Big push for inbound infrastructure investment

National Infrastructure Funding and Financing Limited

Established 1 December 2024 (through the repurposing of Crown Infrastructure Partners Limited (CIP)), NIFFCo is responsible for building the Government’s internal capability in relation to Public Private Partnerships (PPPs), receiving and evaluating market-led proposals, and connecting overseas investors and lenders with New Zealand’s infrastructure pipeline.

NIFFCo (as CIP) has had (and will continue to have) a key role in supporting infrastructure to enable housing and urban development, including through the Infrastructure Funding and Financing Act 2020. The legislation is being extended to developer-led proposals, projects under the Local Water Done Well policy (to ensure that councils address deficiencies in their water assets) and the New Zealand Transport Agency, which is responsible for the national rail and road networks. 

PPPs

The Government is actively seeking private sector partners. Initiatives include:

• an invitation for Registrations of Interest issued as part of the 2025 budget package for the first section of the Northland Corridor, a major motorway project to connect the Far North and Auckland, and
• the publication of the New Zealand PPP Framework, A Blueprint for Future Transactions – an initiative that is also supported by the Labour Party.

Inland Revenue is undertaking a review of the tax treatment of limited partnerships, with updated guidance due soon. Given limited partnerships are the ‘vehicle’ that has been used to facilitate foreign investment on all PPPs to date, this guidance will be important for PPP investors in working through how to structure their investments at financial close and on any sell down.

Inland Revenue is also reviewing New Zealand’s thin capitalisation rules as they apply to infrastructure, with a view to relaxing restrictions on interest deductions. As currently drafted, these rules disallow interest deductions from majority overseas-owned or controlled entities when certain debt to asset ratios are exceeded (with the 60% safe harbour debt to asset ratio the most often applied threshold). 

While the Labour Party has a nuanced position on PPPs, both Labour and National have responded to clear messaging from infrastructure stakeholders that the sector needs a more bi-partisan approach and more project and policy continuity across the electoral cycle. 

Labour Infrastructure Spokesperson Kieran McAnulty has signalled that this will apply also to the PPP space, saying a Labour Government would honour any PPPs entered into by the current Government.

"The fact is we might be in government in 18 months’ time and these people need to know that there's going to be stability in New Zealand".

Market-led proposals

The Government through the Treasury has released new guidelines for the submission and assessment of market-led proposals. The thinking is that “there is no government monopoly on good ideas”. The three core considerations that will be applied are:

• public interest – is the proposal consistent with government and community interests, including the Government’s objectives and priorities
• value for money – does the proposal represent a good and responsible use of the taxpayer dollar, and
• exclusivity – does the nature of the proposal justify bypassing a competitive tendering process in favour of entering exclusive negotiations with the proponent.

As noted above, NIFFCo will evaluate any market-led proposals.

Regional deals

A Strategic Framework was published last year and all councils have been invited to submit “light touch” proposals for consideration. The aim is to have the first deal completed by the end of this year and a further three by October 2026. Priority will be given to regions that are best placed to deliver on the Government’s economic growth agenda. 

Project consenting

Projects of national or regional significance may qualify for a ‘one-stop shop’ assessment process under the Fast Track Approvals Act 2024. Three applications have been accepted for reference to the Environmental Protection Authority for assessment by an expert panel – wharf extensions at Ports of Auckland, an 180-unit residential development in Nelson and a 1250-home subdivision project in Auckland.

Other revised settings

Invest New Zealand – is being incubated within New Zealand Trade and Enterprise (NZTE) before being established as an Autonomous Crown Entity modelled on Irish and Singaporean best practice. Will be charged with attracting Foreign Direct Investment into high-potential sectors and increasing research and development within New Zealand by multinational companies.
 
Funding and Financing Framework – a set of principles and a decision process published by the Treasury in November 2024 with the aim of broadening the funding base, using private capital where efficient, and applying commercial disciplines to the Crown’s approach to the provision of public capital.

A more welcoming overseas investment regime – the Overseas Investment Act 2005 will be amended to allow investments to proceed unless there is an identified risk to the national interest, remove the good character test and create an expectation that the Overseas Investment Office will decide non-contentious applications within 15 working days. However, the existing requirements will continue for farmland, fishing quota and residential/lifestyle properties, and issues of what is and is not within the national interest will remain a matter for political judgement. See Chapman Tripp’s commentary here.

Reducing the tax burden on new migrants

Aimed more broadly than infrastructure, the Government will amend the foreign investment fund regime to allow new migrants and eligible returning New Zealanders to pay tax on foreign shares acquired while outside New Zealand on a realised basis (rather than on an unrealised basis under the “fair dividend rate” method). The changes are expected to be included in an August taxation bill.

Projects promoted at Investment Summit

The Government promoted a number of projects at the summit, including:

• a second crossing to supplement the Auckland Harbour Bridge, “the most travelled piece of road in New Zealand”. The New Zealand Transport Agency will begin market soundings soon on whether to build a bridge or a tunnel
• toll concessions (as in WestConnex in Sydney and the Limerick Tunnel in Ireland), starting with six routes, three already tolled and the remaining three to be tolled when completed
• the Northland Expressway by way of a PPP, a three-stage development connecting the Far North and Auckland (referred to above)
• three new courts by way of a PPP (one in Waitakere and two in Rotorua), and
• a phase 1 expansion at Christchurch Men’s Prison by way of a PPP.

As New Zealand opens its doors wider to foreign direct investment into infrastructure, the government aims to create robust frameworks and settings – and a credible pipeline. If you would like more information on this topic, please get in touch with one of our experts.