InnovationAus - Govt loan untouched as PsiQuantum capital raise incomplete

US-based PsiQuantum is yet to meet the terms of its $275 million debt agreement with the federal government, preventing it from drawing down on the partially-interest free loan months after the deal was signed.

The government’s separate US$125 million equity investment in the Californian-based quantum startup is also yet to convert to shares as it is conditional on the company completing a further private capital raising.

Officials from Australia’s export credit agency and Finance department officials confirmed that neither the conditions of the equity or loan components of Canberra’s $470 million investment had been met during Senate Estimates hearings late last week.

Interest rates pertaining to the loans were published by Export Finance Australia (EFA) ahead of the estimates hearings on November 1 – six months after the deal was announced and three months after the contract was signed.

The document – which makes no reference to PsiQuantum – shows the company will pay an interest rate of BBSY + 4.8 per cent on the two separate loans: one for $200 million and the other for $75 million.

But no interest will be charged on the $75 million loan automatically, with PsiQuantum only on the hook for the rate (plus a premium equal to that of consumer price inflation) if a default occurs.

Finance’s assistant secretary for Commercial Policy and Advice Cameron Jose last week said the company would also have to “meet its ecosystem commitments which it has entered into with… the Department of Industry”, without elaborating.

EFA’s chief investment officer Amanda Copping offered no further information when asked by Nationals Senator Ross Cadell on Thursday last week, citing confidentiality requirements.

At the time of the PsiQuantum announcement, the government said the company would establish partnerships with the local quantum industry and invest in university and research collaborations.

Mr Jose confirmed, however, that the conditions on the government’s equity investment converting into shares includes a further capital raise. The company has completed a Series A, B, C and D to date.

“There are a range of conditions that the company has to do, including an equity-raise more broadly because the facility, obviously, is going to cost more than the Commonwealth’s investment, so it has to raise that and meet a number of conditions around that before it converts to equity,” he said

Shadow minister for government services and the digital economy Paul Fletcher said the revelations call into question the government management of the contract – itself a costly exercise at $28 million over the decade.

“The Albanese Labor government’s big risky bet on one American company is looking shakier and shakier by the day,” Mr Fletcher, who has led the Opposition’s criticism of the deal.

“Alarm bells should be ringing given key financial milestones haven’t yet been reached, putting the project under a cloud.”

After the Queensland government confirmed it would review its involvement in the investment, Industry and Science minister Ed Husic on Wednesday said Australia would be “crazy not to” want to have the world’s first commercial quantum computer built here.

“When Queenslanders say they want to come back to the country and work with other Australians to develop a sharp tech edge for our country, who doesn’t listen to that,” he told the National Tech Summit.

Mr Husic again defended the “rigorous” due diligence process performed on the company, which is meeting their technical milestones and have a “novel approach, utilising conventional chip technology, to be able to deliver what they want.

“If they achieve what they say they can do, that computing power will be fundamental for our economic and national security longer term,” Mr Husic said emphatically on Wednesday.

“What that does to supercharge our industries, who get a jump ahead of anyone else in the world to be able to crack problems in their sector and grow jobs is a profound and transformational opportunity we are not going to turn our backs on.”

Mr Husic has previously described the Albanese government’s PsiQuantum investment as an opportunity to right past wrongs, such as the Howard government’s decision to walk away from a $2 billion deal with Intel in the late 90s.

He has also said the approach to the investment – consulting and negotiating with PsiQuantum while doing an expression of interest with other companies – was comparable to the former Morrison government’s mRNA manufacturing deal with Moderna.

The national audit office is now set to probe the Moderna mRNA deal, which reportedly looked past a much cheaper bid by Australia’s CSL. Moderna, which was expected to start production by the end of this year, is yet to receive regulatory approval for the facility to produce the vaccines.

The Opposition referred the PsiQuantum deal to the Australian National Audit Office without success earlier this year, with then auditor-general Rona Mellor only flagging a potential audit of government investment vehicles like EFA.

Mr Fletcher is now calling for a parliamentary inquiry, which he said would allow Mr Husic to  “honour his word” in welcoming more scrutiny of the deal by the ANAO, which he declared in August.