4. What’s Possible?
• The numbers are straightforward:
£250m BDUK
+ £250m Council match
+ £500m Investor match
+ £2,500m debt, 2.5:1 leverage
= £3.5bn a/v to invest
• Regulatory perspective:
•
Assuming 12% allowed return… if Kd = 5%,
allowed equity return = 33%
• Market perspective:
•
•
•
£3,000 cost/connected home, £150 p.a. yields 2% to equity
£2,000 cost/connected home, £150 p.a. yields 10% to equity
£1,000 cost/connected home, £150 p.a. yields 32% to equity
• i.e. with scale, blended returns can compensate for
uneconomic returns
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5. Conclusion
• Councils and Government can fix the ‘final 10%’!
• All the tools are available and proven – co-investment,
project finance SPVs, local authorities as procurers –
it’s only the combination that is new
• Benefits are substantial:
•
•
•
•
•
•
•
A real choice, not a re-tread
Superior technology solution – FTTH, with Open Access
An investment, not a grant – no State aid issues under MEIP
Service diversity – think 100% digital inclusion
More efficient delivery of public services
Stimulus to inward investment
Demonstrably better VFM with public funds
• In the vulgarism of the day, ‘what’s not to like?’
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