Government’s Chorus investment could be worth more than $1.2 billion

The Government is looking at selling off the debt it raised to help Chorus roll out the ultra-fast broadband. Photo / NZME

The Government is looking at selling the debt and equity securities it provided to telecommunications lines company Chorus for the rollout of ultra-fast broadband fibre around the country, which was completed in 2022.

Government funding for the project was provided to Chorus through a vehicle called National Infrastructure Funding and Financing, or NIFFCo.

The NIFFCo securities have some equity-like attributes but do not come with the same rights and obligations as those of ordinary shares.

They are separate from Chorus’ NZX-listed shares and are more like zero-coupon bonds or, as one analyst said, “debt dressed up as equity”.

Finance Minister Nicola Willis did not quantify the sums involved, but materials released at Chorus’ latest annual result showed it had NIFFCo debt and equity with a face value of $1.165 billion – maturing from 2030 to 2036.

Willis said the Government was exploring ways to free up the capital locked up with its investment in Chorus.

She said NIFFCo would investigate the feasibility of selling the debt and equity securities it holds in the company.

With the completion of the ultra-fast broadband (UFB) initiative, there was no longer a reason for the Crown to own the securities, she said.

Most New Zealanders were probably not aware that the Government had an investment in Chorus, she added.

“That’s why it is sensible and prudent to consider the feasibility of divestment to redirect the Government’s capital stored in Chorus into investments that New Zealanders can benefit from,” she said.

Infrastructure Minister Chris Bishop said he had asked NIFFCo to explore the feasibility of selling the securities to private investors in early 2026, rather than waiting another five to 10 years for the securities to mature.

This process would be done with oversight from the Treasury, he said.

Bishop said advice on whether to proceed with the sale was expected to go to the NIFFCo board and shareholding ministers by the end of this year.

One fund manager said he expected the potential sale would be attractive to private parties, and for the debt to meet strong demand.

Chorus, in its latest annual report, said it had received Crown funding to finance construction costs associated with the development of the UFB network in two phases.

Phase one of the build (UFB1) was completed in December 2019, with a total of $924 million of funding received.

Phase two (UFB2 and UFB2+) was completed in December 2022 with a total $411m of funding received.

On June 30, $85m of NIFFCo debt and $85m of NIFFCo equity securities were repaid, the report said.

In August, Chorus reported earnings before interest, tax, depreciation and amortisation (ebitda) improved by $5m to $705m – ahead of market expectations.

Total revenue increased $4m to $1.014b, driven by a 7% increase in fibre revenues.

The full-year dividend was confirmed at 57.5 cents per share (from 35cps last year) as the company continued its strategy shift “from network builder to network operator” with the capital-intensive UFB build behind it.

Chorus, once part of Telecom (now Spark) until its separation in 2011, is a big constituent of the S&P/NZX50 Index, with a market capitalisation of about $4b.

Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.