Peadar Tóibín (Meath West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

804. To ask the Minister for Communications, Energy and Natural Resources the way in which the private ownership model would require an additional €500 million to €600 million in capital spending regarding the national broadband strategy; the way, in terms of overall spend on the project it would impact on the current capital plan and the Government balance sheet; and if he will make a statement on the matter. [22229/16]

Peadar Tóibín (Meath West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

805. To ask the Minister for Communications, Energy and Natural Resources the reason the private ownership model cost an additional €500 million to €600 million in capital spending when it has been explicitly stated its cost is €270 million, €70 million of which will be EU funding, regarding the national broadband strategy; and if he will make a statement on the matter. [22230/16]

Denis Naughten (Roscommon-Galway, Independent)
Link to this: Individually | In context | Oireachtas source

I propose to take Questions Nos. 804 and 805 together.

I refer the Deputy to my reply to Question Numbers 21272/16  and 21273/16 (Proof 766 and 767) of 12 July 2016 . The position remains as set out in that reply. (see below)

On 5 July the Government selected the Commercial Stimulus Model as the optimum ownership model for the network that will be part-funded by the Exchequer.  The Government considered two ownership models, having narrowed the options down last December, from five models. The two models are:

- Commercial Stimulus (or ‘Gap Funding’) – the private sector finances, designs, builds, owns and operates the network, with contractual obligations to the Department;

- Full Concession – the private sector finances, designs, builds and operates the network with contractual obligations to the Department.  Those assets funded by the State are handed back to the State after 25 years. Commercial assets that support the NBP infrastructure would however remain in private ownership.

Both Models will deliver the same network, with the same service specifications and controls, for 25 years. In both models, the winning bidder(s) will be subject to stringent contract provisions to ensure that the network delivers quality, affordable high speed broadband to all parts of Ireland that cannot access services.

The Department has completed detailed costings, down to every individual premise in the Intervention Area and, on that basis, has modelled the likely cost of each ownership model. It would not be appropriate to publish the expected cost of building the network or the likely cost to the State while a major public procurement process is underway. I do not intend therefore to indicate the overall estimated Exchequer funding parameters. Ultimately, the costs will depend on the price that bidder(s) quote in the tender process. I can however confirm the following based on the cost modelling completed to date:

- The Full Concession Model is estimated to cost 50 – 70% more in nominal terms that the Commercial Stimulus Funding model;

- In the Full Concession Model, the full cost of the project would be likely to go on the Government’s Balance Sheet, and the commercial sector input would likely be regarded as Government debt;

- Having the entire project on the Government’s Balance sheet would impact the general Government deficit by approximately €1bn more than the Commercial Stimulus Model. This would also reduce the available capital spend for other key investment projects by up to €600m over the next six years.

In addition to the funding implications of the Full Concession Model, I am advised that this model could take at least 6 months longer to negotiate a contract, than with the Gap funding model.