Northern Australia captures the Northern Territory and parts of Western Australia and Queensland above the Tropic of Capricorn. This area covers 40% of Australia’s land mass, contributes to 11.7% of Australia’s GDP and holds only 5.5% of Australia’s population.

Australia’s north is uniquely geographically positioned to take advantage of:

• Its proximity to growing South East Asian economies which are within 3-5 hours flying time from Darwin
• Growing Asian middle class which by 2030 will represent around 2/3 of the global middle class population
• Similar time zones to the most dynamic economies in Asia, which is advantageous for service industries

Northern Australia Infrastructure Facility

In 2016, the Northern Australia Infrastructure Facility (NAIF) became available for project proponents to support infrastructure developments in Northern Australia including through the provision of concessional loans.

Headquartered in Cairns, the NAIF has A$5 billion of funding available to deploy into projects over the next five years.

In order to accelerate the development of infrastructure projects and fill gaps where private sector debt may not be fully available, loans provided by the NAIF may be structured to provide concessional benefits to borrowers including:

• Competitive interest rate – calculated with reference to the Commonwealth Bond rate as a base
• Longer loan tenor – up to maturity of the longest Commonwealth Bond term (currently 2046)
• Different repayment schedule – longer interest-only periods with NAIF loan repaid following amortisation of commercial bank debt
• Capitalised interest during construction
• Capital structure flexibility – NAIF loans may form any part of the debt capital structure including senior or subordinated

To be eligible for NAIF funding, proponents must demonstrate that the project involves construction of infrastructure (either greenfield or material expansions), provides a basis for economic and population growth in Northern Australia and is preferably the infrastructure is capable of serving multiple users. In addition, NAIF must co-lend alongside commercial or other lenders with NAIF providing no more than 50% of the total infrastructure debt funding. As such the involvement of NAB in your NAIF application process is important as we can assist in optimising commercial outcomes from NAIF negotiations.

 Infrastructure gaps in Northern Australia

Infrastructure Australia identified infrastructure gaps requiring investment in order to meet the Government’s population and economic growth projections. Gaps were identified across the transport (airport, port, rail, road), energy (electricity, gas pipeline), water, and telecommunications sectors. These sectors   drive economic growth outside the projects themselves.

The Government will facilitate the development of Northern Australia by creating successful environments in which businesses can thrive. This will be achieved through:

• Economic policies
• Enabling infrastructure to get things moving
• Regulation that minimises costs on business
• A workforce with the right skills
• Basic research to assist business to identify opportunities

NAB is well positioned to assist customers throughout their NAIF application process given our strong working engagement with the NAIF, robust understanding of deal structuring and appetite for funding infrastructure projects. Please reach out to your NAB relationship banker should you wish to discuss opportunities to fund your Northern Australia capital expenditures and take advantage of the opportunities available through the Northern Australia Infrastructure Facility.

Article adapted from Capital Financing 2016 Year in Review