Earlier this week the Commerce Commission released its final decision about Chorus’ financial losses and costs during the fibre rollout. The decision sets out the rules the Commission will apply to Chorus’ historic financial losses. The new rules will then be used from January 2022 to determine the prices Chorus can charge for wholesale network access.
In a statement to the stock exchanges, Chorus says while there’s an improvement on the draft, the decisions do not reflect commercial reality, the true costs of building the network or the risk involved.
The statement was authorised by chief financial officer David Collins.
It goes on to say: “The final views today, and range of changed views from the Commission during this process, send extremely poor signals to investors in New Zealand’s infrastructure and future public private partnerships. They signal that real commercial risk may be assumed away with hindsight.”
Previously the Commerce Commission considered using a ‘building blocks’ method to value the financial losses. This has now changed to a discounted cash flow approach.
Telecommunications commissioner Tristan Gilbertson says: “Submitters, including fibre companies and financial analysts, recognised this would help make the calculations easier to understand and therefore provide greater transparency when we set Chorus’ price-quality path and the broader information disclosure regulations next year”.
He says the Commission has put safeguards in place to address the risk of windfall gains or of over-recovery.