WEL reviewing capital structure of fibre business

By Gavin Evans

Aug. 23 (BusinessDesk) - WEL Networks is reviewing the capital structure of its Ultrafast Fibre subsidiary.

The Hamilton-based network operator owns 85 percent of UFF in partnership with neighbouring power distributor Waipa Networks.

WEL offered no immediate explanation for the review and said the options available to it include maintaining the status quo.

The community trust-owned business is the country’s sixth-largest power distributor, supplying about 92,800 homes and businesses. It is benefiting from strong growth across its region and the on-going roll-out of fibre broadband services by UFF across the central North Island.

WEL partnered with Waipa to participate in the Crown’s ultrafast broadband roll-out in 2012 and the venture was subsequently awarded additional contracts to connect more communities in Taranaki, Waikato and the Bay of Plenty. In 2016, WEL bought out the Crown’s interest in the partnership.

UFF had more than 120,000 active customers on its network at the end of June. It expects to complete the UFB2 and UFB2-plus roll-outs for the Crown by the end of the year and says new residential developments in Taranaki, Waikato and the Bay of Plenty will see the network expanded to a potential market of 235,000 homes and businesses.

WEL had total assets of about $1.24 billion at March 31, of which the fibre network accounted for just over $599 million. The fibre network provided $67 million of the group’s $210.6 million of revenue in the March year, and $39.6 million of WEL’s $115 million of operating earnings.

The fibre network had a carrying value of $467 million at the end of March. WEL’s board opted not to increase it to $480.1 million, the mid-point of a three-yearly Deloitte valuation, citing the changing regulatory environment for broadband services and the potential risk from future 5G services.

The network operator has bonds listed on the NZX. The notes, which mature in 2023, pay annual interest of 4.9 percent. The recently traded at a yield of 2.75 percent, down 1 basis point.

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