STOCK EXCHANGE ANNOUNCEMENT
18 October 2016
Deal agreed for non-standard UFB installations
Chorus today announced a conditional agreement with Crown Fibre Holdings
(CFH) that will see free residential installations continue through to 31
December 2019 for those premises connecting to the UFB network.
Chorus has been providing funding for residential non-standard installations
since late 2012, with an initial fund of $20 million increased to $28 million
in 2014.
In February this year Chorus said funding would be extended until the end of
2016 following a further agreement with CFH.
Chorus has worked closely with CFH to find a value neutral way to continue to
provide free non-standard residential connections through to the end of the
build period (2019).
Chorus Chief Financial Officer Andrew Carroll said the new agreement
recognises that the Government''s pending regulatory review has proposed
building block model regulation. As such, its finalisation and
implementation should ultimately provide a long term sustainable solution for
funding these costs, but this is not yet currently certain.
"We''ve therefore taken the pragmatic approach that a building block model is
likely to include the cost of residential non-standard installations in a
regulated asset base, thereby allowing a regulated return on this investment.
"In the event that this hasn''t occurred by 31 December 2020, or not all of
Chorus'' actual UFB non-standard installation costs are included in the asset
base, the dates on which Chorus must redeem or provide dividends on the CFH
debt and equity securities will be postponed.
"The CFH security postponement dates would effectively range from a few
months in the event that 80% of non-standard installation costs are included
in an asset base, through to about two years in the event that no costs are
included.
"The agreement, therefore, does not require any additional funding from CFH,
change the underlying contractual obligations to pass all premises in Chorus''
coverage area before December 2019, or change the network requirements."
At a maximum, postponement of Chorus'' repayment of the CFH debt and equity
securities would contribute approximately $60 million towards non-standard
installation costs incurred from 2017 to the end of 2019.
Today''s announcement will see Chorus continuing to offer free residential
installations up to 200 metres in single dwelling units and free residential
installations in multi-dwelling units with no more than three residential
tenanted stories.
The agreement is conditional on confirmation that the tax status of the CFH
securities is unchanged.
"New Zealand is leading the world on its fibre roll out and fibre growth, and
today''s announcement represents another step towards enabling better
broadband for more New Zealanders."
ENDS
For further information:
Brett Jackson
Investor Relations Manager
Phone: +64 4 896 4039
Mobile: +64 (27) 488 7808
Email: brett.jackson@chorus.co.nz
Nathan Beaumont
Stakeholder Communications Manager
Phone: +64 4 896 4352
Mobile: +64 (21) 243 8412
Email: nathan.beaumont@chorus.co.nz
End CA:00290985 For:CNU Type:GENERAL Time:2016-10-18 08:34:59