By The Australian Financial Review

David Ramli

New Zealand-based Pacific Fibre has set a mid-June deadline for obtaining the funds it needs to build a $US400?million ($389 million) undersea cable after months of delays.

The company’s ambitious plan is to run a 12,950 kilometre undersea link from Sydney to Auckland before heading across the Pacific Ocean all the way to Los Angeles.

But while Pacific Fibre was meant to have its construction funding sorted by November 2011, a range of issues led to delays with senior industry sources claiming the company was struggling to find the money required.

Pacific Fibre co-founder and Fairfax Media director Sam Morgan said he was “apologetic” about the delays and that the company was now confident all funding would be locked in within the next eight weeks.

“There is nothing secured at the moment because we haven’t done the documentation,” he said. “We’re in the process of closing the financing .?.?. so we’re talking to a couple of potential cornerstone funders. You can’t really do it at $5 million at a time. You’ve got to secure large investors and build around them.”

Mr Morgan said earlier plans to use construction finance and large amounts of debt had fallen through, resulting in a need to chase different backers including pension funds in Australia, New Zealand and Canada.

“We’d found $100 million of sales and then we went to the market and said ‘here’s the investment case’ .?.?. but we didn’t quite get there,” he said. “That forced us to talk to investors who were interested but only if we had high levels of pre-sales that would underwrite a minimum rate on investment [RoI]. They have an RoI number in mind and if we can provide them with that guarantee .?.?. that’s what will get them over the line.”

With five foundation customers, a headline figure $200 million in sales, a minimum RoI of 8-12 per cent and promises to avoid using expensive debt, Mr Morgan said the company would be ready for customers in 2014.

Pacific Fibre’s announcement of a fifth foundation customer came after The Australian Financial Review revealed the federal government had banned Chinese tech giant Huawei from tendering on the national broadband network and was investigating the use of its technology in key submarine cables. Chinese firm Axin and Huawei Marine are leading a project to build a trans-Tasman cable between Australia and New Zealand.

Mr Morgan said when his firm was planning which company to build the Pacific Fibre link he was told through back channels it would be much easier to gain Australian and US approval if a US company was selected. “We selected a US vendor because they were the best of course but we would’ve had to give it serious thought if it was a Chinese vendor because of those political things beyond my pay grade.”