Home' IAQ Yearbook : 2017-18 Contents 66 Infrastructure Association of Queensland Yearbook 2017--2018
• deferral of loan repayments or other types of
tailored loan repayment schedules
• extended periods of capitalisation of interest
beyond construction completion
• ranking lower for cash ow purposes.
The primary challenge to NAIF is nding projects
to fund within its mandate. NAIF faces the same
challenge that nanciers have faced for some time
-- there is no shortage of interest in investing in
projects that promote northern Australia, especially
in areas of agriculture and transport; but nding
the projects that t private investment mandates
and generate an acceptable risk-assessed return
on investment is very dif cult. Given that NAIF's
investment mandate mimics many private sector
mandates, the challenge is the same.
Providing competitive nance for a project on the
basis that it WILL be repaid or can be re nanced will
only assist in converting a small number of projects.
So, the challenge is to create a pipeline of projects
that are investable either by NAIF or the private
sector. Developing investable projects is expensive
and risky; and while there appear to be funds
for later-stage projects, there is a limited amount
of 'risk' capital to develop projects to a bankable
position. A potential solution could be for NAIF
to assist prospective projects through leveraging
its expertise, contacts, prestige and willingness to
invest if no private sector investor is willing to fund
the riskier stages of the project.
The projects that develop the north could be
classi ed in several ways and a successful operating
NAIF could look at these projects in different ways.
Some projects will meet the investment mandate
of the private sector. These would meet the
investment criteria of NAIF but not its mandate, so
NAIF funding is not required.
A second group of projects are candidates for
private sector funding, but need the assistance of
a team of experts to make them ready for NAIF
funding. In these situations, the NAIF would offer
advice and guide the project to the relevant advisers
and possible equity providers in the private sector.
A third set of projects will need more help and
might be incubated with the assistance of NAIF.
Within this set of projects, there will be some that
are spun out as purely private sector projects, some
that will be so innovative that the private sector
will only be involved if NAIF also invests, and others
that are too risky or are nancially unviable, and are
subsequently set aside.
What could evolve through this model is something
more akin to a development banking model. NAIF
becomes more of an active facilitator, as well as
a possible investor, and leverages its intellectual
property, relationship with government and
willingness to invest if required. In this environment,
the government receives a leveraged bene t from
NAIF where a greater number of projects are helped
to source private investment and NAIF lending is
only used as a last resort -- as is the current mandate.
Bolder suggestions are for NAIF to become a supplier
of 'risk' capital. NAIF could bridge the gap as a
nancial investor for projects as they are developed
to become private sector--ready and bankable
investments. At the moment, all the risks of the
bankable feasibility stage are borne by the private
sector proponent. It is a daring suggestion, but being
involved at this point is where government funding
could make a real and immediate difference. The
challenge for government in this strategy is that it
will lose some capital in the search for sustainable
projects, since some will be investigated and not
satisfy the bankable nancial investment hurdle.
Another solution could be to reassess the grants
programs that currently operates in northern
Australia and align them to develop projects that are
investable. The National Water Infrastructure Fund
(NWIF) is an example of how such a program could
operate. The NWIF funded a series of feasibility
studies that will be used to justify investments
from other government or private funds. A similar
program could be used to encourage and develop
projects ready for NAIF funding.
With the role of the NAIF to stimulate productivity
and economic growth, and encourage investment
in northern Australia, there is a compelling
argument to expand the mandate of NAIF to assist,
advise and participate in the development of ideas
to create bankable, investable projects. These
can then be turned over to the private sector or
part-funded by NAIF. As it evolves, NAIF has the
potential to ll a gap and fund the development of
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