The Clean Energy Finance Corporation, the investment body yet to gain support from the federal government, has attracted $3.5 billion in investment commitments over its lifetime, according to its just-released 2014-15 annual report.
The CEFC was installed by the former federal Labor government to address the financial barriers inhibiting the take-up of clean energy technologies, namely the availability, tenor and cost of finance for clean energy projects. Through its investments the CEFC aims to “influence the risk landscape”, attracting investment from the private sector.
These financial barriers were something Prime Minister Malcolm Turnbull refused to acknowledge last month when he said: “[W]e do not support government banks for the simple reason that new government banks are performing roles that can be perfectly adequately fulfilled by the private sector and are not necessary.”
He questioned whether the CEFC was “an appropriate use of government money”.
In her chair’s report, CEFC chair Jillian Broadbent said amid a challenging investment environment, the CEFC’s portfolio was forecast to earn a lifetime yield of 6.1 per cent – 2.94 per cent above the government bond rate of 3.16 per cent. In other terms, for each tonne of carbon abatement (estimated at 4.2 million tonnes a year), $2.30 is being returned to the taxpayer.
Bucking the clean investment trend
The body has grown its investment portfolio in its second full year of operation, despite the dismal Australian environment.
“In a financial year which saw an all-time record of around US$320 billion of global investment in clean energy, Australian clean energy investment fell by 31 per cent,” Ms Broadbent said. “Against this background, the CEFC has continued to be an active investor and its portfolio grew by 29 per cent.”
In his report, CEFC chief executive Oliver Yates said the significant contraction of investment in large-scale renewables was disappointing, though the CEFC had manged to expand its operations, “working with new partners to create new financing options for borrowers for energy efficiency and renewable energy projects”.
A buildings focus for 2014-15
The focus of the last financial year was on building energy efficiency, particularly in the government and manufacturing sectors, as the number of large-scale renewable projects had declined.
“The CEFC has a focus on the property sector to widen efforts for efficiency upgrades to Australia’s building stock,” Mr Yates said. “The benefits of reduced energy use, operating costs and emissions are well documented, but barriers remain.
“In 2014–15, the CEFC made a $125 million equity investment commitment to the EG Group’s High Income Sustainable Office Trust. The Trust will invest in older office stock to upgrade their energy performance in order to revitalise and reposition them in the market.
“This is our second investment into a fund structure, the first being our investment into the CFS Australian Clean Energy Infrastructure Fund. We expect to use this approach more in the future, to leverage funds and accelerate investment across other sectors and opportunities.”
HISOT investments will be targeting improvement outcomes of at least 4.5 star NABERS.
Over $1 billion in investments made
The 2014-15 financial year saw $484 million of new investment commitments made, taking the total CEFC investment portfolio to $1.2 billion.
“In less than three full years of operation, the CEFC has made cumulative investment commitments of more than $1.4 billion, with a current portfolio of $1.2 billion of investment commitments at 30 June 2015,” Mr Yates said. “These investment commitments contribute to projects and programs with a total value of around $3.5 billion.”
Indeed for every dollar invested by the CEFC, $1.80 was invested by the private sector.
The CEFC-financed projects are expected to achieve lifetime abatement of 77 million tonnes of CO2, with the abatement achieved at -$2.30 a tonne. That is, the taxpayer gets $2.30 back for each tonne of abatement.
Read the full report.