NAIF Strategy Overview
NAIF’s strategic approach is designed to deliver on its vision for the benefit of all stakeholders.
The following table provides a summary of NAIF’s strategic framework detailing key areas of financing focus (in terms of geographies and sectors) as well as key strategic initiatives.
A discussion on each of the key strategic initiatives is detailed further below.
NAIF’s specialised Investment team has developed strategies to better support a wider range of projects for assessment and Investment Decision:
Resourcing – NAIF’s Investment team has been restructured in order to effectively support more projects. This will result in sector and regional specialities within the Investment team. Understanding the business drivers and investment opportunities within each sector is critical in being able to identify and support projects which require specialist knowledge. In addition, NAIF is developing product specialities within the team, so that there is expertise readily available to assist Proponents with a variety of product and structuring options.
Innovative Financing Tools & Structures – NAIF seeks to utilise a range of debt financing tools and structures to assist in the development of these projects. The specific nature of the financing tools and structures that are utilised are determined on a project by project basis to assist in supporting the development of the project.
Developing Partnerships – A key areas of focus for NAIF is to work with aligned government and private sector partners across jurisdictions and sectors to assist in identifying and executing various project development opportunities. As an example, in 2020, NAIF entered into a Memorandum of Understanding with Indigenous Business Australia (“IBA”) and the Indigenous Land and Sea Corporation (“ILSC”) to share information, expertise and potential opportunities on economic infrastructure supporting Indigenous Australians in northern Australia.
NAIF are committed to supporting the development of transformational projects. These are projects that that once developed, assisted or financed by NAIF will provide one or more of the following transformational benefits:
- A material increase in population growth or employment to a region in northern Australia;
- Creation or significant development of a new industry in northern Australia;
- A material improvement in living standard for northern Australia (or a region);
- A project which brings significant improvement to the lives of the Indigenous population; and/or
- An enabling piece of infrastructure (road, port, communication link, dam, energy solution etc) that facilitates any of the above.
These projects must be able to demonstrate significant Public Benefit relative to NAIF’s financing amount and concessions provided.
Transformational projects generally take a number of years to reach completion and require funding from a number of sources, in addition to NAIF, such as additional funding from a combination of State and Territory and Federal Governments.
NAIF is committed to working with key government, regional and industry stakeholders to identify transformational projects across each of the jurisdictions that we operate in.
The Kidston Pumped Hydro Project is an example of a Transformational Project that NAIF has supported, with NAIF’s conditional $610m financing approval in July 2019 assisting in allowing the Project sponsors to progress other key commercial discussions including equity capital raising, negotiations with key off takers and negotiations with the Queensland Government to bring this project closer to realisation.
Impact & Stakeholder Engagement
NAIF seeks to maximise positive impact for the benefit of northern communities including the Indigenous populations in the region of projects financed by NAIF, and in doing so also for northern Australia and our nation more broadly. NAIF will publish case studies on the impact of each Investment Decision including economic impact and public benefit, forecast jobs and Indigenous Engagement.
NAIF has a refreshed Stakeholder Engagement strategy to ensure that its purpose, operations and value to northern Australia are understood by key stakeholders. NAIF’s focus is to be engaged on key parts of policy development and be recognised as an important partner in the development of northern Australia.
NAIF has a broad range of stakeholders who each require a customised engagement approach. This includes:
- General Public: As Australians with an interest in the growth and prosperity of our country, the realisation of the aspirations for northern Australia and appropriate use of NAIF’s taxpayer funds, NAIF is accountable to the Australian public;
- Commonwealth Government: NAIF is an important initiative of the Government’s agenda for economic and population growth for northern Australia and the Commonwealth at all levels (political, bureaucratic and agency) who can support NAIF‘s success (including policy, identification of priorities and progressing cross governmental collaboration, commitment and engagement with NAIF);
- QLD, WA, & NT Governments: The states and territory are key beneficiaries of the NAIF framework and are critical to achievement of its objectives. NAIF seeks to partner with the states and territory to ensure appropriate projects are identified and to ensure NAIF finance is invested into their communities as quickly as feasible to optimise the amount of public benefit generated;
- Indigenous Groups: The Indigenous estate in northern Australia is significant, with 40 percent of the land mass directly owned or managed by Aboriginal and Torres Strait Islander peoples. The Indigenous population currently averages 15 percent across northern Australia, comprising over 60 percent in some sub-regions and over 25 percent of the Northern Territory (ABS 2016). The Aboriginal and Torres Strait Islander population is projected to increase to over 50% of the permanent population of northern Australia by 2040, further reinforcing the importance of relationships with Indigenous Australians within jurisdictions;
- Local Governments, RDA and industry bodies: These groups are well placed to help promote NAIF and the reach of its mandate. By identifying suitable local proponents and key industry leaders and applying their knowledge of project opportunities and risks across the north they can help NAIF clarify project scale, sustainability and success factors;
- Investors: It is important that potential sponsors or proponents and project participants and consultants who will need to be involved in moving a project from concept to financial close understand NAIF’s mandate and value proposition. NAIF works closely with these constituents including to help them to identify opportunities that match the NAIF criteria and the new model of financing that the NAIF mandate has brought to the Australian market. NAIF also helps to fast track projects where that is possible; and
- Other interest groups: Communication plays an extremely important role in the articulation of the benefits and the opportunities afforded by NAIF investment and the expectations for delivery on NAIF’s mandate and vision.
While NAIF is primarily driven by public benefit and driving Indigenous outcomes for each of the projects we finance, NAIF must not lend money at less than the Commonwealth cost of borrowing. In addition, over the life of NAIF supported loans (up to 30 years at present) the returns should cover the operating costs of NAIF.
To achieve financial sustainability, NAIF is looking at methods to minimise the time taken from an Investment Decision by the NAIF Board to contractual and financial close. For each project that NAIF seeks to provide finance, NAIF also seeks to tailor the nature of the financing tools provided to the needs of the project, including a prudent assessment of the concessions that are required for a project to proceed.
In addition, NAIF will continue to focus on careful management of costs, and any increase in employee numbers within NAIF will continue to be commensurate with the level of investment activity and a continued focus on operating efficiency.
Operational Effectiveness and Risk Management
In order to achieve its purpose of transforming northern Australia, NAIF will invest in the efficiency of its decision-making and risk management processes and systems, to ensure they are fit for purpose.
As NAIF transforms from a ‘start-up’ phase to a more established phase with the number of Investment Decisions and projects funded increasing, NAIF continues to focus on ensuring that processes mature in line with the business to ensure the efficiency and effectiveness of operations. NAIF will also strategically manage its access to the resources of Export Finance Australia under its service legal agreement to ensure it meets the needs of NAIF’s business.
NAIF will apply its appetite for risk to help build market confidence to invest in the country’s most geographically dispersed regions, to leverage the region’s unique natural assets, create skilled job opportunities and enhance the liveability of northern Australia.
NAIF’s Investment Mandate specifically provides that NAIF may have a high risk tolerance for factors unique to investing in northern Australia such as distance, remoteness and climate. This means that NAIF has tools available to assist projects overcome barriers common to infrastructure investment in this region. For example, NAIF specifically looks to support projects to become scalable to overcome the first mover disadvantage, to reduce productivity inefficiencies and the challenges associated with remoteness, and also has flexibility to deal with seasonal extremes.
NAIF’s unique way of applying its financing tools in accordance with risk appetite is central to the NAIF value proposition. NAIF will continue to strive to find innovative ways to apply its risk appetite to support more projects in northern Australia.
Positive People & Culture
The quality of NAIF’s people is critical to the effectiveness and efficiency of its operations. NAIF’s People & Culture Strategy underpins the development, engagement and alignment of its people to deliver and execute on NAIF’s strategy over the next four years and beyond.
To achieve NAIF’s purpose of transforming northern Australia, NAIF is committed to developing and maintaining a high performance team and will invest in systems and processes to support high performance including:
- An upgraded Performance Management Framework which includes well defined Key Performance Indicators (KPI’s) that utilise a combination of performance targets and behaviour expectations individualised for each employee;
- Reward and Recognition program that values sustained high performance;
- Employee Development Program, providing technical and behavioural development opportunities; and
- Employee Engagement, implementation of recommendations arising from a recently completed Culture review and the development of a common set of NAIF values that help guide the Board and all employees.