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Friday, 19 December 2008 07:00

Supplier and key customer save Pipe Networks' sub cable

Pipe Networks' submarine cable to Guam is back on track thanks to its main supplier and an unnamed key customer agreeing to, respectively, defer and advance scheduled payments.

The project was put on hold indefinitely earlier this month after Pipe's negotiations with its financiers collapsed. (In is annual report in late September, Pipe said it was in final negotiations with ANZ Bank in relation to debt funding for PPC-1). However the project was already well advanced at that stage with all the cable manufactured and construction of landing stations nearing completion.

Pipe is giving few details of the deal but says that salvation follows an agreement by key supplier, Tyco Telecom, to reschedule a number of payments to align with customer receipts, and a 'key customer' agreeing to bring forward a number of its payments "to more closely align with the timing of supplier payments."

Pipe Networks CEO, Bevan Slattery said: "It's been a tough few weeks, but there was an overwhelming commitment by everyone involved to ensure this project is a success. Everyone essentially got together and said 'how can we help to make this project happen'."

He added: "Despite all the goodwill in the world, this would not have been possible without the support of our supplier Tyco Telecoms, as well as having already secured substantial capacity agreements from quality counterparties..[who] are all keen to see PPC-1 create real competition in the Australian bandwidth marketplace."

Pipe chairman, Roger Clarke, said: "It is a testament to the commercial potential and importance of the project that an alternative agreement could be reached that side-stepped the debt markets for primary project financing.

Terms of the deal are set out in an MoU between Pipe and its subsidiaries, Tyco and the customer. According to Pipe, "The MoU is comprehensive in outlining all major commercial terms and the board is now confident that binding definitive agreements reflecting these terms will be completed in the next four weeks On this basis, the company reiterates its previously issued financial guidance of revenues of $45 million and NPAT of $11 million for the 2008/9 financial year."

Pipe expects that the terms of the new funding s will have no adverse effect on previously issued guidance for the 2009/10 financial year.

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