The Turnbull government plans to overhaul the lending rules of the $5bn Northern Australia Infrastructure Facility to make it much easier to finance major projects that have struggled to attract commercial lenders.
Matt Canavan, the resources and northern Australia minister, said the Naif was only allowed to provide 50% of an infrastructure project’s total debt, and that was too restrictive.
The government would remove that cap to allow the commonwealth to take on 100% of the debt risk of major projects. Project proponents would still have to repay the loan, but the Naif would be able to provide the larger finance on concessional terms, he said.
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Canavan said the government would also make it easier for Naif to finance a larger range of projects by redefining the term “infrastructure”.
It would also loosen the “gap test” which confines the Naif to funding projects that would not have gone ahead without Naif assistance.
The changes would make the Naif more flexible, and help drive investment in northern Australia where there was often little infrastructure, he said.
Canavan said the Naif was established in 2015 with some arbitrary rules that had since proved too restrictive, so it made sense to reform some.
Since 2015, one project has been approved, 17 are going through a due diligence process and 90 are being considered across Western Australia, the Northern Territory and Queensland.
“Over the last two years we have attracted a lot of interest for a strong pipeline of projects but it has been challenging to get them to financial close,” Canavan told ABC radio on Wednesday.
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“That’s why some of these rules are being changed to allow more commercial footing for the Naif to operate, and to bring what are some good projects in the pipeline to financial close.”
The changes will not make it easier for Naif to fund the controversial Adani Carmichael mine in Queensland because the Palaszczuk government has the power to veto its funding.
The key changes were recommended by a review by the businessman Tony Shepherd.
LNP senator Ian Macdonald welcomed the announcement.
“There will no longer be a need to prove that other finance was not available and the non-binding cap of $50m will be scrapped,” he said.
“In addition there will be a change of definition of what constitutes an infrastructure project, which will broaden the scope of investments which can be made.
“I am confident that many of the projects currently under consideration by the board of Naif will quickly be given the tick of approval once these changes are made.”
with Australian Associated Press