Kordia has no concerns about the financial viability of the proposed trans-Tasman telecommunications cable build, even as its Australian partner, Pipe Networks, is talking about modifying its plans due to credit market turmoil.
Kordia’s general manager of strategic development, Susie Stone, says plans were for the cable to go live mid next year and that Pipe had always intended to seek bridging finance.
“Kordia has no concern,” she says. “The analysts still recommend Pipe as a buy.”
She says any company applying for large financing would face more stringent conditions in the current economic climate.
Pipe’s chief executive, Bevan Slattery, said last week that an application for bridging finance was currently with ANZ Banking Corporation’s credit committee and that, given the current market conditions, any offer might come with more stringent draw-down conditions than would previously have been the case.
The submarine cable would link with another cable being built by Pipe between Sydney and the regional hub in Guam. Kordia is working on a business case for the trans-tasman link, expected to cost up to $60 million.
Slattery said at the company’s annual general meeting that directors would consider the implications of any funding offer based on improved earnings per share at the time the project comes on stream.
“Obviously, we are hopeful of proceeding as planned. The other possibilities are that modifications to our plans will be required: for example, we may talk to partners. Or, quite simply, we will not be able to meet our own stated criteria. We expect to be able to make these assessments within a relatively short time frame.”
Kordia chief executive Geoff Hunt was quoted last week as saying Slattery’s statement didn’t change the work being done to get the business case together. “The news has only just come out and we are still a bit away from concluding the business case.”
The trans-tasman cable will be known as PPC-2 and its construction will follow the building of PPC-1, the cable linking Sydney and Guam.
Pipe’s Sydney landing station has been designed to co-locate the PPC-2 system; the PPC-1 cable system has two additional pairs of fibre installed to a branching unit in the waters 120km east of Sydney that will allow any new New Zealand-Australia cable to simply interconnect to those spare pairs.
In announcing the deal with Kordia, Pipe had said this negated many of the costs, timing and permitting issues associated with landing PPC-2 into Australia.
The Research and Education Advanced Network New Zealand, which operates the advanced research network KAREN, has been allocated $15 million from the Budget to buy international capacity for its network on a new cable. It issued an RFI from suppliers last month.