Clean Energy Finance Corporation

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 for 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 draws on this finance on an as needs basis, with non-committed funds remaining in the Special Account until required.

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

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 making investment commitments from 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 said on ABC Radio National that the government should "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 would shut the corporation down.^[10]. Legislation to abolish the CEFC and transfer the CEFC's existing assets and liabilities to the Commonwealth was put before Parliament but blocked by non-government senators in the Senate. In July 2015, Abbott announced he would ban the 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.

Then 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

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

In July 2018, CEO Ian Learmonth reported that the CEFC had directly committed to a further 39 projects in the 12 months to 30 June 2018, up from 36 direct investments in FY17. Total new CEFC commitments in FY18 were $2.3 billion, up from $2.1 billion in the previous year. CEFC commitments in FY18 included $1.1 billion in renewable energy, $939 million in energy efficiency, $100 million in transport and $127 million in waste-related projects. At 30 June 2018, total CEFC investment commitments since inception exceeded $6.6 billion. After allowing for repayment, amortisation and any cancellations, the CEFC investment portfolio was $5.3 billion at 30 June 2018. In five years of investing, CEFC commitments have now contributed to clean energy projects Australia-wide, with a total project value of $19 billion. The organisation had directly invested in more than 110 individual transactions and delivered finance for more than 5,500 smaller-scale clean energy projects. The CEFC said each dollar of CEFC investment commitments was matched by more than $1.80 of private sector finance, with the portfolio of investment commitments targeting annual cuts to greenhouse gas emissions of 10.8 million tonnes of CO2-e, and lifetime cuts to greenhouse gas emissions of more than 190 million tonnes of CO2-e.

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 an ongoing investment priority and, with ARENA, commissioned a detailed report into measures to accelerate the transition to electric vehicles.^[21]

Clean Energy Innovation Fund

At 30 June 2018, the CEFC reported that the Clean Energy Innovation Fund had established itself as the largest dedicated Australian investor of its kind. The Innovation Fund was created as a specialist financier to invest $200 million in early-stage clean energy companies. It draws on CEFC finance to provide primarily equity finance to innovative clean energy projects and businesses which involve renewable, energy efficiency and low emissions technologies. The Innovation Fund made investments commitments of more than $55 million in nine transactions in its first 18 months. The investments were across a diverse range of technologies – from second life batteries to smart meters; from state-of-the art car wheels to the internet of things, and many more.  The CEFC said the investments demonstrate the potential of Australian innovators to lead Australia's transition to a low carbon economy, helping to lower carbon emissions and to deliver on the benefits of clean energy. They also demonstrated the potential for innovative companies to capitalise on the new business opportunities emerging from Australia's clean energy transition. The CEFC draws on the technical expertise of the Australian Renewable Energy Agency (ARENA) in assessing potential investment opportunities for the Innovation Fund. The Innovation Fund does not provide grants.

Object and functions

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

Under section 4 of the CEFC Act, the Responsible Ministers are the Minister for the Environment and Energy and the Minister for Finance.^[22] 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.

CEFC operations

The CEFC is a statutory authority established by the Australian Government under the Clean Energy Finance Corporation Act 2012.  Under the Public Governance, Performance and Accountability Act (PGPA Act), the CEFC is known as a corporate Commonwealth entity.  The CEFC Act:

• Creates the CEFC Special Account, a Special Account under the PGPA Act which is credited with $2 billion each 1 July, for five years from 1 July 2013, to enable the CEFC to invest in the clean energy sector
• Provides the CEFC Board with statutory responsibility for decision-making and managing the CEFC's investments. The Board operates and makes its investment decisions independently of government, based on rigorous commercial assessments
• Provides for the appointment of the CEFC Chief Executive Officer, who is responsible for the day-to-day administration of the CEFC, subject to (and in accordance with the policies determined by) the Board
• Requires investments by the CEFC to be "complying investments" as defined in Section 59 (2).

The CEFC publishes quarterly reports on its website regarding investment commitments.

Investment Mandate

An Investment Mandate direction 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 CEFC 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.

Offices

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.^[23]

See also

• Energy policy of Australia
• Australian Renewable Energy Agency (ARENA)

References

External links

• Clean Energy Finance Corporation- Clean Energy Finance Corporation website
• The CEFC- "Clean Energy Finance Corporation Expert Review" website (Australian federal government)
• Clean Energy Finance Corporation, press release from the Prime Minister of Australia, Wed 7 March 2012.
• Clean Energy Future – Renewable energy - Clean Energy Future.