The Northern Australia Infrastructure Facility (NAIF) consultation paper has been released for comments.  You have until 30 November 2015 to give your feedback.

The NAIF will be a $5 billion project finance facility that provides concessional loans for economic infrastructure projects in Northern Australia.  Among other proposed requirements, the projects must have the potential to bring new capacity online for the benefit of multiple users, must be of significnat benefit to Northern Australia, and either would not proceed, or would not proceed until a much later date, without NAIF financing.

Background

The NAIF is an important component of the federal government’s recent Northern Australia White Paper.  Northern Australia includes all of the Northern Territory, and generally those parts of Western Australia and Queensland that are north of the Tropic of Capricorn.  In Queensland, the Tropic of Capricorn is approximately level with Rockhampton, but the NAIF will include Gladstone, and other projects that are below the tropic of Capricorn but which will significantly benefit Northern Australia.  You can access our previous article on the White Paper here ‘Our North’ white paper.

Since the release of the Northern Australia White Paper, the federal government has appointed the Hon. Josh Frydenberg MP as the first Minister for Northern Australia, and between 8 and 10 November hosted an invitation only Northern Australia Investment Forum in Darwin.  The release of the NAIF consultation paper on 9 November is another important step in the government’s plans for Northern Australia.

Proposed features of the NAIF

The NAIF will complement existing private finance for infrastructure by offering loans for longer terms, with different interest rates and with more flexible repayment options, than is usually offered by private sector loans.  NAIF loans will be expected to be repaid in full (including the Commonwealth’s operational costs and costs of borrowing), and will only provide the degree of concessionality necessary for a particular project.

Investment decisions for the NAIF will be made by a government appointed independent statutory Board.  That Board will be led by an independent chair and loan administration and back office support will be provided by a Commonwealth corporation such as the Export Finance and Insurance Corporation (Efic).  The Minister will set an investment mandate that the Board must comply with, and the Minister will be able to issue limited directions to the Board, similar to the scope of directions that may be issued to Efic.  The relevant Minister for Efic may issue directions with respect to the performance of Efic’s functions, or the exercise of its powers, if the Minister is satisfied that it is desirable in the public interest to do so, but the Minister may not give directions concerning the entry into particular contracts or the giving of particular loans or guarantees.

It is intended that applications to the NAIF will be considered on a rolling basis (rather than in predetermined application rounds) and the terms and conditions of the loans will be negotiated on a case by case basis.  Loans may be drawn down as early as 1 July 2016.

The consultation paper sets out the following proposed mandatory criteria for loans (all of which must be satisfied):

  • the project involves construction or enhancement of economic infrastructure
  • the project will be of public benefit
  • the project is unlikely to proceed, or will only proceed at a much later date, without NAIF assistance
  • the project is located in, or will have a significant benefit for, Northern Australia
  • Commonwealth loan monies are not the majority source of project funding, and
  • the loan will be able to be repaid.

In addition, loans that satisfy some or all of the following non-mandatory criteria will be preferred:

  • the NAIF financing component for the project is for an amount of $50 million or more
  • there is an identified need for the project, and
  • the project has state or territory endorsement.

Timeframes

The deadline for feedback on the consultation paper is 30 November 2015.  An exposure draft of the legislation is intended to be released in early 2016, with the aim of releasing legislation to parliament in the first quarter of 2016.  If you would like any assistance with this process, please let us know.

The Consultation Paper can be accessed here.