WHO SHOULD READ THIS
- Private and public sector proponents of economic infrastructure projects for Northern Australia, including those in the resources, agribusiness, tourism and medical science sectors.
THINGS YOU NEED TO KNOW
- The draft Bill to establish the NAIF has been released for comment. The deadline for comments is 4 February 2016.
WHAT YOU NEED TO DO
- Consider how the NAIF could assist your project, and if relevant, make a submission on any alterations that you think should be made to the draft Bill.
The Federal Government has released a draft Bill for the Northern Australia Infrastructure Facility (NAIF).
The Government is inviting public feedback on the draft Bill. The deadline for feedback is 4 February 2016.
The NAIF is an initiative of the Government’s White Paper on Developing Northern Australia (White Paper). The NAIF will offer up to $5 billion in concessional loans to encourage and complement private sector investment in economic infrastructure in Northern Australia that would not otherwise be built.
Key features of draft Bill
- The draft Bill establishes the NAIF as an independent body corporate. Acting through its board, CEO and staff, the NAIF is given the functions of:
- granting financial assistance to States and Territories for the construction of ‘Northern Australia economic infrastructure’; and
- determining the terms and conditions for those grants.
‘Northern Australia economic infrastructure’ is defined to mean, ‘…infrastructure that:
- provides a basis for economic growth in Northern Australia; and
- stimulates population growth in Northern Australia’.
- The NAIF is required to act in accordance with the Minister’s directions, which are to be known as the ‘Investment Mandate’. The Minister responsible for NAIF is the Hon Josh Frydenberg MP. The Investment Mandate is intended to address:
- NAIF’s objectives in providing financial assistance
- the strategies and policies to be followed in performing its functions
- the loan characteristics for financial assistance that is used to provide or support loans
- the provision of financial assistance for purposes other than to provide or support loans
- the eligibility criteria for financial assistance
- the risk and return in relation to NAIF’s financial assistance, and
- any other matters the Minister thinks appropriate.
The Investment Mandate cannot be directed to particular infrastructure or to a particular person. However, the Minister is given limited grounds on which to veto certain financial assistance, and any such veto, by definition, will be directed to the financing of a particular infrastructure project. One of these grounds is quite broad, namely that the financial assistance would ‘… be inconsistent with the objectives and policies of the Commonwealth Government’. The Investment Mandate is currently being developed, and will be set out in a legislative instrument for which a separate consultation process is planned to occur before the NAIF commences in July 2016.
- The NAIF board will be comprised of a Chair and between four and six other members. We expect this will be a mix of public and private sector individuals. It is not yet known how the government will liaise with the private sector regarding the appointment process.
- The NAIF will not be allowed to make a decision after 30 June 2021 to provide financial assistance, but that apparently will not prevent the NAIF from deciding before that date to provide financial assistance after that date. If an infrastructure project will require financing beyond that date, it may be necessary for project proponents to agree in advance any relevant terms that might be affected by this deadline.
- The NAIF will have the benefit of the privileges and immunities of the Crown. This may include immunities from suit, which could potentially cause issues for borrowers and their other financiers (e.g. any intercreditor arrangements that NAIF may be party to for a particular finance arrangement). If so, the private sector might need to seek appropriate protection (e.g. some form of government guarantee).
- The draft Bill appropriates $5 billion from the Consolidated revenue Fund, but this money will presumably be accessed by NAIF incrementally. The NAIF is to commence its activities from 1 July 2016. It remains to be seen whether there will be a formal staging process for its financing of infrastructure projects over the five year term.
Further information regarding the draft Bill and the feedback process can be found at the NAIF website here.