Last Tuesday, National Broadband Ireland (NBI) set aside a full day to show me around its business and made five members of its senior management team available to answer any of my questions, including chief executive Peter Hendrick. They also invited Fergal Mulligan, who heads up the Department of Communications’ unit tasked with overseeing the National Broadband Plan (NBP) contract.

There were no PR consultants trying to format quotes or photos, no requests to keep anything off the record and no topic was declared off-limits. This allowed me to publish a detailed article on Friday answering all the questions raised by my reporting of the company’s first annual accounts two months ago.

This is a significant improvement in interactions between the private company tasked with rolling out the NBP at a maximum gross subsidised cost of €2.97 billion, the government department paying this out, and journalists and elected representatives scrutinising the most expensive taxpayer-supported project in Irish history.

At the end of last year, NBI declined to answer The Currency’s questions on its shareholders or the conditions attached to their investment, reported by the company itself as loans that were “repayable ’on demand’ from 9 January 2024 and bear interest at 12 per cent”. In the Oireachtas, ministers refused to answers TD’s questions seeking the list of NBI’s shareholders and their respective interests.

In the intervening time, we have lived through an uncomfortable two months during which the Minister of State in charge of the NBP, Ossian Smyth, repeatedly told the Oireachtas the loans described above qualified as promised equity, without explaining how – and declined an interview request from The Currency to clarify this. Smyth and Hendrick publicly described media reporting of the incomplete information available from their organisations as “misrepresentation” on the part on journalists including myself.

In recent weeks, however, NBI and the Department of Communications have changed tack and engaged in a transparency drive, giving journalists and politicians full access to NBP locations and senior personnel in parallel to multiple appearances before Oireachtas committees. The company’s website now provides useful contractual and corporate information alongside updates on the network’s deployment. 

As I reported last week, NBI has now provided a full list of its ultimate shareholders and given its rationale for the ongoing capital restructuring process revealed by The Currency in December. The company has also offered a credible explanation for the initial mismatch between investment figures posted by its largest shareholder Oak Hill Advisors and its shareholding (a temporary bridging loan). The company and the Department of Communications have clarified how they expect the conditions attached to shareholders’ loans to guarantee sufficient investment in the business past January 2024. 

Members of the company’s senior management team wondered aloud last week if they should hold a press conference to coincide with the release of its annual accounts. This sounds like a good idea.

Much like the rural broadband roll-out was at first physically delayed, including by Covid-19 restrictions, and is now being rescheduled to make up for delays, the reset in NBI’s acceptance of public scrutiny hopefully signals a fresh departure. 

Aware but unprepared

There are lessons to be learned from the past two months’ back-and-forth. The NBP was always going to face the highest level of probing, given the sheer volume of taxpayers’ money involved, the award of the contract to a single bidder in the lead-up to an election, and warnings over its value for money from the Department of Public Expenditure and Reform. 

It is now clear that NBI and the Department of Communications were both aware of this – and unprepared to answer questions when they came. Both sides said last week that they didn’t expect the public to want to know who exactly were the investors set to support and benefit from the massive taxpayer-supported rural broadband scheme.

“We weren’t hiding this,” said Hendrick “There just didn’t seem to be any drive or purpose to run out and me saying I’m a shareholder, or anybody else is a shareholder – it was set up that it was David McCourt who was the controlling shareholder and responsible for delivering.”

Mulligan added from the Department’s perspective: “At the state level, our obligation is to get the appropriate level of information. If we start chasing down every single investor across the world who’s investing in projects, are we going to disincentivise anybody wanting to deal with Ireland if they think that ’I’m going to be on the front of the next newspaper because of 1 per cent of a company in Ireland’?”

“From my perspective, due diligence-wise, I’ve got to see the documents at the final tender stage which tell me what exactly I need to know, what I need to get, and the financial lawyers and the financial accountants will say how we tick the checklist of what we need as a state to underpin the contract,” Mulligan said. “So once the bidder has satisfied the criteria, then we’re probably in a position where we don’t have the need or even the legal ability to go back after other people and start asking them questions.”

The minister for communications must approve any “change of control”, which the NBP contract defines as at least a 30 per cent interest in NBI changing hands. Mulligan said fresh due diligence would take place if the current search for new shareholders comest to fruition, to ensure any incoming investors meet the same criteria as the original bidders. He added:  “Of course, you have to have a cut-off point there. Because if you’re going to follow the thread of who’s an unsuitable third party, you could be talking to thousands of people. So obviously, there has to be a cut-off point within our process. Now, public interest-wise, curiosity-wise, people might – and I would – like to know who that person is. That’s a different question.”

This approach is crystallised in the use of the word “fund” in “Granahan McCourt Fund Ltd”, the name of the holding company for 51 per cent of NBI’s share capital. The other 49 per cent are held by Oak Hill Advisors, a US firm channelling investment from five of the funds under its management. Oak Hill’s products are regulated by the Securities and Exchange Commission in the US. The largest involved in NBI is a hedge fund called Strategic Credit Fund II, which has a priority (but not exclusive) focus on distressed debt deals, over $2 billion in assets, and around 200 institutional investors such as American pension schemes.

NBI’s other shareholders – David McCourt and his partners in previous ventures such as Enet in Ireland, and another US investment firm focused on the broadband industry called Twin Point Capital – have grouped their interests through the Granahan McCourt Fund vehicle. Hendrick described it in similar terms to Oak Hill Advisors: A “fund” channelling capital from a group of investors whose identity is not relevant to the business, aside from that of the project’s lead promoter and NBI chairman David McCourt.

The government has endorsed this approach, with officials repeatedly stating before the Oireachtas that they had no interest in knowing who exactly was behind Granahan McCourt Fund as long as McCourt himself held on to his pledged control of voting rights. Mulligan said of Brian Thompson, NBI’s final minority shareholder to be named by The Currency last week: “We don’t care who he is, or what he is, we don’t need to know. We have no interest in it. He’s not giving us any financial guarantees.” He added: “That man, whoever he is, has decided to invest a few percent of the project with his own money, and that’s his business.”

There are, however, key differences between Oak Hill Advisors and Granahan McCourt Fund. The latter is an Irish privately held limited company formed by the investors supporting McCourt according to the rules they have chosen. It is not regulated by the Central Bank of Ireland as an investment fund sold on the open market. There is nothing wrong with that – it is just a different way of making an investment.

This is illustrated by the fact that the government sought individual guarantees that at least €175 million would be available to NBI from Oak Hill Advisors as a fund manager, which stood as a credible entity in itself, and from Tetrad, the largest shareholder in the private group led my McCourt – not from Granahan McCourt Fund.

“It’s not a publicly listed company, but it nearly is in the public eye”.

At the end of my visit to NBI, I put it to company and Department executives that “it’s not a publicly listed company, but it nearly is in the public eye”. The comparison came to my mind because, although NBI is a privately-held business, the largest asset on its balance sheet for its foreseeable lifetime is going to be the taxpayer-funded rural broadband network. The net cost of this network, at €2.1 to 2.6 billion under the NBP contract, will dwarf the €223 million pledged by the company’s shareholders ten times over. 

When commercial companies need to deploy capital expenditure to roll out their business model to the market, they go public. Because Irish rural broadband is not a commercial proposition, NBI goes to the state. The taxpayers don’t get shares or bonds in return, but I would argue that they still have a right to know what happens inside the business.

There has been frustration because the NBP contract, which acts in place of the set of stock market rules that would normally govern the relationship between multitudes of shareholders and the business they are funding, was never published in full. We don’t know against what criteria NBI can gradually collect the subsidy, what is the target level of return above which a share of profits return to the taxpayer, or how shareholders are expected to materialise their investment commitments. 

Mulligan said the government genuinely thought they had made an unprecedented transparency effort. “We probably published 85 per cent of the pages that are relative to the contract. The majority of public contracts are 0 per cent published,” he said. While the rejection of a recent freedom of information (FOI) request for the full contract from The Currency revealed that the majority of the contract by volume remained secret, Mulligan said this was because a copy of NBI’s bid itself occupies around half of the full document and such incoming tenders are never published.

Freedom of information correspondence also reveals that there have been “a number of amendments to the contract since the date of signing” – again deemed inaccessible to the public. There was, of course, a publicly agreed remedial plan following initial roll-out delays that saw the target for premises passed at the end of 2021 slashed from 115,000 to 60,000. After this was missed too, both sides are due to agree a fresh resecheduling in the coming weeks. Mulligan and NBI’s chief legal officer Jenny Fisher said other amendments related to practical arrangements surrounding the company’s reporting to the Department, but did not alter the level and cap of the subsidy available or core commitments such as the obligation to reach every single address in the country – “nothing that fundamentally alters the risk allocation under the contract,” Fisher said. 

Secrecy extends beyond the contract itself. The state’s due diligence on the evolving group of investors who won the NBP contract involved experts including those of the National Development Finance Agency (NDFA), a division of the National Treasury Management Agency (NTMA) established to help the government conduct public-private partnerships (PPPs). In response to freedom of information requests, the NTMA said it had only one record of exchanges with the Department of Communications regarding this assessment process and it could not be released because it concerned legal advice. The Department did find records of interaction with the NDFA after the May 2019 choice of NBI as the preferred bidder but did not say how many, and refused to release them.

Both the contract and its amendments, and the pre-contract due diligence reports, were deemed legitimately secret for a number of reasons. Those included:

• the fact that NBI and its investors had provided financial information “in confidence”;
• “access to the records would prematurely disclose positions taken by the Department in ongoing negotiations” and damage both NBI and the Department’s efforts “to the detriment of 1.1m citizens waiting for access to high speed broadband in rural Ireland”; and
• the “commercially sensitive” nature of the information for both the Department and the company.

In summary: “There is a public interest in commercial operators’ entitlement to privacy in relation to their business affairs when dealing with a public body and to ensure that FOI is not used to release information relating to commercially sensitive information and information obtained in confidence,” a Department official told The Currency.

Fisher said, for example, that revealing more about NBI’s contract would impact its ability to secure the best subcontracting deals. There is also an argument in favour of the state keeping its cards close to its chest to deal with other contractors in ongoing and future procurement.

Relying on PPP contract holders to decide how much they want to disclose is not good enough.

This brings us back to the listed company comparison, where shareholders don’t have access to trade secrets, but still receive voluminous quarterly and annual reports as well as immediate disclosures when any material event happens in the business. They can also ask questions at general meetings. This all happens in full view of journalists.

As pointed out by participants in my visit to NBI last week, Department of Communications officials have full access to the NBP contract and real-time information from the company. They are not, however, the ones paying the subsidy – taxpayers are, and their representatives in the Oireachtas speak for them. The latest series of committee and Dáil hearings into the finances of NBI are the closest we can get to a PLC’s AGM and they have clarified a number of outstanding questions. Long may they continue.

When it comes to documentation and written reporting, a lot more can be done. A listed company would never allow an investor like Twin Point Capital to hold 25 per cent of its share capital through a nominee structure without revealing its identity for two years. It would not raise 98 per cent of its funding through short-term shareholders’ loans without disclosing that they are in fact participating loans.

The standards of transparency applicable to listed companies are well known to the business community, including the full range of investors interested in PPPs in Ireland. Their extension to the privately-held companies operating such contracts wouldn’t surprise nor scare off those investors.