Commonwealth Investments Glossary

The following provides definitions to terms relating to RMG-308 Commonwealth Investments:

Brownfield projectstypically involve the modification, expansion and/or upgrade of infrastructure and facilities on a site that has been previously been developed or improved. Used in contrast to Greenfield projects (see below).
Bundling the organisation of responsibilities into 'bundles' that can then be evaluated for potential delivery options, including potential delivery by a private sector partner. Bundles are often defined around commonly understood phases of a project: e.g., bundling of responsibility for one or more of the design, build, operation / maintenance phases of a project. 
Business caseinforms an investment decision of the Government by providing analysis of options, costs, benefits and risks associated with addressing an identified problem. The business case is a document that is subject to an iterative process and should be continually updated throughout the development and decision-making process to include the best information available.
Capital expenses (CAPEX) are funds used to acquire, upgrade and maintain assets, often through a new project or investment.
Commercial loanthe Commonwealth advances a loan on terms comparable with private markets.
Commonwealth entity are those Commonwealth bodies specified in section 10 of the Public Government, Performance and Accountability Act 2013 (PGPA Act). There are 2 types of Commonwealth entity: non-corporate Commonwealth entities (i.e., Department of State, Parliamentary Department, or listed entity) or; corporate Commonwealth entities (i.e., a body corporate established by a Commonwealth law or under a Commonwealth law that is prescribed by an Act or the PGPA rules). For the purposes of the Framework they are the Commonwealth entity bringing forward the investment proposal for consideration by the Government.
Concessional loana loan made on more favourable terms than the borrower could obtain in private markets.
Construction risks can be defined as any exposure to possible loss during different stages of a construction project.
Contestabilitythe prospect of competition in public sector functions to improve both the efficiency and effectiveness of contributing to achieving government's outcomes.
Contract risks generally refer to the probability-adjusted impact of losses as a result of parties involved in a contract not fulfilling the terms of a contract
Cost of capital is the required return by private sector participants to ensure their investment in a capital project is worthwhile, given its perceived risk.
Cost benefit analysisinvolves a systematic evaluation of the impacts of a regulatory proposal, accounting for all the effects on the community and economy. It emphasises, to the extent possible, valuing the gains and losses from a regulatory proposal in monetary terms. 
Cost estimationthe process for approximating the costs associated with undertaking an investment proposal.
Delivery Vehicle refers to how a project is to be delivered and acts as a contractual framework for the project or program.
Equitythe Commonwealth takes an ownership interest in an entity in anticipation of future returns (e.g., dividends or capital returns).
Exit when any entity ceases its interest in an investment. This may involve divestment, wind-up, or expiry of the investment term. It should be considered as part of the investment lifecycle.
Financial / capital structure refers to the way an entity structures its debt and equity to finance its overall operations.
Financial risk refers to the potential loss of the financial instrument.
Financing the private or public capital used to pay for the upfront investment costs of a project or programme.
First-pass seeks in-principle agreement from Cabinet on different delivery vehicle and investment instrument options.
Funding revenue sources to pay for the costs of a project or program over its life. Possible funding sources include direct user charges (e.g., road tolls) and general taxation.
Grantfor the purposes of the Commonwealth Grant Rules and Guidelines, a ‘grant’ is an arrangement for the provision of financial assistance by or on behalf of the Commonwealth to a grantee to address one or more of the Australian Government’s policy outcomes while assisting the grantee achieve its objectives. 
Greenfield projects refer to projects that are completed on a new site with no constraints imposed by prior work, typically a vacant site without previously constructed buildings and/or improvements.
Guaranteethe Commonwealth assumes responsibility for the debt, or performance obligations of another party on default of its obligation.
Hybrid Instrument A single financial instrument that combines two or more different financial instruments. For example, a convertible note which is a loan type instrument, that converts to equity at the achievement of pre-determined events.
Infrastructure priority list a prioritised list of investment opportunities that can deliver nationally significant benefits to Australians, compiled by Infrastructure Australia annually.
Investment fundinvolves the purchase and management of financial assets to fund a particular policy objective by subsequently drawing on earnings and/or capital from the investment in financial assets. 
Investment instrumenthow the Government finances the upfront costs of the investment.
Investment lifecycle the phases of investment from acquisition or creation, through management to exit by the Commonwealth.
Letters of comfort are issued to the other party in a contract to indicate a level of assurance that an obligation will be met. Although letters of comfort are a moral commitment, they are not legally binding. The issuer of the letter may therefore be unlikely to take responsibility for any losses caused by reliance on the letter and has no obligation.
Net Benefitsthe sum of all the benefits of a proposal minus the sum of the costs of the proposal.
Non-financial risk or project risk risks specific to the investment proposal and may include planning risk, delivery risk, stakeholder risk, environmental risk.
Operating expenses (OPEX) are expenses a business incurs through normal day-to-day business operations
Operating risks refer to the potential for projects to incur operating, maintenance or life-cycle costs that are greater than those projected.
Problem identification problems prevent the goals/objectives of the market, or the existence of a market, from being realised. Problem identification involves the development of an evidence base of the scale, costs, causes and effects of the problem.
Project or non-financial risk risks specific to the investment proposal and may include planning risk, delivery risk, stakeholder risk, and environmental risk.
ProponentA person or organisation that submits a proposal.
Risk defined in ISO31000:2018 Risk Management as ‘the effect of uncertainty on objectives’. An effect is a deviation from the expected outcome — positive or negative. Risk is often expressed as a combination of the consequences of an event and the associated likelihood of occurrence.
Second-pass seeks Cabinet’s agreement to proceed with the proposal. It is supported by a detailed business case including a detailed implementation plan, strategy for active whole-of-life management including governance and controls for mitigating risks, and an exit strategy.
Specialist Investment Vehicles occasionally referred to as a “policy fund”. A form of delivery vehicle which uses a particular, or range of, investment instruments directed towards a particular market sector or industry to achieve a particular policy objective.
Toolkitsupports this RMG in delivering practical, user-focussed support to Commonwealth entities who may have no prior experience in developing investment proposals.
Underwriting the process through which an entity takes on financial risk for a fee.
Usage risks refer to the risk that the project may fail to meet agreed construction outcomes and / or that the asset is not used as intended. 
User funding users of the project or program provide a source of funding.

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