I have ferreted out the reference below:
https://comcom.govt.nz/__data/assets...ember-2020.PDF
p20 of my above referenced paper confirms you are correct:
"The initial PQ RAB (Price Quality Regulated Asset Base) will reflect the historical costs of investments incurred in providing FFLAS (Fixed Fibre Local Access Services), as well as a financial loss asset reflecting the value of ‘accumulated unrecovered returns’ in providing UFB FFLAS for the period starting on 1 December 2011 and ending on the close of the day immediately before the implementation date (the pre-implementation period)."
I do find this rather startling though. Chorus knew they were getting into a long term project. They knew it would be initially unviable in the sense that the infrastructure had to be rolled out before the demand caught up with it. In recognition of this the government in effect provided a vey large interest free loan in the form of CIP debt and CIP preference shares for which no repayments of any kind were required until 15 years after the fibre roll out started. Granted this loan only covered about half the real cost of the roll out. But countering this was that Chorus were allowed to keep all income earned on the network they only half paid for along the way. They also got to keep the profits from the legacy copper network, which will ultimately be superseeded by fibre.
Effectively Chorus have an indefinite license to operate their fixed broadband network into the future, when it is at its most profitable.. And now we find they are to be further compensated for losses incurred in the establishment phase when they aware fully aware of the kinds of risks they were taking at the beginning? That doesn't seem right.
What you are saying is that the earnings capability of the Regulated Asset Base are a separate thing to the value of those assets in the financial statements. I am not sure I can accept that as true. For example, are you aware that 'Enable' - who have the job of doing what Chorus has done for much of the country - in Christchurch regularly evaluate the value of its broadband network book value based on future earnings capacity? See Enable AR2020 Note 3 on Property Plant & Equipment:
"The UFB network Layer 1 and 2 assets, together with the Central Offices (collectively described as UFB network assets) were revalued to fair value as at 30 June 2020 based on a range provided by independent valuers Deloitte. Deloitte are considered to have the appropriate qualifications and experience in the fair value measurement of such assets. Deloitte considered that the discounted cash flow (DCF) methodology was the most appropriate method of valuation,"
Over FY2020, the underlying net profit at Enable of $11.320m, was boosted by $66.424m net of tax because of that (See Statement of Comprehensive Income'. And yes that extra equity found its way onto the Enable balance sheet.
SNOOPY