17 september 2010 Financing FttH Networks in the Netherlands Directeur Corporate en Business Development Jan Davids 1| 19 the Netherlands Pre Conference Workshop 8 February 2011, Milan Mark Meijer Manager Corporate Finance Reggefiber
Jan 14, 2015
17 september 2010
Financing FttH Networks in the Netherlands
Directeur Corporate en Business Development
Jan Davids
1 | 19
the Netherlands
Pre Conference Workshop 8 February 2011, Milan
Mark Meijer
Manager Corporate Finance Reggefiber
History
2 | 19‘Regge’ river + Fiber = “Reggefiber”
Vision
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FttH is future proof (end infrastructure)FttH is like real estate
Network has to be open
Why glass fibre ?
� Fiber to the Home is the only broadband infrastructure that can comply withthe exponentially growing broadband demands of the consumer and service providers
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CAPACITYSPEED
SYMMETRICALUNINIQUE
FIBER PAIR
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About Reggefiber
� Founded in 2005 by Reggeborgh
� Builds, owns, rents and operates passive (dark fiber) networks (FttH) in the Netherlands
� Since 19 December 2008 a joint venture of Reggeborgh – KPN approved byNMa and OPTA and regulated OPTA
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� Combination of KPN’s installed base of consumer clients with Reggefiber’sexperience in building and operating FttH networks
� Current shareholding: KPN 41% - Reggeborgh 59%� Under certain conditions KPN could acquire the majority of the shares
� Rental income has been regulated by OPTA to capped fees
� Balance Sheet total c. €900mn; strongly growing
Key figures
30 locations 55 locations
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Key figures
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Consumer broadband subscription packages
EUR 55– 110 (triple play)
Wholesale broadband accessEUR 35 – 42 (triple play)
● Deliver services to consumers● Communicate to consumers
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Wholesale agreements
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Business model – Parties involved & Value chain
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ODF AccessEUR 12 – 17.50 [*]
Indicative monthly price ranges per active
connection
Indicative monthly price ranges per active
connection
● Buy in capacity on Reggefiber’spassive fiber network
● Deliver wholesale fiber services to service providers
● Builds, owns and operates the passive fiber network
● Delivers open access to active operators
[*] excludes one-off fees, line rentals etc.
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ODF Agreement
Management Agreement
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� Monthly rentals paid by Active Operators to Reggefiber:� Fixed tariffs per Home Activated (fiber pair rental) dependent on capex : €12.00 – 17.50� Fixed tariffs for Area PoP rental (€500) and City Pop rental (€600)
� One-off fees:
Business model – Revenues & Penetration
Revenues
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� Area PoP connection: €3,000� fiber pair connection: €100
� A discount applies depending on the total number of Homes Activated / customers served in a certain area
� Rentals indexed anually with CPI
(*) one Area PoP can serve maximum 2,500 Homes Passed
Capital expenditure�CAPEX per Home Connected typically around €1,000,
consisting of labor (civil works, engineering: > 80%) and materials: < 20%
�Capex reduces 10% every year�CAPEX levels vary depending on local circumstances
(in particular urban density, rivers, canals, railroads)
Business model - Capex, Opex
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Operational expenses�Main items and model assumptions:
� General costs: 3% of gross rental revenues� Activation costs: €20,- one-off for activating one fiber pair� Management fee:€12,- per year per Home Passed
(payable by NEM subsidiaries to ReggefiberOperator B.V. pursuant to Management Agreement)
An example, how would you raise debt funding for such a project?
Typical cash flow profile of a FttH project
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Key issues Debt fundingIssue AnswerTrack record Many projects were evidencing already
mature cashflows that could beringfenced as a portfolio in a seperatevehicle: Ringfence
How to “secure” penetration Demand-based-role-out ensuring upfrontc. 30-40% start penetration
Regulated Billing entity “RFO” could notb t /b
Direct Agreement between RFO and the Ri f
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be a guarantor/borrower RingfenceNon-recourse Significant contribution of the sponsors:
c. 65% of the BS total at financial close and 45% at the end of the constructionFttH is very strategic to KPN
Hybrid debt structure. Various bankers from different backgrounds/desks: Project Finance/TMT/General CorporateLending
Learning by doing ☺
ReggefiberGroup B.V.
KPN B.V.Reggefiber
Reggefiber Group B.V.
KPN B.V.Reggeborgh
Secured credit facilities (€285m) from EIB and commercial banks for33 local Network Companies (NEM) in ‘ring fence’
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(G)NEMsubsidiaries
ReggefiberttH B.V. Reggefiber
Wholesale B.V.
NEM33 FttH projects
Reggefiber ttH B.V.
ReggefiberWholesale B.V.
KPN B.V.
KPN B.V.
Ring fence
Reggefiber Operator B.V.
NEM other FttH projects
Financing
Key characteristics
� Maturity c. 10 years� €285mn 50/50: EIB and commercial banks� Drawings and repayments show a roller coaster shape� Draw test: Total debt / Homes Activated < “fixed amount”� N D b /EBITDA
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� Net Debt/EBITDA covenant� After construction; DSCR-covenant and cash sweep� Security on network, receivables, bankaccounts, shares, etc� Minimum interest hedging requirement� Significant information requirements
Questions?
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Regional marketing is Key to create a local hype
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Information session
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Construction
No digging in the gardens! A garden rocket
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Thank you for your attention!
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