PWK to go ahead with project runway

Whilst it hasn't been formally announced today's request from Pipe Networks for a trading halt due to a capital raising can only mean one thing - that they are proceeding with 'Operation Runway'. This is no surprise as previous announcements had indicated that the company had significant support from both domestic and international carriers. PWK is aiming to transform the economics of the Australian internet and telecommunications market by building a new submarine cable linking Sydney to the key international telecommunications interconnection hub at Guam.

PWK have etimated the price tag at somewhere between $180 - $200m - more than their current market cap of around $140m. Last week the company announced a new $20m debt facility had been established with ANZ so the capital raising is expected to be significant, much bigger than their intial IPO offering. Management have consistently said they will not proceed with the project if they cannot produce the high returns on capital they currently earn. Considering the size of the project, estimated to be complete by calendar 4Q08, the project runway undertaking will significantly transform the company into a major telecommunications infrastructure provider domesticly and to a lesser extent abroad.

I expect a healthy appetite for PWK scrip from institutional investors and hope that management give current shareholders the opportunity to top up their existing holdings and take part in the next growth phase of the company.