Applications to have a project designated as a DIP must meet certain published criteria including:
- The project is on Infrastructure Australia’s Infrastructure Priority List and assessed as ‘Ready to Proceed’.
- The infrastructure to be provided will be public common-user infrastructure or readily accessible by multiple users.
- Some part of the project is privately owned/financed.
- Construction has not commenced.
- Granting the project DIP status will not cause the estimated capital expenditure of all projects granted DIP status to exceed $25 billion or a higher prescribed amount.
Notwithstanding that the exposure draft legislation containing these proposals is welcomed and will provide increased liquidity for investors (thus a larger secondary market) we observe the following:
- The fixed trust requirement raises various issues on flexibility of investment in a trust vehicle due to the current interpretation of ‘fixed trust’. As a fixed trusts cannot have different classes of units with differing rights, this will impact consortiums whose members have different investor profiles (e.g. some seeking high yields, whilst others long term capital growth).
- Given the infrastructure projects in states' pipelines, the capital expenditure cap (of $25 billion) is relatively low.
Consultation timeframe will only be running for two weeks. Closing date for submissions is 30 April 2013.
KPMG has a market leading Government Advisory team and can assist clients with DIP applications.