Body considering Adani loan has loose governing framework
The investment mandate for the Northern Australia Infrastructure Facility (NAIF) is legally ‘loose’ and its safeguards completely inadequate for a body that administers $5 billion of taxpayers’ money.
The concessional loan facility’s investment mandate is full of holes.
As we say in our submission:
Objective and reasonable standards to consider risky loan proposals are completely absent. Instead operative terms feature cursory requirements, containing vague wording such as ‘have regard to’, ‘consider a preference for’, ‘be satisfied there is an expectation’, ‘to the Board’s satisfaction’ and ‘based on assumptions acceptable to the Board’.
Although NAIF’s board has a duty to act with care and diligence, its investment mandate is vague and legally loose, exposing Australian taxpayers to unacceptable risks.
EJA’s submission says NAIF’s consideration of a loan of up to $1 billion towards Adani’s Carmichael railway project was ‘a $1 billion bet from the public purse that the Paris Agreement will fail’.
Our analysis of High Court of Australia judicial authority concluded that the only viable pathway for the funding of Adani’s rail proposal appeared unlawful. A new analysis by Constitutional law expert Professor Anne Twomey cited in the submission supports EJA’s conclusion.
The process to appoint board members appears grossly inadequate, with former Minister Matthew Canavan – who recently said it had been ‘such an honour to represent the Australian mining sector’ – left to nominate board members.
Stacking a board in favour of mining interests does not provide a sound basis for consideration of infrastructure projects in northern Australia.
EJA submitted that the ‘public benefit’ test in the Investment Mandate ‘is limited to two almost meaningless considerations that could be satisfied by almost any proposal’.
The submissions noted NAIF's reliance on 30 year financial models. Finance professionals have described such models as ‘bound to be wrong’ because ‘no-one can know how financial markets will perform in the future’.
Financial risk to NAIF and likely harm to governments’ reputations are almost certain when long-term forecasts, such as those for the Galilee Basin railway, fly in the face of the Paris Agreement.
With all that is known about Adani’s activities and how much the Carmichael project’s coal would add to the world’s climate problem, it is inconceivable that a loan for the project would satisfy NAIF’s requirement not to damage government reputations.