The Northern Australia Infrastructure Facility (NAIF) is all about investment in the development of infrastructure in northern Australia for public benefit including longer-term economic and population growth.
I am passionate about investing in infrastructure to drive public benefit for northern Australian communities and businesses. My appointment as CEO of NAIF in October 2016 is an incredible opportunity for me to pursue this passion and an opportunity to contribute to the nation’s future in a positive way.
The statistics show northern Australia has the potential to be the trade gateway to Asia.
By 2030, two-thirds of the world’s middle class and 50 per cent of the world’s GDP will be in the Asia Pacific region.
By 2050, 50 per cent of global growth in demand for agricultural products will come from China.
The rapidly growing middle class in those markets is driving demand for commodities, food, goods and services, better health and education.
Northern Australia can service that growth. If we don’t, our other neighbours will.
How will investing in infrastructure in the north realise the potential of our north and achieve the public benefit that NAIF is tasked with helping to create? And how can NAIF help improve the way we do business, create new opportunities, new supply chains, new sectors, new jobs and employment opportunities?
There is a simple answer.
Infrastructure is an enabler. It is the backbone to economic growth. It is core to developing and enhancing our life in the north.
In essence, that is what NAIF’s $5 billion of debt finance to invest is all about.
Without all-weather roads providing year-round accessibility or without ports or airports with capacity to meet demand to get produce to market – we can’t achieve growth.
We also need social amenity to encourage people to live and work in the north to generate that economic benefit. There is no point having ports, airports, rail or roads if people aren’t in the region to operate them or to use them.
NAIF is an infrastructure lender, not a grant funder.
NAIF offers up to $5 billion dollars in debt or alternative financing mechanisms, which may be on concessional terms, to benefit northern Australia.
Through NAIF’s Investment Mandate, we have an incredible opportunity to transform northern Australia for the benefit of all Australians through the strategic investment of NAIF finance.
We know the private sector is currently not investing at the level needed to facilitate such growth for many reasons; including the tyranny of distance, remoteness and climate (weather related) events, which make investing in the north expensive and riskier than for projects in the south.
The private sector has different risk parameters to NAIF.
This gives NAIF an opportunity to partner with the private sector; to complement rather than compete with the private sector and to lead the market in a new direction.
NAIF is specifically mandated to have a higher risk appetite and tolerance to factors that are unique to investing in northern Australia’s economic infrastructure, which include, but are not limited to, distance, remoteness and climate.
To develop a new way of investing in the north, NAIF is designed to and must partner with other lenders – but we are also what is called a “gap financier” i.e., we can only put in the minimum amount of debt or other concessions to fill a gap that other lenders or investors cannot satisfy. We envisage that we will do this by using our risk appetite to complement the private sector – to allow that sector to optimise their participation in projects and for NAIF to then structure its loan terms around that.
NAIF aims to help achieve transformational change for northern Australia through optionality, which its mandate allows it to offer in terms of concessions compared to what private sector financiers are able to offer. NAIF will thereby assist in the development of new and more resilient and reliable supply chains; in overcoming diseconomies of scale and first mover disadvantage and by encouraging better use of infrastructure through co-sharing to reduce costs.
Since NAIF has been in operation for only 12 months, it’s significant that NAIF has 119 projects in the pipeline across all of northern Australia’s jurisdictions. They include: transport, resources, agriculture, energy generation, gas pipelines, construction, telecommunications, tourism and water.
Sixty of these projects are defined as active and five are in due diligence.
We anticipate the financial close of our first transaction in Q3 of 2017.
This is significant as infrastructure development is a big undertaking.
There are the long gestation periods for development of infrastructure projects. Independent market analysis has confirmed that infrastructure financing can range from 19 to 32 months from project conception to a point where a project is ready for assessment by lenders, and then a further three to six months of commercial negotiations to reach financial close. This can significantly increase for higher risk projects.
NAIF’s progress in its first year of operation has been similar to that of the Clean Energy Finance Corporation (CEFC) when it was established.
Given that the money we have to invest is taxpayer money, we must ensure that we maximise the benefit for the north and more broadly all Australians and ensure that investment decisions are subject to rigorous best practice due diligence and analysis.
For example, it is a requirement that all projects have acquired all their environmental, social and native title approvals under state and federal regulations, and that all projects have an Indigenous engagement and procurement strategy in place before they can be eligible for a NAIF loan.
We have a strong team in place to manage this responsibility. Our independent skills based board has a strong mix of regional northern Australia knowledge, backgrounds in the private and public sector and business skills required for infrastructure financing. The executive team is comprised of highly experienced specialist infrastructure financiers from a mix of commercial and investment banks with lending, financial advisory and equity arranging skills to help structure bankable projects aligned with NAIF’s Investment Mandate.
I am looking forward to speaking at CEDA’s 2017 Queensland Economic Development forum – new investment, regional economies, on 13 July in Brisbane.
To find out more about the Queensland Economic Development Forum, or to register, click here.