Section 1: Agency overview and resources
1.1 Strategic direction statement
The Clean Energy Finance Corporation (CEFC) was established to facilitate increased flows of finance into the clean energy sector. The CEFC invests in accordance with its legislation, the Clean Energy Finance Corporation Act 2012 (CEFC Act) and the Clean Energy Finance Corporation Investment Mandate Direction 2013 (Investment Mandate), as issued by the Treasurer and the Minister for Finance and Deregulation on 24 April 2013.
The CEFC is a statutory authority under the Commonwealth Authorities and Companies Act 1997 (CAC Act). The CEFC will have 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 will commence funding investments from 1 July 2013.
The CEFC is governed by an independent Board who have statutory responsibility for decision‑making and managing the CEFC's investments. 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, thus preparing and positioning the Australian economy and industry for a carbon constrained future.
The CEFC seeks to make commercial investments to counter market failures and financing impediments and to generate positive public policy outcomes. The CEFC will supplement existing clean energy initiatives, such as the carbon price, the Renewable Energy Target and grant funding from the Australian Renewable Energy Agency.
The CEFC will achieve its objectives through the prudent application of capital, in adherence with its risk management framework, the Investment Mandate and the CEFC investment policies issued by the Board.
By adopting a commercially rigorous approach to investment activities and risk management practices, it is expected that the CEFC will invest responsibly and manage risk prudently to ensure that its investment portfolio performs in line with the portfolio benchmark return as set out in the Investment Mandate.
1.2 Agency resource statement
Table 1.1 shows the total resources for the CEFC.
Estimate of prior year amounts available in 2013‑14 $'000 |
+ | Proposed at Budget 2013‑14 $'000 |
= | Total estimate 2013‑14 $'000 |
Actual available appropriation 2012‑13 $'000 |
|
---|---|---|---|---|---|---|
Opening balance/Reserves at bank | 9,934 | - | 9,934 | - | ||
REVENUE FROM GOVERNMENT | ||||||
Ordinary annual services1 | - | 18,062 | 18,062 | - | ||
Total revenue from Government | - | 18,062 | 18,062 | - | ||
FUNDS FROM OTHER SOURCES | ||||||
Interest | - | 2,475 | 2,475 | - | ||
Payment from portfolio department | - | - | - | 18,383 | ||
Payment from the CEFC Special Account | - | 1,034,398 | 1,034,398 | - | ||
Total funds from other sources | - | 1,036,873 | 1,036,873 | 18,383 | ||
Total net resourcing for CEFC | 9,934 | 1,054,935 | 1,064,869 | 18,383 |
1. Appropriation Bill (No. 1) 2013‑14.
Note: As the CEFC is a CAC body it is not directly appropriated. Appropriations are made to the Department of the Treasury which are then paid to the CEFC and are considered 'departmental' for all purposes.
1.3 Budget measures
The CEFC does not have any budget measures for 2013‑14.
Section 2: Outcomes and planned performance
2.1 Outcomes and performance information
Government outcomes are the intended results, impacts or consequences of actions by the Government on the Australian community. Commonwealth programs are the primary vehicle by which government agencies achieve the intended results of their outcome statements. Agencies are required to identify the programs which contribute to government outcomes over the budget and forward years.
The CEFC's outcome is described below, specifying the strategy, program objective, program deliverables and program key performance indicators used to assess and monitor the performance of the CEFC.
Outcome 1: Facilitate increased flows of finance into Australia's clean energy sector, applying commercial rigour to investing in renewable energy, low‑emissions and energy efficiency technologies, building industry capacity, and disseminating information to industry stakeholders
Outcome 1 strategy
The scope of the CEFC's operations will be guided by an operating framework based on three principles that will direct where and how the CEFC will invest.
Principle One — Clean energy sector focus
The CEFC will focus its investments in the clean energy sector, namely on renewable energy, low‑emissions and energy efficiency technologies in Australia, as well as manufacturing businesses that produce the required inputs.
The CEFC will allocate its funding within two streams: 50 per cent or more of funds will be allocated to the renewable energy stream and up to 50 per cent will be allocated to the low‑emissions and energy efficiency stream.
In accordance with the requirements of the CEFC Act, the CEFC Board has published guidelines on low emissions technologies. In addition, the Board has published policy guidance as to the renewable energy technologies and energy efficiency technologies the CEFC will inve
st in. These documents are available on the CEFC's website
www.cleanenergyfinancecorp.com.au.
Principle Two — Commercial approach
The CEFC will apply commercial rigour when making investment decisions and deliver a return on its investments above the CEFC's portfolio benchmark return. It will focus on projects and technologies at the later stages of development. The CEFC will invest responsibly and manage risk appropriately.
Principle Three — Addressing financial barriers
The CEFC, as a financial institution able to offer concessional finance, has capacity to directly influence financial impediments. The individuality of each project necessitates a case‑by‑case approach. Where necessary and justified in the CEFC's assessment, the CEFC will tailor concessionality in each case and apply it through availability, tenor or cost of finance or by absorbing additional risk. The CEFC will set terms on a case‑by‑case basis and lend at the rate that is commercially reasonable and on the least generous terms possible for the project to proceed (that is as close to market terms as possible).
Outcome expense statement
Table 2.1 provides an overview of the total expenses for Outcome 1.
Outcome 1: Facilitate increased flows of finance into Australia's clean energy sector, applying commercial rigour to investing in renewable energy, low-emissions and energy efficiency technologies,building industry capacity, and disseminating information to industrystakeholders | 2012‑13 Estimated actual expenses $'000 |
2013 ‑14 Estimated expenses $'000 |
---|---|---|
Program 1.1: Clean Energy Finance Corporation | ||
Revenue from Government | ||
Ordinary annual services (Appropriation Bill No. 1) | 8,299 | 18,062 |
Revenues from other independent sources | - | 2,475 |
Expenses not requiring appropriation | 110 | 317,815 |
Total expenses for Outcome 1 | 8,409 | 338,352 |
Average Staffing Level (number) | 2012‑13 | 2013‑14 |
11 | 50 |
Note: As the CEFC was established during 2012‑13, the increase in ASL in 2013‑14 reflects the full year impact of employees.
Contributions to Outcome 1
Program 1.1: Clean Energy Finance Corporation
Program objective
The objectives of the Clean Energy Finance Corporation are:
- to invest, directly and indirectly, in clean energy technologies, which can be any one or more of the following:
- renewable energy technologies, which include hybrid technologies that integrate renewable energy technologies and enabling technologies, that are related to renewable energy technologies;
- energy efficiency technologies, including enabling technologies that are related to energy conservation technologies or demand management technologies; and
- low emissions technologies;
- in order 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, thus preparing and positioning the Australian economy and industry for a carbon constrained world;
- to liaise with relevant persons and bodies, including the Australian Renewable Energy Agency, the Clean Energy Regulator, other Commonwealth agencies and State and Territory governments, for the purposes of facilitating its investment function;
- to work with industry, banks and other financiers, and project proponents, to accelerate Australia's transformation towards a more competitive economy in a carbon constrained world, by acting as a catalyst to increase investment in the clean energy sector; and
- to do anything incidental or conducive to the performance of the above functions.
Program expenses
There are no significant changes anticipated in expenses over the forward years.
2012‑13 Revised budget $'000 |
2013‑14 Budget $'000 |
2014‑15 Forward year 1 $'000 |
2015‑16 Forward year 2 $'000 |
2016‑17 Forward year 3 $'000 |
|
---|---|---|---|---|---|
Annual departmental expenses: | |||||
Ordinary annual services | 8,299 | 18,062 | 18,190 | - | - |
Expenses not requiring appropriation | 110 | 320,290 | 326,938 | 346,523 | 347,848 |
Total program expenses | 8,409 | 338,352 | 345,128 | 346,523 | 347,848 |
Program deliverables
The CEFC will co‑finance and invest, directly and indirectly, in clean energy projects and technologies which:
- meet the CEFC's Australian clean energy sector criteria;
- offer a commercial return and demonstrate a capacity to repay capital;
- are above the minimum transaction sizes which are set by the CEFC Board;
- result in an acceptable concentration of risk within the CEFC portfolio; and
- have priority against competing proposals within the balance of the $2 billion per annum investment budget.
Program key performance indicators
For the purpose of the CEFC's Investment Mandate, the Government has directed the Board to adopt a portfolio benchmark return for the performance of funds invested by the CEFC, net of operating expenses, based on a weighted average of the five‑year Australian Government bond rate. The portfolio benchmark return is a long‑term target and expected to be earned across the portfolio and over a period of time. Individual investments could be made with expected individual returns above or below the portfolio benchmark return.
The performance of the CEFC will be measured by reference to the following key performance indicators:
- performance against the portfolio benchmark return set by the Government;
- placement of funds into Australia's clean energy sector;
- investment in renewable energy, low emissions and energy efficiency technologies;
- building industry capacity; and
- dissemination of information to industry stakeholders.
Section 3: Explanatory tables and budgeted financial statements
Section 3 presents explanatory tables and budgeted financial statements which provide a comprehensive snapshot of agency finances fo
r the budget year 2013‑14. It explains how budget plans are incorporated into the financial statements and provides further details of the reconciliation between appropriations, program expenses, movements in administered funds and special accounts.
3.1 Explanatory tables
3.1.1 Movement of administered funds between years
The CEFC does not have any administered funds.
3.1.2 Special accounts
The CEFC Act established the CEFC Special Account which will be credited with $2 billion per year on 1 July from 2013 to 2017. This provides the CEFC with certainty in funding and these amounts will roll over to be available in future years if the amounts are not invested in one year.
The CEFC's $2 billion per year from 2013 to 2017 is deemed as a special appropriation under section 21 of the Financial Management and Accountability Act 1997.
The CEFC Special Account must also be credited with the CEFC's surplus money that is returned.
The CEFC Special Account is administered by the Department of the Treasury. Details of the Special Account can be found in Table 3.1.2 in the Department of the Treasury's section of this Portfolio Budget Statement.
3.1.3 Australian Government Indigenous Expenditure
The CEFC does not have any Australian Government Indigenous Expenditure.
3.2 Budgeted financial statements
3.2.1 Differences in agency resourcing and financial statements
There are no material differences between agency resourcing and financial statements.
3.2.2 Analysis of budgeted financial statements
The budgeted financial statements have been prepared on the basis of Australian Accounting Standards.
The budgeted surplus (deficit) for 2013‑14 through 2016‑17 includes a number of large non‑cash charges including a concessional loan charge and a provision for loan impairment as well as the non‑cash revenue from the unwind of the concessional loan charge. After eliminating the impact of these non‑cash charges and revenue in each of the periods, the CEFC is budgeting for operating surpluses of $13.4 million in 2013‑14, $66.9 million in 2014‑15, $129.5 million in 2015‑16 and $209.9 million in 2016‑17.
3.2.3 Budgeted financial statements tables
Estimated actual 2012‑13 $'000 |
Budget estimate 2013‑14 $'000 |
Forward estimate 2014‑15 $'000 |
Forward estimate 2015‑16 $'000 |
Forward estimate 2016‑17 $'000 |
|
---|---|---|---|---|---|
EXPENSES | |||||
Employee benefits | 3,674 | 13,835 | 15,053 | 16,031 | 16,930 |
Suppliers | 4,625 | 5,392 | 5,730 | 6,323 | 6,749 |
Depreciation and amortisation | 110 | 418 | 426 | 250 | 250 |
Write-down and impairment of assets | - | 18,750 | 25,000 | 25,000 | 25,000 |
Borrowing costs | - | 299,957 | 298,919 | 298,919 | 298,919 |
Total expenses | 8,409 | 338,352 | 345,128 | 346,523 | 347,848 |
LESS: | |||||
OWN-SOURCE INCOME | |||||
Own-source revenue | |||||
Interest and dividends | - | 21,626 | 103,585 | 230,764 | 359,481 |
Total own-source revenue | - | 21,626 | 103,585 | 230,764 | 359,481 |
Total own-source income | - | 21,626 | 103,585 | 230,764 | 359,481 |
Net cost of (contribution by) services | (8,409) | (316,726) | (241,543) | (115,759) | 11,633 |
Revenue from Government | 18,383 | 18,062 | 18,190 | - | - |
Surplus (Deficit) attributable to the Australian Government | 9,974 | (298,664) | (223,353) | (115,759) | 11,633 |
ADD NON-CASH CHARGES | |||||
Concessional loan charge | - | 299,957 | 298,919 | 298,919 | 298,919 |
Provision for loan impairment | - | 18,750 | 25,000 | 25,000 | 25,000 |
Total non-cash charges | - | 318,707 | 323,919 | 323,919 | 323,919 |
LESS NON-CASH REVENUE | |||||
Unwind of concessional loan charge | - | (6,628) | (33,670) | (78,638) | (125,627) |
Total non-cash revenue | - | (6,628) | (33,670) | (78,638) | (125,627) |
Surplus (Deficit) attributable to the Australian Government after eliminating non-cash adjustments | 9,974 | 13,415 | 66,896 | 129,522 | 209,925 |
Prepared on Australian Accounting Standards basis.
Estimated actual 2012‑13 $'000 |
Budget estimate 2013‑14 $'000 |
Forward estimate 2014‑15 $'000 |
Forward estimate 2015‑16 $'000 |
Forward estimate 2016‑17 $'000 |
|
---|---|---|---|---|---|
ASSETS | |||||
Financial assets | |||||
Cash and equivalents | 9,934 | 20,000 | 20,000 | 20,000 | 20,000 |
Advances and loans | - | 579,797 | 1,617,158 | 2,949,509 | 4,300,074 |
Trade and other receivables | - | 12,523 | 57,691 | 96,691 | 105,776 |
Investments | - | 300,000 | 600,000 | 900,000 | 1,200,000 |
Total financial assets | 9,934 | 912,320 | 2,294,849 | 3,966,200 | 5,625,850 |
Non-financial assets | |||||
Infrastructure, plant and equipment | 580 | 339 | 173 | 183 | 183 |
Intangibles | 80 | 153 | 143 | 133 | 133 |
Other | - | 105 | 109 | 114 | 118 |
Total non-financial assets | 660 | 597 | 425 | 430 | 434 |
Total assets | 10,594 | 912,917 | 2,295,274 | 3,966,630 | 5,626,284 |
LIABILITIES | |||||
Provisions | |||||
Employees | 120 | 1,448 | 2,128 | 2,845 | 3,599 |
Other | - | 170,000 | 180,000 | 200,000 | 225,000 |
Total provisions | 120 | 171,448 | 182,128 | 202,845 | 228,599 |
Payables | |||||
Other | 500 | 919 | 968 | 1,039 | 1,099 |
Total payables | 500 | 919 | 968 | 1,039 | 1,099 |
Total liabilities | 620 | 172,367 | 183,096 | 203,884 | 229,698 |
Net assets | 9,974 | 740,550 | 2,112,178 | 3,762,746 | 5,396,586 |
EQUITY | |||||
Contributed equity | - | 1,029,240 | 2,624,221 | 4,390,548 | 6,012,755 |
Retained surpluses | 9,974 | (288,690) | (512,043) | (627,802) | (616,169) |
Total equity | 9,974 | 740,550 | 2,112,178 | 3,762,746 | 5,396,586 |
Current assets | 9,934 | 32,523 | 77,691 | 116,691 | 125,776 |
Non-current assets | 660 | 880,394 | 2,217,583 | 3,849,939 | 5,500,508 |
Current liabilities | 500 | 919 | 968 | 1,039 | 1,099 |
Non-current liabilities | 120 | 171,448 | 182,128 | 202,845 | 228,599 |
Prepared on Australian Accounting Standards basis.
Estimated actual 2012‑13 $'000 |
Budget estimate 2013‑14 $'000 |
Forward estimate 2014‑15 $'000 |
Forward estimate 2015‑16 $'000 |
Forward estimate 2016‑17 $'000 |
|
---|---|---|---|---|---|
OPERATING ACTIVITIES | |||||
Cash received | |||||
Interest | - | 2,475 | 24,747 | 113,126 | 224,769 |
Grants | 18,383 | 18,062 | 18,190 | - | - |
Total cash received | 18,383 | 20,537 | 42,937 | 113,126 | 224,769 |
Cash used | |||||
Employees | 3,378 | 11,963 | 13,774 | 14,727 | 15,600 |
Suppliers | 4,301 | 5,623 | 6,284 | 6,843 | 7,270 |
Total cash used | 7,679 | 17,586 | 20,058 | 21,570 | 22,870 |
Net cash from or (used by) operating activities | 10,704 | 2,951 | 22,879 | 91,556 | 201,899 |
INVESTING ACTIVITIES | |||||
Cash received | |||||
Loan advances | - | - | 37,078 | 137,680 | 176,144 |
Total cash received | - | - | 37,078 | 137,680 | 176,144 |
Cash used | |||||
Purchase of property, plant and equipment and intangibles | 770 | 250 | 250 | 250 | 250 |
Loan advances | - | 721,875 | 1,354,688 | 1,695,313 | 1,700,000 |
Purchase of investments | - | 300,000 | 300,000 | 300,000 | 300,000 |
Total cash used | 770 | 1,022,125 | 1,654,938 | 1,995,563 | 2,000,250 |
Net cash from or (used by) investing activities | (770) | (1,022,125) | (1,617,860) | (1,857,883) | (1,824,106) |
FINANCING ACTIVITIES | |||||
Cash received | |||||
Contributed equity | - | 1,034,398 | 1,699,856 | 2,034,312 | 2,009,085 |
Total cash received | - | 1,034,398 | 1,699,856 | 2,034,312 | 2,009,085 |
Cash used | |||||
Return of equity | - | 5,158 | 104,875 | 267,985 | 386,878 |
Total cash used | - | 5,158 | 104,875 | 267,985 | 386,878 |
Net cash from or (used by) financing activities | - | 1,029,240 | 1,594,981 | 1,766,327 | 1,622,207 |
Net increase or (decrease) in cash held | 9,934 | 10,066 | - | - | - |
Cash at the beginning of the reporting period | - | 9,934 | 20,000 | 20,000 | 20,000 |
Cash at the end of the reporting period | 9,934 | 20,000 | 20,000 | 20,000 | 20,000 |
Prepared on Australian Accounting Standards basis.
Retained surpluses $'000 |
Asset revaluation reserve $'000 |
Other reserves $'000 |
Contributed equity/ capital $'000 |
Total equity $'000 |
|
---|---|---|---|---|---|
Opening balance as at 1 July 2013 | |||||
Balance carried forward from previous period | 9,974 | - | - | - | 9,974 |
Adjusted opening balance | 9,974 | - | - | - | 9,974 |
Comprehensive income | |||||
Surplus (deficit) for the period | (298,664) | - | - | - | (298,664) |
Total comprehensive income recognised directly in equity | (298,664) | - | - | - | (298,664) |
Transactions with owners | |||||
Contributions by owners | |||||
Distribution of equity | - | - | - | 1,029,240 | 1,029,240 |
Total transactions with owners | - | - | - | 1,029,240 | 1,029,240 |
Estimated closing balance as at 30 June 2014 | (288,690) | - | - | 1,029,240 | 740,550 |
Prepared on Australian Accounting Standards basis.
Estimated actual 2012‑13 $'000 |
Budget estimate 2013‑14 $'000 |
Forward estimate 2014‑15 $'000 |
Forward estimate 2015‑16 $'000 |
Forward estimate 2016‑17 $'000 |
|
---|---|---|---|---|---|
NEW CAPITAL APPROPRIATIONS | |||||
Capital budget - Bill 1 | - | - | - | - | - |
Total new capital appropriations | - | - | - | - | - |
Provided for: | |||||
Purchase of non-financial assets | - | - | - | - | - |
Total Items | - | - | - | - | - |
PURCHASE OF NON-FINANCIAL ASSETS | |||||
Funded by capital appropriation | - | - | - | - | - |
Funded internally from departmental resources | 770 | 250 | 250 | 250 | 250 |
TOTAL | 770 | 250 | 250 | 250 | 250 |
RECONCILIATION OF CASH USED TO ACQUIRE ASSETS TO ASSET MOVEMENT TABLE | |||||
Total purchases | 770 | 250 | 250 | 250 | 250 |
Total cash used to acquire assets | 770 | 250 | 250 | 250 | 250 |
Prepared on Australian Accounting Standards basis.
Buildings $'000 |
Other infrastructure, plant and equipment $'000 |
Intangibles $'000 |
Total $'000 |
|
---|---|---|---|---|
As at 1 July 2013 | ||||
Gross book value | - | 650 | 120 | 770 |
Accumulated depreciation/amortisation and impairment | - | 70 | 40 | 110 |
Opening net book balance | - | 580 | 80 | 660 |
Capital Asset Additions/Disposals | ||||
By purchase - appropriation ordinary | ||||
annual services | - | 87 | 163 | 250 |
Disposals - gross value | - | - | - | - |
Total asset additions/disposals | - | 87 | 163 | 250 |
Other movements | ||||
Depreciation/amortisation expense | - | 328 | 90 | 418 |
Disposals - accumulated depreciation/amortisation | - | - | - | - |
Total other movements | - | 328 | 90 | 418 |
As at 30 June 2014 | ||||
Gross book value | - | 737 | 283 | 1,020 |
Accumulated depreciation/amortisation and impairment | - | 398 | 130 | 528 |
Closing net book balance | - | 339 | 153 | 492 |
Prepared on Australian Accounting Standards basis.
3.2.4 Notes to the financial statements
Basis of accounting
The departmental financial statements, included in Tables 3.2.1 to 3.2.6 have been prepared in accordance with the requirements of the CAC Act, the Finance Minister's Orders (Financial Statements for reporting periods ending on or after 1 July 2011), Australian Accounting Standards issued by the Australian Accounting Standards Board and the Department of Finance and Deregulation guidance for the preparation of financial statements.
The financial report has been prepared on an accrual basis and is prepared in accordance with the historical cost convention.
Notes to the departmental statements
The budget statements and estimated forward years should be read taking into account the following matters:
Concession loan discount
The CEFC is in the business of making loans which may be at a discount to the prevailing market equivalent rates or terms. For each investment the CEFC will attempt to maximise its return and provide only the level of discount from market rates/terms that is required to ensure the project proceeds, however, this will typically involve the CEFC taking a position that is not generally offered by other market participants (for example, longer term fixed‑rate debt or sub‑ordinated debt) at rates that are below those that an equivalent market participant would demand if it were to participate in this market.
The CEFC is required to record a non‑cash charge referred to as a concessional loan discount in relation to such loans and is a matter of judgment as to the market equivalent rate so as to ascertain the extent of the implicit discount attached to the loan.
Impairment of loans
The CEFC is required to ascertain the extent to which its portfolio of loans is likely to be recoverable. Given the higher risk position that will typically be assumed by the CEFC in its various loans (for example, unsecured debt, sub‑ordinated or mezzanine debt, longer terms, lower credit worthiness of its customers, etc) it is considered likely that the CEFC will not fully recover 100 per cent of the principal relating to the loans it makes.