Clean Energy Finance Corporation

Industry	Clean Energy Investment
Headquarters	Sydney , Australia
Number of locations	4 Offices
Key people	Ian Learmonth (CEO) Steven Skala AO (Chairperson)
Owner	Australian Government
Website	www.cefc.com.au

The Clean Energy Finance Corporation (CEFC) is an Australian Government-owned green bank that invests alongside private investors, innovators and industry leaders to increase the flow of finance into the clean energy sector, and to help achieve Australia's national goal of net zero emissions by 2050.^[1]

The CEFC is responsible for investing more than $30 billion on behalf of the Australian Government in economy-wide decarbonisation opportunities, from renewable energy and natural capital to energy efficiency, alternative fuels and low carbon materials. It is also focused on transforming the Australian energy grid, backing sustainable housing and supporting the growth of climate tech innovators.^[2]

Legislative requirements

The Clean Energy Finance Corporation Act 2012 establishes the CEFC, sets out the organisation’s purpose and functions, and establishes arrangements for the Board, CEO and staff.^[3]

The CEFC is a corporate Commonwealth entity under the Public Governance, Performance and Accountability Act 2013 (PGPA Act).^[4]

Under the CEFC Act, the Australian Government can provide directions to the CEFC by issuing it with an investment mandate on matters set out in the Act. The CEFC Board is consulted in a process set out in the Act. Directions contained in the Investment Mandate must be consistent with the CEFC Act.

Investment Mandate

The Investment Mandate Direction 2023 provides direction on the $19 billion Rewiring the Nation Fund, the $1 billion Household Energy Upgrades Fund and the $500 million Powering Australia Technology Fund, all of which were created in 2023. The Mandate also provides for the continuation of the Advancing Hydrogen Fund and the Clean Energy Innovation Fund. The Mandate also adjusts the CEFC Portfolio Benchmark rate of Return (PBR) for the CEFC General Portfolio to an average of 2-3 per cent above the 5-year Australian Government bond rate per annum over the medium to long term, down from 3-4 per cent previously stipulated.^[5]

Investment strategy

The CEFC works with businesses, institutional investors and entrepreneurs to accelerate investment in Australia’s transition to net zero emissions. In operating within the parameters of the CEFC Act and Investment Mandate directions, the CEFC must also anticipate and respond to the environment and market conditions in which it operates. This means retreating where the private sector is operating effectively, and stepping up its investment activities to fill market gaps where the private sector is absent.^[6] The CEFC has an enduring commitment to operating with commercial rigour to deliver a positive return for taxpayers across its portfolio. The CEFC publishes quarterly reports on its website regarding investment commitments.^[7]

Investment performance

The CEFC completed 30 new and 20 follow-on transactions in the 2022-23 year, confirming $1.9 billion in new investment commitments with a total transaction value of $11.7 billion. This included a record $1.2 billion in renewable energy and grid related commitments. Lifetime CEFC commitments were $12.7 billion across more than 300 large-scale transactions to 30 June 2023. The lifetime total transaction value reached $48.8 billion. Capital returned to the CEFC in 2022-23 was $1.2 billion, taking lifetime repayments and returns to more than $4.5 billion. At 30 June 2023, the CEFC portfolio of on-risk investments was $7.7 billion. The CEFC also invested a record $54.5 million in new and follow on commitments via the Clean Energy Innovation Fund, managed by Virescent Ventures. Each $1 of Innovation Fund capital attracted an additional $6.47in private sector capital in the 2022-23 year, delivering a combined $407.3 million to emerging climate tech businesses.^[8]

All figures AUD

The CEFC publishes quarterly reports on its website regarding investment commitments.^[9]

History

The CEFC was established under the Clean Energy Finance Corporation Act 2012, passed by the Parliament of Australia on 22 July 2012.^[10] It was established on 3 August 2012^[11] and commenced making investment commitments from 1 July 2013. The CEFC marked 10 years of investment and surpassed lifetime investment commitments of $10 billion in 2022. Minister for Climate Change and Energy, the Hon Chris Bowen MP, described the CEFC as "the proud legacy of Labor in government" and said it would be "vital" to the achievement of Australia's net zero emissions ambitions.^[12]

At the start of the organisation's second decade, the Australian Parliament approved the first material change to the CEFC Act, expanding the role of the CEFC in driving investment towards the achievement of Australia's net zero ambitions. In parallel, the Government made the first increase in the organisation's capital allocation since 2012, empowering the CEFC to drive investment across priority areas critical to the clean energy transition with an additional capital allocation of $20.5 billion.^[13]

Ian Learmonth was appointed CEO in March 2017 ^[14] In August 2017 Steven Skala AO was appointed CEO Chair.^[15] In marking the first decade of the CEFC, Mr Skala noted in a 2022 address at Parliament House in Canberra that the CEFC enjoyed political support, observing that the cornerstone of a strong economy was stable and affordable energy.^[16]

An independent statutory review of the CEFC Act found that the CEFC had facilitated the flows of finance into the clean energy sector, successfully enabling projects that would not have otherwise proceeded, attracting substantial private co-investment to projects. The statutory review was conducted by Deloitte and tabled in Parliament on 14 December 2018.^[17] The CEFC submission to the Statutory Review of the Corporation is also publicly available.^[18]

Then Australian Prime Minister Scott Morrison subsequently said "The fact Australia leads the world in per capita investment in clean energy, we have the world's most successful green bank in the Clean Energy Finance Corporation, and that we're on track to have around a quarter of our electricity needs met by renewables by 2020, all underscores the work underway to reduce our global emissions."^[19]

The organisation did not always enjoy the support of Government. In 2013 then Opposition leader Tony Abbott wrote to the CEFC asking it to stop making new loans and to cease assessing new projects.^[20] Then CEFC Chair Jillian Braodbent AO later told ABC radio the new government should "break an election promise" and keep the CEFC in operation, citing a 7% profit. Coalition Senator Arthur Sinodinos said that if it is making a profit, it should survive without the government and essentially confirmed the government would shut the corporation down.^[21]

Legislation to abolish the CEFC and transfer the CEFC's existing assets and liabilities to the Commonwealth was blocked by non-government senators. In July 2015, Abbott said he would ban the CEFC from investing in wind power^[22] and rooftop solar.^[23] Prime Minister Malcolm Turnbull lifted the ban in 2015, reportedly directing the CEFC to focus on innovative and emerging technologies, reversing the position of his predecessor Abbott.^[24]

See also

• Australian Renewable Energy Agency (ARENA)
• Energy policy of Australia
• National electricity market
• Project finance
• Power purchase agreement

References