On 28 May 2021, the Northern Australia Infrastructure Facility Amendment (Extension and Other Measures) Act 2021 (Amending Act) commenced operation and brought with it important amendments to the Northern Australia Infrastructure Act 2016 (Cth) (NAIF Act).
These amendments will extend the life of the Northern Australia Infrastructure Fund (NAIF), a body corporate established under the NAIF Act to provide financial assistance for infrastructure projects that promote growth in Northern Australia, and enhance its functions and flexibility in providing such assistance.
The key amendments are set out below.
Extended statutory life
As foreshadowed in the Corrs Insight on key considerations for project proponents in seeking NAIF funding, the statutory life of NAIF is extended by five years to 30 June 2026.
With only $2.9 billion of its $5 billion facility having been committed to date, the extended life of NAIF will ensure that it has an opportunity to invest the remaining $2.1 billion to support projects across Northern Australia.
Enhanced functions and flexibility of NAIF
In December 2020, the Australian Government released a statutory review of NAIF which, among other things, contained recommendations directed towards accelerating NAIF’s lending rate and expanding the type of projects that are eligible for NAIF funding.
As a response to these recommendations, the NAIF Act has been amended by the Amending Act as follows:
NAIF may act as lender in certain transactions
NAIF is not able to provide financial assistance directly to project proponents but instead must channel its funds through the government of the state or territory where a project is located.
In limited circumstances NAIF may provide financial assistance directly to project proponents. This ability is very limited, as NAIF is subject to constitutional restraints, and the state retains its effective veto right.
Defence and postal, telegraphic, telephonic or similar infrastructure projects are likely to be the main beneficiaries from this amendment.
NAIF to have wider investment scope within individual projects
NAIF may only provide financial assistance towards the construction of Northern Australia economic infrastructure.
NAIF may provide financial assistance towards the development of Northern Australia economic infrastructure. This change will enable NAIF to support infrastructure projects beyond the ‘construction’ stage, including feasibility studies and other development activities.
More projects are eligible for NAIF consideration
NAIF may only provide financial assistance to project proponents if the projects involve infrastructure that both provides a basis for economic growth and stimulates population growth in Northern Australia.
NAIF may provide financial assistance to project proponents if the projects involve infrastructure that either provides a basis for economic growth or stimulates population growth in Northern Australia.
NAIF may invest through broader range of financial instruments and provide equity
Financial assistance is not defined but NAIF typically resorts to the default mechanism of loans.
Financial assistance may take any of the following forms: loans, letters of credit, guarantees, purchase of bonds and equity investments. Equity investments include direct investments, investment through subsidiaries and investments through partnerships, trusts and joint ventures.
This change significantly expands the options that project proponents have in seeking funding from NAIF, which in turn provides flexibility for the proponents to tailor its funding arrangements to suit the needs of its project.
However, NAIF is prohibited from making equity investments in foreign corporations, or trading or financial corporations formed within the limits of the Commonwealth.
Timing for granting financial assistance may be reduced
NAIF may not provide financial assistance until 21 days (which may be extended to 60 days) after it has provided notice to the relevant Minister stating that it proposes to provide financial assistance (Minister’s consideration period).
NAIF may provide financial assistance at any time within the Minister’s consideration period if the relevant Minister notifies NAIF in writing that they do not intend to object to the proposed funding.
NAIF may provide derivate and hedging support
Was not permitted to provide derivate or hedging support.
NAIF is able to acquire derivatives as a risk management tool or for the purpose of reducing transaction costs, provided the derivatives are not acquired for the purpose of speculation or leverage.
Definition of Northern Australia will be expanded
Includes the Northern Territory, certain areas north and south of the Tropic of Capricorn in Queensland and Western Australia, Gladstone, Gladstone Hinterland, Carnarvon, Meekatharra and Wiluna.
The Local Government Area of Ngaanyatjarraku, a region in Western Australia that straddles the Northern Territory and South Australian borders, is included as a new region eligible for NAIF funding.
The amendments brought about by the Amending Act allow NAIF to invest in a wider range of infrastructure projects through a number of additional mechanisms than it currently possesses. From a project proponent perspective, these are certainly welcomed changes, which should hopefully encourage more proactive investing by NAIF in a wider range of projects and therefore underpin the continued development and prosperity of Northern Australia.
This publication is introductory in nature. Its content is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this publication. Some information may have been obtained from external sources, and we cannot guarantee the accuracy or currency of any such information.