Clean Energy Finance Corporation

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Clean Energy Finance Corporation
Industry Clean Energy Investment
Headquarters Sydney, Australia
Key people
CEO Ian Learmonth
Chairperson Steven Skala AO
Owner Commonwealth of Australia
Website www.cefc.com.au

The Clean Energy Finance Corporation (CEFC) is an Australian Government-owned Green Bank that was established to facilitate increased flows of finance into the clean energy sector. The CEFC is responsible for investing $10 billion in clean energy projects on behalf of the Australian Government.  Its mission is to help lower Australia's carbon emissions by investing in renewable energy, energy efficiency and low emissions technologies across the economy, via a range of finance options.[1]  The CEFC also supports innovative start-up companies through the Clean Energy Innovation Fund [2].  Across its portfolio, the CEFC invests to deliver a positive return to taxpayers.

The CEFC invests in accordance with its legislation, the Clean Energy Finance Corporation Act 2012 (CEFC Act) [3]and the prevailing Investment Mandate. The CEFC is a corporate Commonwealth entity under the Public Governance, Performance and Accountability Act 2013 (PGPA Act)[4]. The CEFC has access to funding of $10 billion comprising annual appropriations to the CEFC Special Account of $2 billion every 1 July from 2013 to 2017 inclusive, in accordance with section 46 of the CEFC Act.

The CEFC is governed by an independent Board which has a statutory responsibility for decision-making, performance of the Corporation’s functions and managing the CEFC’s investments, and a Chief Executive Officer who is responsible for the day-to-day administration of the Corporation. A system of delegations exist to aid in the performance of these functions. The Board reports to Parliament through its Responsible Ministers.

The CEFC’s investment objectives are to catalyse and leverage an increased flow of funds for the commercialisation and deployment of Australian-based renewable energy, energy efficiency and low-emissions technologies. The CEFC achieves its objectives through the prudent application of capital, in adherence with its risk management framework, its Investment Mandate and the investment policies issued by the CEFC Board.

In March 2017, Mr Ian Learmonth was appointed CEO[5], replacing founding CEO Mr Oliver Yates. New Board members[6] were appointed from August 2017, with Mr Steven Skala AO replacing founding chair Ms Jillian Broadbent AO.

History[edit]

The CEFC was established under the Clean Energy Finance Corporation Act 2012, passed by the Parliament of Australia on 22 July 2012.[7] It was established on 3 August 2012[8] and commenced funding investments on 1 July 2013.

On 5 August 2013 the federal Coalition Opposition led by Tony Abbott wrote to the CEFC asking it to stop making new loans and to cease assessing new projects.[9] After the 2013 federal election, on 5 December 2013, then CEFC Chair Jillian Broadbent complained to ABC Radio National, begging the government to "break an election promise" and keep the CEFC in operation, citing a 7% profit. Coalition Senator Arthur Sinodinos said that if it's making a profit, it should survive without the government and essentially confirmed the government will shut the corporation down.[10]

The Abbott Government announced its intention to abolish the CEFC. Abbott and then Assistant Treasurer Senator Arthur Sinodinos confirmed the Government would scrap the CEFC. Legislation to abolish the CEFC and transfer the CEFC’s existing assets and liabilities to the Commonwealth was before Parliament but blocked by non-government senators in the Senate. In July 2015, Abbott announced he would ban CEFC from investing in wind power[11] and rooftop solar.[12] On 13 July 2015, the CEFC said it was taking advice in relation to the draft Mandate.[13]

In December 2015, Fairfax media reported that Prime Minister Malcolm Turnbull had lifted the ban on CEFC investment in wind power, in his first major break from the former regime's environmental policy.[14] The Guardian reported on 24 December 2015 that the CEFC had been directed to focus on innovative and emerging technologies, reversing a mandate by the former prime minister Tony Abbott that would have specifically blocked funding for windfarms and small-scale solar projects.[15]

The Australian Government further tasked the CEFC with creating a $1 billion Sustainable Cities Investment Program and a $1 billion Reef Funding Program, in addition to its $200 million Clean Energy Innovation Fund, which is operated alongside the Australian Renewable Energy Agency (ARENA). Finance for the three programs is drawn from the CEFC's existing $10 billion allocation, with investments to be made in accordance with usual CEFC investment practice.

CEFC Chair Jillian Broadbent AO canvassed the CEFC's role in the energy sector in a March 2017 discussion on "Australia's Energy Future: Achieving the goals of energy security, sustainability and affordability." In her comments, Broadbent said: "Australia's energy mix can incorporate higher levels of clean energy with strengthened transmission, better demand management systems and increased storage capacity. These need to be planned and co-ordinated."

These matters were explored further in the CEFC's submission to the Independent Review into the Future Security of the National Electricity Market - commonly referred to as the Finkel Review. The CEFC said the March 2017 submission drew on its experience as a specialist clean energy investor to frame out a number of areas that would benefit from reform, including: Market design to support security and reliability; technology to transform the electricity sector and barriers to investment.

Commercial approach[edit]

The CEFC applies a commercial approach when making investment decisions and seeks to develop a portfolio across the spectrum of clean energy technologies that in aggregate must have an acceptable but not excessive level of risk relative to the sector.[16] The Corporation applies a commercial filter when making its investment decisions, focussing on projects and technologies at the later stages of development. The filter is not as stringent as the private sector equivalent, as the Corporation has a public policy purpose and values any positive externalities being generated. Consequently, it has different risk/return requirements. For a given return, the Corporation may take on higher risk and, for a given level of risk, due to positive externalities, may accept a lower financial return. In line with its policy intent, the Corporation considers the positive externalities and public policy outcomes when making investment decisions and when determining the extent of any concession for an investment.[17] The CEFC submission to the Statutory Review of the Corporation is publicly available. [18]

Investment commitments[edit]

Throughout 2017-18, the CEFC announced a number of innovative financing transactions to encourage additional private sector investment in measures to reduce carbon emissions. These included measures to lower agribusiness-related emissions, through the agricultural platform of Macquarie Infrastructure and Real Assets (MIRA)[19] as well as lowering infrastructure-related carbon emissions, with an investment in the IFM Australian Infrastructure Fund[20] The CEFC has also identified transport-related emissions as a an ongoing investment priority and, with ARENA, commissioned a detailed report into measures to accelerate the transition to electric vehicles.[21]

The CEFC provides regular reports on new investment commitments, as well as annualised details following the end of each financial year. In July 2017, the CEFC provided an update on its investment commitments for the 12 months to 30 June 2017. This included new commitments of almost $2.1 billion, across 35 transactions. Each dollar of CEFC investment commitments in 2016-2017 was matched by more than $2 from the private sector, with the investment portfolio expected to generate a return above the Government's costs of funds. The CEFC said the increased value and scale of its investment activity had eclipse prior year commitments, with breadth and depth of transactions signaling strong growth in business and investor appetite for clean energy assets. . After four years of operation, the CEFC had made investment commitments of $4.3 billion, in projects with a total value of $11 billion.

The CEFC 2016-17 Annual Report[22] showed the organisation's 30 June 2017 investment portfolio, upon financial close, would finance projects estimated to achieve annual abatement of almost 7.3 million tonnes CO2-e, or more than 121 million tonnes CO2-e over their lifetimes. CEFC 2016-2017 commitments included an additional $300 million towards asset finance facilities for business, manufacturing and agribusiness, which had delivered more than 2,000 investments in energy efficiency equipment and low emissions vehicles Australia-wide. CEFC investment focused on industry sectors with the strongest potential for decarbonisation, including electricity generation, transport, property, infrastructure and manufacturing. CEO Ian Learmonth described Australia’s clean energy sector as coming of age, with investment activity increasingly stretching across the economy. But while there had been a considerable increase in the level of clean energy investment, Australia was still at the beginning of the required transition and a commitment to long-term investment remained essential to decarbonisation.

Key investments in the 2016-17 financial year included:

  • Additional finance for SGCH (St George Community Housing), which is building 500 new energy efficient homes for low-income families, locking in lower energy costs for the long term.
  • Its first infrastructure investment, in the Qube Moorebank intermodal project in Sydney, which will substantially reduce freight transport emissions
  • Investing in 10 large-scale solar projects in regional Queensland, NSW and Victoria, including alongside ARENA, as well as additional CEFC investments in solar and wind
  • Investing in Australia's world-leading lithium resources, to capitalise on the booming energy storage market for grid-scale batteries and electric vehicle
  • The Clean Energy Innovation Fund committed $30 million across four investments in its first year of operation, including finance for Geelong-based Carbon Revolution, to increase production of its unique carbon fibre wheels, and GreenSync, which is commercialising smart software controls for renewable energy and battery storage.
  • The CEFC said it had been a cornerstone investor in eight of Australia's 14 climate bond issuances to date, including a $20 million commitment to the world's first university climate bond, with Melbourne’s Monash University.

Object and functions[edit]

The object of the CEFC is specified in section 3 of the CEFC Act as being ‘to facilitate financial flows into the clean energy sector’.

The main function of the CEFC is the ‘investment function’ (as specified in section 9 and subsection 58(1) of the CEFC Act), to invest, directly and indirectly, in renewable and low carbon technologies. Section 9 also specifies a number of support functions such as:

  • liaison with relevant individuals, businesses and agencies to facilitate the investment function
  • to perform any other functions conferred by the CEFC Act or any other Commonwealth law
  • to do anything incidental or conducive to the performance of the investment function or the other functions.

Responsible ministers[edit]

Under section 4 of the CEFC Act, the Responsible Ministers are the Minister for the Environment and Energy and the Minister for Finance.[23] The Nominated Minister is one of the Responsible Ministers who exercises additional powers and functions under the CEFC Act. Subsection 76(1) of the CEFC Act provides that the Responsible Ministers determine between them which is to be nominated.

Investment Mandate[edit]

An Investment Mandate direction [1] is the means by which the Government of the day provides instruction as to how the Corporation can make investments, providing it:

  • does not have a purpose of directing the Corporation to require the corporation to make or not make a particular investment and
  • is not inconsistent with the Act, (including the object of the Act).

Under the Act, the CEFC Board must be consulted on the draft of a proposed new mandate, and any submission made by the Board must be tabled in the Parliament. [2]

The Australian Government is providing $2 billion per year in funding to CEFC on 1 July for five years commencing in 2013 (Clean Energy Finance Corporation Bill 2012)[3] The CEFC will be exempt from tax in order to overcome capital market barriers.[24]

Offices[edit]

CEFC is headquartered in Sydney with offices also in Brisbane and Melbourne, and an additional staff member based in Townsville to focus on opportunities in North Queensland and in the Reef Catchment Area.[25]

See also[edit]

References[edit]

  1. ^ "Where we invest - Clean Energy Finance Corporation (CEFC)". www.cefc.com.au. Retrieved 2018-07-02. 
  2. ^ "Innovation Fund - Clean Energy Finance Corporation (CEFC)". www.cefc.com.au. Retrieved 2018-07-02. 
  3. ^ http://www6.austlii.edu.au/cgi-bin/viewdb/au/legis/cth/num_act/cefca2012297/
  4. ^ https://www.legislation.gov.au/Details/C2017C00269
  5. ^ https://www.cefc.com.au/media/files/cefc-board-appoints-ian-learmonth-as-new-chief-executive-officer-replacing-oliver-yates.aspx
  6. ^ https://www.cefc.com.au/media/296276/minister-cormann-minister-frydenberg-media-release-cefc-appointments.pdf
  7. ^ "Clean Energy Finance Corporation Bill 2012". Parliament of Australia. Commonwealth of Australia. 16 August 2012. Retrieved 19 May 2013. 
  8. ^ "The CEFC and Government - Enabling legislation". Cleanenergyfinancecorp.com.au. Retrieved 2016-07-30. 
  9. ^ Abbott, Tony. "Coalition Leader's Letter to CEFC 5 Aug 2013" (PDF). Leader of the Opposition. Retrieved 6 August 2013. 
  10. ^ Bourne, James. "CEFC fights for its life". Australian Broadcasting Corporation. Retrieved 7 December 2013. 
  11. ^ Adam Gartell (11 Jul 2015). "Tony Abbott has escalated his war on wind power". Sydney Morning Herald. 
  12. ^ "Government pulls the plug on household solar". Sydney Morning Herald. 13 Jul 2015. 
  13. ^ "Statement from the CEFC". Cleanenergyfinancecorp.com.au. 2015-07-13. Retrieved 2016-07-30. 
  14. ^ Federal Politics (2015-12-13). "Malcolm Turnbull has lifted Tony Abbott's wind power investment ban". Theage.com.au. Retrieved 2016-07-30. 
  15. ^ The Guardian, 24 December 2015: New clean energy investment mandate a shift from policy proposed by Abbott
  16. ^ http://annualreport2015.cleanenergyfinancecorp.com.au/performance/year-in-review/our-investment-portfolio/aspx
  17. ^ Byrnes, L.; Brown, C.; Foster, J.; Wagner, L. (December 2013). "Australian renewable energy policy: Barriers and challenges". Renewable Energy. 60: 711–721. doi:10.1016/j.renene.2013.06.024. 
  18. ^ https://www.cefc.com.au/media/390711/statutory-review-cefc-submission-february-2018.pdf
  19. ^ "CEFC in finance first to target energy efficiency and sustainability in Australian farming sector - Clean Energy Finance Corporation (CEFC)". www.cefc.com.au. Retrieved 2018-07-02. 
  20. ^ "IFM Investors and the CEFC work together to cut carbon emissions in the infrastructure assets - Clean Energy Finance Corporation (CEFC)". www.cefc.com.au. Retrieved 2018-07-02. 
  21. ^ "Transport - Clean Energy Finance Corporation (CEFC)". www.cefc.com.au. Retrieved 2018-07-02. 
  22. ^ http://annualreport2017.cefc.com.au/
  23. ^ "Responsible Ministers". Annualreport2015.cleanenergyfinancecorp.com.au. Retrieved 2016-07-30. 
  24. ^ "Clean Energy Finance Corporation income tax exemption". Australian Taxation Office. Australian Taxation Office for the Commonwealth of Australia. 14 November 2012. Retrieved 19 May 2013. 
  25. ^ Alice Uribe (26 April 2013). "$10bn CEFC fund gets govt mandate". Financial Standard. Rainmaker Group. Retrieved 18 May 2013. 

External links[edit]