Newcastle and Port Stephens ratepayers will not bear any financial liability for the $850 million Konsberg missile factory at Williamtown, the minister responsible for overseeing the project says.
In an interview with the Newcastle Herald, Minister for Defence Industry and Capability Delivery Pat Conroy also sought to assure residents that the project was not exposed to any financial stresses affecting Newcastle Airport.
The government announced in August that it had partnered with Kongsberg Defence Australia to build an advanced guided weapons production facility on land leased from Newcastle Airport, which is owned by Newcastle and Port Stephens councils.
It is anticipated the project would create 500 construction jobs, inject $100 million into the Hunter's economy and employ a further 100 people when operating.
But the airport's property development arm, Greater Newcastle Aerotropolis Pty Ltd (GNAPL), is seeking Commonwealth Bank funding to build the factory, which will then be leased to Kongsberg for 20 years.
The Herald recently reported that a confidential paper submitted to last month's GNAPL board meeting revealed concerns about funding the construction of the missile factory, which had added to the growing chorus of internal warnings about the airport's financial solvency.
It said that funding from the Commonwealth Bank for the Kongsberg factory was "not likely to be approved and committed until 31 March 2025 at the earliest".
"Based on .... group forecasts there is insufficient headroom to fund unbudgeted capex from cash reserves, and in the event that CBA [Commonwealth Bank] debt funding is not obtained, there is expected to be a shortfall that would either breach the businesses $15 million working capital limit or require significant capital or operating cost savings to offset," it said.
Mr Conroy said that ultimately the project represented a zero-risk proposition for the bank, because it had federal government backing.
The Commonwealth is in contract negotiations with Kongsberg Defence Australia for the delivery of the facility and will not have a direct contract with either Newcastle Airport Pty Ltd or GNAPL.
"I can guarantee the ratepayers of Port Stephens and Newcastle councils that the full cost of the lease, which is what Kongsberg and GNAPL will enter into, will be passed on to the Commonwealth," Mr Conroy said.
"The Commonwealth will be paying every single part of the lease. Therefore, it is backed by the Commonwealth Government as the sovereign lender. The Commonwealth Government is the safest investment partner anyone can partner with in this country. Full cost recovery is what's expected through the lease."
The Foreign Investment Review Board has given its approval for Kongsberg Defence Australia to enter into a lease with GNAPL for the purpose of building the facility.
Various planning and development approvals have also been obtained, including stage one subdivision work registered in 2024 with Port Stephens Council, with stage two, four and subdivision works currently underway and scheduled for completion in 2025.
"When we make defence announcements we make it very clear that they are subject to all relevant approvals processes that could include development approvals processes or finance with whoever we're contracting with. So this was the right time to make this announcement, because it then allowed full transparency with the people of our community," Mr Conroy said.
"I'd say anyone who is conflating people's questions about the structure of Newcastle airport with this particular deal are either misunderstanding two separate processes or serving the purposes of people who want to destroy this deal, and that's against the national interest."
In a separate development Mr Conroy said he would provide a briefing to Newcastle Council about the missile project.
It followed a social media post by Newcastle Lord Mayor Ross Kerridge who expressed concern about how initial communication about the project had been handled.
