Bush Summit: NAIF executive says failed investments are always a risk when supporting new industry

Risks can’t be avoided when investing in new ideas and new technology, says NAIF executive.

NAIF chief ­strategic policy officer Cathie McBean at the Bush Summit in Port Hedland on Friday. Picture: Colin Murty

Failed investments are an inevitable consequence of a mandate to invest where major banks won’t, a Northern Australia ­Infrastructure Facility senior executive has warned, as the federal government embarks on a review of the $7bn funding facility’s future.

Speaking at The Australian’s Bush Summit in Port Hedland on Friday, NAIF chief ­strategic policy officer Cathie McBean said the organisation’s role was to be a “high-risk financier” of projects where commercial lenders were not prepared to take a risk.

The federal government last week launched a review into whether the $7bn facility’s investment mandate should be extended beyond 2026, and whether the organisation’s funding of projects in northern Australia had been effective in “facilitating and supporting the development of economic infrastructure”.

NAIF’s current portfolio includes agreements to extend up to $4.4bn in concessional loans across 32 projects, with another $3.1bn in project loans under ­consideration.

But NAIF’s track record has also been criticised, initially for its slow start to lending after its establishment in 2016.

More recently, concerns have surrounded the risk of lending to junior mine developers as commodity prices turned south, particularly in the wake of the collapse of ASX-listed Kalium Lakes in 2023, which put about $83m in NAIF loans to the company at risk.

But Ms McBean told the Bush Summit NAIF’s mandate to lend where major bankers would not meant the facility would always carry the risk of failed investments, as would any commercial lender.

To be eligible for NAIF funding, projects must include infrastructure development that will benefit northern Australia.

After topping up the original $5bn fund with an additional $2bn, the federal Labor government earmarked $500m for projects aimed at supporting the government’s National Critical Minerals Strategy.

“We’re probably the leader in investment in critical minerals. We’ve supported six critical minerals projects – that’s over a billion dollars we’ve invested. It is high risk,” Ms McBean said.

“There are unique technologies, there are unique offtake ­opportunities. All of those need to be considered when looking at these new industries or new sectors, but you need a high-risk financier to be able to back them in, and that’s what we are.”

Ms McBean said it carried the risk of failed investments, “as with any commercial entity, bank or special investment vehicle”.

The government’s five-month review will be run by former Labor minister for defence, science and personnel Warren Snowdon, who resigned from parliament at the 2022 election after almost 35 years as MP for the large Northern Territory seat of Lingiari and its predecessor; businesswoman Lisa Caffery; and Australian National University professor Peter Yu. It will specifically review NAIF’s governance and performance, including “risk management and reporting of NAIF loan assets and associated impairment”.

Ms McBean told the Bush Summit the organisation was ­conscious of its role as a steward of public money.

“We are very aware that we are loaning, not granting – it has to be repaid,” Ms McBean said.

“It’s about picking or assessing the projects on their merits and that means that not all projects will move forward through our pipeline. Those that have rigorous due diligence and prove they have offtake and fill a commercial need will move forward.”