Reggefiber also turns to EIB for FTTH project financing

Thursday 21 January 2010 | 12:22 CET | Market Commentary
Dutch fibre network operator Reggefiber has applied to the European Investment Bank for financing. Its shareholder KPN already said last year that it was looking for new sources of financing for the venture and hoped to find external funds in the first half of 2010. Reggefiber has applied for a loan of EUR 130 million.

While the EIB has made the application public, this probably only means that they have spent some time looking at it. Reggefiber appears to have a good chance of getting approval for the loan. The project financing would cover 33 cities and towns where open FTTH networks are planned for deployment. These include Leeuwarden, Houten, Enter and possibly other areas of Amersfoort.

While the loan may suggest to some unfair state support, this is not the case. This is a "normal" bank loan at market terms. Reggefiber is not the first operator to get this type of financing. Recently Iliad in France, Sonaecom and Zon in Portugal and Stadtwerke Munich have all turned the EIB.

There are numerous implications from the decision. First, assuming a deal is reached, shareholders KPN and Reggeborgh should be happy with the outside lender. Especially KPN's shareholders will be happy, as the EIB loan means no further pressure on KPN's balance sheet. Second, commercial banks will likely also lend to Reggefiber, as this is usually a condition at the EIB. A return to bank financing is good news for the telecoms sector. Third, the loan, with Reggefiber's balance sheet in mind, is for a limited amount. Reggefiber has shareholders equity of EUR 500 million (and so far debt of only EUR 100 million), so its borrowing capacity is 2-3 times this amount. After completing the 33 projects, another loan is the clear next step. Fourth, the EIB is a solid party, with an eye on EU goals such as the Lisbon agreement for expanding next-generation broadband. The loan fits with a European trend for project financing for FTTH. Everyone with a healthy plan can turn the EIB.

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