. The Spanish investment company, which recently closed a €1.8bn funding round, specialises in European infrastructure, with technology and telecoms investments in the UK (MS3), Spain (Olivenet) and Italy (Irideos).

NBI declined to disclose the value of the deal.

clohamon

Anyone know who the 'smaller backers' are?

The Madrid-based investor in European infrastructure is set to acquire the stakes of a number of major investors as well as a number of smaller backers of the multi-billion-euro National Broadband Plan (NBP).

https://www.businesspost.ie/news/asterion-industrial-partners-to-buy-80-stake-in-national-broadband-ireland/

heavydawson

https://www.boards.ie/discussion/comment/119326583#Comment_119326583

The Currency just ran a piece on it and honed in on that specific point:

The new investor is also due to acquire other “certain minorities,” which covers smaller stakes held until now by telecoms businessmen Bruno Ducharme of Canada and Brian Thompson in the US

Source:

https://thecurrency.news/articles/90016/nbi-has-a-new-80-shareholder-what-control-and-return-will-the-company-give-asterion/

I'd encourage anyone who's interested to subscribe to the Currency if you can afford it. Reporting is top class, and less opinionated than certain other Sunday Business Publications IMHO

clohamon

https://www.boards.ie/discussion/comment/119329517#Comment_119329517

I wonder if that's the Brian Thompson who resigned as Chairman of Telecom Eireann weeks before the floatation in 1999.

The main concern is whether the NBI executives Hendrick, Malone etc are selling their stakes.

heavydawson

https://www.boards.ie/discussion/comment/119330139#Comment_119330139

Again, from the Currency report:

Management stakes including Hendrick’s are not transferring to Asterion

And from the Independent report:

But a spokesperson said that neither Granahan McCourt or its CEO and chairman, David McCourt, is selling any equity as part of the sale

heavydawson

Another interesting update on the NBI management side of things:

https://thecurrency.news/articles/90321/tracker-shares-and-cash-incentives-inside-nbis-performance-pay-plan/

heavydawson

https://www.businesspost.ie/news/nbi-backers-set-for-returns-over-25-from-sale-of-stake-to-spanish-investor/

Key points

The departing investors stand to make an internal rate of return of more than 25 per cent on their investment just two and a half years into the 25-year contract which will net them millions of euro.

Several company and departmental sources have confirmed that a clawback will apply whereby the state recoups part of the departing investors’ returns on their investment.

clohamon

So, question remains, is the interest on the 'equity' loans calculated as part of the IRR or is it separate ? And is it off-settable against corporation tax ?

But, reassuring to know that financial professionals, (who've presumably seen the books) think it's a good enough bet to pay a premium. And good to know that executive stakeholders are staying in.

heavydawson

https://www.boards.ie/discussion/comment/119355770#Comment_119355770

Maybe I'm just being clever, but if you only end up paying 200-odd million for majority ownership of something that's largely paid for by the government and worth billions, it seems like a good bet on the face of it, without ever having to check the books!

The network is going to get built without question. The only question is over the timelines, and final cost. I can't imagine they've factored in the level of inflation we're seeing into any of their cost models.

NBI have been talking up selling their expertise for future fibre build-outs in Europe, and there may be something to that, but I think that's a lot of marketing fluff IMHO.

You should ask Thomas Hubert on Twitter (who wrote the Currency piece) about the Corp Tax / IRR questions. He might answer them in any follow up pieces he does.

heavydawson

Asterion seem to be on an acquisition tear at the moment

https://bebeez.it/en/private-equity-en/asterion-conquers-irideos-too-together-with-retelit-a-super-platform-in-italy-active-in-the-optic-fiber-and-datacenter-business/

clohamon

https://www.boards.ie/discussion/comment/119353048#Comment_119353048

Minister consents to sale.

https://www.gov.ie/en/press-release/eebb2-statement-by-minister-of-state-ossian-smyth-on-the-national-broadband-plan-and-national-broadband-ireland/