The Federal Government has recently released a Consultation Paper for the Northern Australia Infrastructure Facility (NAIF), a scheme designed to provide up to $5 billion in concessional loans to encourage and complement private sector investment in the construction of major projects in northern Australia.
Infrastructure in northern Australia faces cost and service challenges, resulting in critical infrastructure gaps. The Government intends that the NAIF will be used to fill gaps in the infrastructure financing market for northern Australia by supporting infrastructure projects that are otherwise highly unlikely to proceed.
There are two key circumstances where NAIF financing could supplement private lending:
- as a source of 'patient' capital which extends beyond the term of typical bank loans and has more flexible repayment options; and
- as 'top-up' funding for large-scale projects that are commercially viable but lack sufficient scale of commercial debt to achieve an acceptable level of gearing.
The Government intends to appoint an independent statutory board to make investment decisions for the NAIF, with loan applications to be considered on a rolling basis and the terms of the loan negotiated case-by-case. Investment decisions would be made in accordance with an investment mandate prescribed by the Minister, which will be informed by both mandatory and non-mandatory eligibility criteria.
To be eligible, proposed infrastructure projects must:
- involve construction or enhancement of economic infrastructure, being physical structures associated with the flow of goods, services, information and workers;
- benefit the public and be capable of serving multiple users;
- be unlikely to proceed without NAIF assistance;
- be partly located in, or will have a significant benefit for, northern Australia, which includes all of the Northern Territory and those parts of Queensland and Western Australia above the Tropic of Capricorn;
- not be reliant on NAIF finance as the majority source of project funding, meaning it must not exceed 50 per cent of total debt; and
- demonstrate that the loan will be able to be repaid by presenting comprehensive financial modelling. Applicants will be preferred where:
- the proposed loan is more than $50 million;
- the project meets an infrastructure need identified through a government assessment process; and/or
- the project has state/territory endorsement evidenced by, for example, complementary state/territory funding.
The Consultation Paper can be accessed at http://www.industry.gov.au/Industry/Northern-Australia- Infrastructure-Facility/Pages/default.aspx . Feedback on the paper must be provided by 30 November 2015, with further consultation to occur once draft legislation has been finalised.