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UPDATE Government Seek Proposals for New Broadband Investment Fund

Friday, Jun 17th, 2016 (7:53 am) - Score 766

The Government has begun seeking proposals for its new Broadband Investment Fund (BIF), which was first announced in last year’s Autumn Statement (here) and is designed to help alternative network ISPs secure funds for building “ultrafast” (100Mbps+) broadband infrastructure.

Under the plan the new BIF would be supported by both public and private investors, and would be managed by the private sector on a commercial basis. It’s hoped that the fund itself could be used to address a perceived “lack of suitable finance” in this area and thus “act as a catalyst for private investment in alternative networks.”

Last year the Government were still trying to decide if the BIF, which would also receive a cornerstone public investment from HM Treasury (on commercial terms) that would need to be at least matched by the private sector, was even feasible (i.e. gauging investor appetite).

At the time the Government promised that, if it were deemed feasible, they would develop a fund mandate and look to appoint, through a competitive process, a fund manager to raise and manage the fund. Today’s proposal reflects the hunt for such a fund manager and as such we assume that the BIF is now moving past the drawing board stage.

Crucially we note that the proposal appears to be focused on building investment for “ultrafast” broadband networks and in keeping with that it’s worth pointing out that the word “rural” doesn’t even crop up once in the entire document, which perhaps hints that this not exclusively about tackling the problems of the final 5% (UK premises).

However it should be noted that some ultrafast FTTP/H/B ISPs, such as Gigaclear, do focus on rural areas and there doesn’t appear to be a specific restriction on the fund’s use in respect to urban vs rural locations.

Extract from the BIF Document

Supporting the market to deliver ultrafast broadband (roughly defined as providing speeds greater than 100 mbps) to as many premises as possible is a government manifesto commitment and the Fund is a key element in delivering this. The main policy objective, therefore, is to increase the amount of capital invested in the sector, particularly (but not exclusively) more “debt-like” capital that would enable faster expansion of ultrafast broadband networks. Funds that do not focus on “debt-like” investments will also be considered but HMT has a preference for a majority of the Fund being focused on debt or “debt-like” investments.

HMT will consider a variety of structures and investment mandates as proposed by applicants with the aim of selecting a proposal that has the best prospect of meeting the government’s aims and policy objectives. In terms of structure, this could include government becoming a cornerstone investor in a new fund focused exclusively on the sector, or structures that involve government investing in a “side-car” to a fund with a broader investment mandate. This could also include more than one fund, each focusing on different parts of the capital structure (for example a debt focused fund and an equity focused one). All applicants should construe the requests in this RFP for information relating to “Funds” and “Managers” as requests for information relating to the specific structure or structures being proposed and should provide the information relating to such structure/s which most closely corresponds to the information requested in relation to Funds and Managers in this RFP.

HMT will also consider structures with more than one tranche, where different tranches have different risk and return profiles, and could invest in any or all of them (for example, in a senior capital tranche within a fund or a more junior “first loss” tranche, if that sort of structure is proposed). It will be important, however, that if HMT does invest it has additional, private sector capital invested alongside it, pari passu, in any tranche it invests in and that, in aggregate, HMT makes up no more than 50% of the total capital, and cannot exercise any control over the Funds or investments. In such a structure, HMT must have the option to invest in any tranche (even if the Manager is proposing HMT invests in a particular tranche).

The Fund is also “intended to complement other government programmes rather than duplicating or competing with them” and by “other programmes” they mean the UK Guarantee Scheme, which is available for certain UK greenfield infrastructure projects (e.g. Virgin Media’s £3bn network expansion and BT’s G.fast / FTTP roll-out) and exists to help infrastructure projects raise debt finance (Guarantees for up to £40 billion in aggregate can be offered), and of course the more familiar Broadband Delivery UK based “Superfast Broadband Programme“.

The deadline for receipt of proposals is 29th July 2016, with the target being to select a Manager by Autumn 2016 and for Funds to be closed and in a position to begin investing by the end of the current fiscal year (March 2017).

BIF: Request for Proposals

UPDATE 22nd July 2016

The deadline for receipt of proposals has been extended to 8th August 2016, albeit with no reason given.

By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook and .
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