Coronavirus (COVID-19) updates from the Australian Government

Clean Energy Finance Corporation

Date

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.

Table 1.1: Clean Energy Finance Corporation resource statement — Budget estimates for 2013‑14 as at Budget May 2013
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.

Table 2.1: Budgeted 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.

Table 2.2: Program expenses
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

Table 3.2.1: Comprehensive income statement (Showing Net Cost of Services)
(for the period ended 30 June)
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.

Table 3.2.2: Budgeted departmental balance sheet
(as at 30 June)
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.

Table 3.2.3: Budgeted departmental statement of cash flows
(for the period ended 30 June)
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.

Table 3.2.4: Departmental statement of changes in equity — summary of movement (Budget year 2013‑14)
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.

Table 3.2.5: Departmental capital budget (DCB) statement
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.

Table 3.2.6: Statement of asset movements — departmental
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.