Public Benefit Guideline

Purpose of this Guideline

Under Mandatory Criteria 2 of the NAIF Investment Mandate, only projects that will produce benefits to the broader economy and community beyond an economic return to the Project Proponent, can be considered. 
This Guideline aims to:

• detail NAIF’s Public Benefit criteria:
• assist Project Proponents in providing appropriate evidence for NAIF’s Board consideration to 
  support meeting NAIF’s Public Benefit criteria; and
• outline ongoing reporting requirements if an Investment Decision is made.

Guidance on Mandatory Criteria 5 of the NAIF Investment Mandate in relation to Indigenous Engagement Strategy is provided in the NAIF Indigenous Engagement Strategy Guideline which can be found on NAIF’s website. 
There are certain elements of an Indigenous Engagement Strategy that are also considered in public benefit, including those that relate to Indigenous jobs and procurement from Indigenous suppliers.

Mandatory Criteria 2

Before making an Investment Decision, the NAIF Board must be satisfied that the applicable Investment Proposal has met all relevant Mandatory Criteria. Mandatory Criterion 2 relates to Public Benefit and states:
The Facility must be satisfied the Project will produce benefits to the broader economy and community beyond an economic return to the Project Proponent. Such benefit could include, but it is not limited to:

• providing a basis for economic growth in the region or community such as by providing local 
  employment opportunities (especially employment opportunities for Indigenous people), growing regional income, increasing sovereign capability, providing local procurement opportunities (including Indigenous procurement opportunities), or increasing business for local suppliers; or
• stimulating population growth by improving regional or community access to social infrastructure, for example social or affordable housing, or by increasing regional or community liveability or living standards.

The expected value of the public benefit must exceed the estimated value of any concessions offered.

Methodology

General

• Independent economics consultant will be required. A consultant will prepare a Public Benefit Assessment and quantify impact to local economy and assess other expected outcomes. This consultant will be at the cost of the Project Proponent.
• Geography. A Northern Australia focus is required.
• Economic return to the Project Proponent is not considered Public Benefit. Economic return will, however, be considered in financial due diligence (Mandatory Criteria 4). In quantifying the public benefit of the Project, only those benefits outside of economic return to the Project Proponent should be estimated.
• Future Public Benefits should be appropriately discounted. Future benefits are quantified in present value terms at a 7% discount rate.
• Qualitative assessments are important where quantification is not possible. Not all benefits or costs of a Project can be quantified. In these circumstances, qualitative assessments may be used to outline expected outcomes using verifiable data where available.
• Jobs must be quantified. All projects are required to forecast the number of FTE that will be Generated or supported by the Project. Indirect jobs that are stimulated by the Project going ahead should be separated from direct jobs. All jobs that would not exist, but for the Project going ahead can be included.

Requirements

The table below is a guide to the type of reporting required, aligned to the size of financial assistance requested.

NAIF retains the right to vary these requirements in circumstances where it is determined that a different approach would be better suited to satisfy the Public Benefit mandatory criteria.

Other impacts to be considered

The Investment Mandate specifically calls for analysis of local employment opportunities, growing regional income, increasing sovereign capability, local supplier opportunities and the extent to which a Project contributes to improving infrastructure in a region. In addition, the below impacts should be considered and analysed where applicable.

Assumptions

The Public Benefit Assessment should outline the following assumptions:

• Base case vs Project case – in most instances the Project case encompasses the benefits of the whole Project which is enabled as a result of NAIF financing.
• Construction life / Operational life – the length of construction and operational life assessed should be outlined. Assumptions should be justified with supporting evidence, sensitivities over different lengths of operational life may be useful in some instances. NAIF rarely assesses an operational life beyond 20 years.
• Area of Northern Australian measured – NAIF is focused on the benefit to its Northern Australia region, however if a Project is forecast to have a material impact outside NAIF’s region this should also be assessed for information purposes. 
• Multiplier impacts – initial stimulus and first round impacts (production induced flow on, industry support impacts, household consumption impacts) unless agreed otherwise.
• Discounting – the impact to Gross Regional Product during the Project’s operational life should be discounted to year of construction commencement.
• Best current data available – the inputs used should align with the base case financial model.
• Construction jobs – annual FTE added together over construction period to give total FTE generated (may include direct and indirect jobs).
• Operational jobs – average annual FTEs stimulated, can be measured either at the point the project reaches full operational capacity or annual average FTE over the operational life (may include direct and indirect jobs).
• All key assumptions documented with the rationale for the assumption, sensitivities should be provided for key assumptions that have a high/low range.

Quantitative Output

The Public Benefit Assessment should include the following quantitative forecasts including assumptions made to derive the outcome and sensitivities where applicable:

Construction period:

• Direct jobs (FTEs)
• Indirect jobs (where available) (FTEs)
• Impact of GRP ($)

Ongoing Operational Period:

• Direct jobs (FTEs)
• Indirect jobs (where available) (FTEs)
• Impact of GRP ($)

Other Quantified Impact (where applicable)

• Royalties ($)
• Traditional Owner payment ($)
• GHG Emissions (abated or generated) in kilotonnes of carbon dioxide equivalents (CO2-e) ($)
• Regional/local procurement ($)

Given the unique nature of each project, there may be additional quantification requirements specific to the project requesting finance.  NAIF will outline these additional requirements when the project enters the due diligence phase.

Publishing public benefit outcomes

Following an Investment Decision, NAIF will work with the Project Proponent to publish information regarding the forecast Public Benefit of the Project. As the Project progresses, the Investment Mandate requires NAIF to monitor and annually report on Public Benefit that is realised (see section 5.1 below). In addition, within two years post Project completion there will be a more fulsome review of Project progress and outcomes versus initial expectations (see section 5.2 below).

Ongoing Public Benefit Reporting Requirements

As NAIF is a corporate Commonwealth entity, there is increased focus on realised benefits derived from Commonwealth funding. NAIF is required to adhere to certain reporting requirements and publish information regarding the benefits derived from NAIF funding for each Project that has commenced drawing on its NAIF facility. There are annual reporting requirements, some of which will be published in NAIF’s Annual Report each year. In addition to the Annual Reporting requirements, and before  two years post construction completion of the Project, NAIF is required to conduct a thorough project evaluation.

Annual Reporting Requirements (each financial year 1 July – 30 June)

Example calculation for reporting jobs:

During the financial year, there was construction activity over 9 months, with 10,200 hours billed by sub-contractors and 8 full time jobs dedicated to the project at head office for the 9 month period.

Sub contractors (10,200 hrs / 40hrs ) / 52 weeks = 4.9 FTE
Dedicated jobs 8 jobs * ¾ year = 6 FTE’s
Total FTE’s generated by the Project for the financial year 4.9 + 6 = 10.9 FTE’s

Two Year Post Completion Review

Within two years of the Project completion, NAIF is required to conduct a  review of Project performance  and outcomes versus initial expectations. This review will require input from the Project Proponent, the details of which are currently being determined.  Once finalised, an updated Public Benefit Guideline will be issued with guidance on requirements.

Definitions