news Embattled construction firm Syntheo has walked away from the construction of the National Broadband Network project after a series of issues that have resulted in a material financial loss for the company, with Lend Lease to pick up its existing contracts and Downer EDI also coming on board with the NBN in other areas.
Syntheo, which is a joint venture between telecommunications contractor Service Stream and construction firm Lend Lease, had suffered a number of problems with its involvement with the NBN rollout. In March this year it was revealed that the company had reached an agreement with NBN Co to hand back its work in the Northern Territory, and Service Stream has been in a trading halt on the Australian Stock Exchange over the past month while it worked out how to progress its NBN involvement.
In a statement to the ASX yesterday, Service Stream said it had completed a review of its NBN contracts. “As a consequence of the review, Service Stream will recognise a material loss for the project in the FY13 financial year,” the company said. “In addition, the Syntheo Joint Venture partners and NBN Co have agreed that Syntheo will complete construction work in progress, under the existing contracts for Western Australia and South Australia, but that no further work will be instructed under these contracts.”
“Service Stream has also reached a new commercial arrangement with Syntheo Joint Venture partner Lend Lease. Under the terms of the agreement, Lend Lease will control the delivery of Syntheo’s remaining obligations under its agreement with NBN Co, subject to the satisfaction of certain conditions precedent.” The delivery of that work is expected to conclude in early 2014.
In a statement on the issue, NBN Co said that SA Power Networks would become the prime contractor for the NBN in South Australia, in addition to the completion of Syntheo’s work. NBN Co recently signed a construction contract with SA Power Networks in the state. “Downer EDI has begun construction in Western Australia, and NBN Co is scoping the prospect of bringing on additional construction capacity in the coming months in both states,” the company said.
“As part of today’s agreement, Syntheo has committed to repaying NBN Co advances for overheads. Furthermore, Lend Lease has advised the Australian Stock Exchange that it has reached a new commercial arrangement with Syntheo joint venture partner, Service Stream Limited. As a result, Lend Lease will control the delivery of Syntheo’s remaining obligations under the agreement withNBN Co, subject to the satisfaction of approval conditions.”
NBN Co chief executive Mike Quigley said the changes were not expected to affect the overall cost of the project or the long-term completion of the build by 2021.
NBN Co has ten contracted construction and operations delivery partners. Service Stream’s obligations for the additional contracts it has directly entered into with NBN Co to deliver the NBN – to new developments in NSW, WA, SA & NT, and for Field Services Delivery (FSD) and Network Augmentation and Restoration Activities (NARA) in Victoria, WA, SA and NT – are unaffected by today’s announcement.
Simultaneously, NBN Co also added to its capabilities in Queensland and Victoria. The company issued a separate media release noting that it had awarded Downer EDI a two-year contract to roll out fibre optic broadband in an area covering approximately 300,000 premises in Brisbane and Melbourne.
The contracts will see Downer design and construct the local and distribution network that runs fibre from a local communications exchange (fibre access node or FAN) through each street in a coverage area. Up to 500 people will be working on the contracts at peak.
Downer has already been contracted by NBN Co to roll out the network in Northern New South Wales. It has further contracts to connect multi dwelling units such as blocks of flats and office blocks to the NBN in Victoria and NSW (“MDUs”) and to connect the fibre from the street to individual premises in northern NSW (“build drops”). Downer is now the third major contractor rolling out fibre in both Queensland (Downer, Silcar, Visionstream) and Victoria (Downer, Transfield, Visionstream).
The news comes as NBN Co is currently behind on its long-term rollout schedule. The company announced in June that its fibre network had passed at that stage only 207,500 premises. The company had previously been targeting a rollout figure of 341,000 premises by the end of June this year, but in mid-March it revised that figure down to between 190,000 and 220,000, stating that it had suffered a delay of about three months in its construction timetable as some of its construction contractors had progressed work “at a slower rate than forecast”.
However, there are questions as to whether the company’s statistics are accurate. NBN Co stipulated in its statement that it was using what it described as “the accepted industry definition of ‘Premises Passed’”, consisting of premises passed by an active telecommunciations network. However, the company also noted that this measure included “those complex premises” that would receive services over the NBN outside of “standard order lead times”. This means that of the premises passed by the NBN, not all will immediately be able to order NBN services from retail ISPs.
However, Quigley has maintained that NBN Co is on track to meet its 2021 targets, saying in July: “I should be clear, this short-term issue will not affect the long-term delivery of the NBN or the overall cost of the project. NBN Co remains on track to deliver fast, affordable and reliable broadband to every Australian by 2021 as set out in our Corporate Plan.”
Image credit: NBN Co