04Appendices, Glossary and Abbreviations

CEFC ANNUAL REPORT / 2015–16

Appendix E: Summary of Operating Costs and Expenses and Benchmark

Under the CEFC Act, the Corporation must include in its annual report:

  • the Corporation’s operating costs and expenses for the financial year
  • a benchmark of the Corporation’s operating costs and expenses for the financial year against the operating costs and expenses
    of other comparable entities for that
    financial year.

The Corporation’s operating costs and expenses for the financial year are reported in the Financial Statements and Notes, and are also reproduced below for convenience.

ABOUT THE CEFC’S STRUCTURE

The CEFC is a corporate Commonwealth entity with an independent Board that makes investment decisions to invest in renewable and low carbon technologies according to ministerial directions supplied by an Investment Mandate. The CEFC’s investment focus is on debt and equity that is solely or mainly Australian based. It cannot invest directly in non-financial assets and does not have a large cash investment function. At 30 June 2016, it had a headcount of 69 employees (approx. 66 FTE) based in Sydney (HQ), Brisbane and Melbourne. The CEFC has drawing rights against the Clean Energy Finance Corporation Special Account maintained by the Department of the Environment and Energy.

NOTE ON COMPARISONS

Direct comparisons of the CEFC with other entities is difficult because:

a. there are very few government-owned public purpose entities that perform the type of function the CEFC does at a similar scale

b. current financial year data on other entities may not necessarily be readily available

c. data is not always reported using the same expense categories across the different entities.

ENTITIES CHOSEN FOR THE PURPOSES OF COMPARISON

In order to provide some comparison as required under section 74 of the CEFC Act, the Corporation has compared its 2015–16 operating costs and expenses against the latest publicly-available information for the Future Fund Board of Guardians as supported by the Future Fund Management Agency (Future Fund), the Export Finance and Insurance Corporation (Efic) and the UK Green Investment Bank (GIB) (all government-owned entities formed for public purpose with a commercial mode of operation). More information about these entities is provided below.

Future Fund Management Agency
(Future Fund) – Structure

The Future Fund was established under Division 2 of Part 5 of the Future Fund Act 2006 and is governed by an independent Board, which makes investment decisions to invest according to ministerial directions supplied by an Investment Mandate. It is not sector-limited to renewable and low carbon technology in the same way the CEFC is, and pursues a broad sectoral spread in a range of investments – primarily equities (39.2 per cent), property, infrastructure and timber land (13.7 per cent), alternative assets (13.7 per cent), debt (11.6 per cent) and cash (21.7 per cent) at 30 June 2016. It had circa AUD$123 billion in funds under management invested in Australia and overseas as of 30 June 2016.

Export Finance and Insurance Corporation (Efic) – Structure

Like the CEFC, Efic is a corporate Commonwealth entity governed by an independent Board. Efic operates on a commercial basis and partners but does not compete with banks. Efic has four key functions under its enabling legislation:

  1. to facilitate and encourage Australian export trade by providing insurance and financial services and products to persons involved directly or indirectly in such trade
  2. to encourage banks and other financial institutions in Australia to finance or assist in financing exports
  3. to manage the Australian Government’s aid supported mixed credit program (a facility which has now been discontinued, although loans are still outstanding under it)
  4. to provide information and advice regarding insurance and financial arrangements to support Australian exports.

Efic’s investment function is primarily related to the issuing of insurance and security guarantees, working capital guarantees and longer-term finance guarantees within these functions. Efic is headquartered in Sydney, provided facilities on the Commercial Account totaling $179 million during 2014-15 and had some $2.9 billion under management at 30 June 2015 (made up of circa $2.0 billion on the Commercial Account and
$0.9 billion on the National Interest Account).

Green Investment Bank (GIB) (UK) – Structure

Formed as a public company owned by the UK Government in May 2012 and became fully operational in October 2012 when it was granted State Aid approval by the European Commission to make investments on commercial terms. The GIB has a mission similar to the CEFC – which the GIB states as “to accelerate the UK’s transition to a greener, stronger economy.” However, the GIB has a broader ‘green impact’ mandate that goes beyond renewable and low carbon energy and emissions reduction into areas such as recycling and the reduction of landfill. Although privatisation of the GIB is being actively pursued by the UK Government, GIB remained state-owned throughout the 2015-16 financial year.

The GIB is an investor in, and manager of, infrastructure projects which are green and profitable, and wants to become a long-term enduring institution. Like the CEFC, the GIB can invest in projects in the form of equity, debt and guarantees. Also like the CEFC, it is still a relatively young business and during its financial year ended 31 March 2016 committed circa £770 million (~$1.5 billion) to 30 new projects, with circa £0.9 billion (~$1.8 billion) of cumulative investments funded at the end of its financial year (March 2016).

Figure 46: CEFC operating costs and expenses benchmark

 

CEFC
2015–16

Future Fund
2014–15 (c)

EFIC
2014–15 (c), (d)

GIB
2015–16 (e)

$’000

%

$’000

%

$’000

%

$’000

%

Staff Employment Related Expenses

Wages and salaries

12,113

41

30,387

 9

17,400

 9

26,116

26

Superannuation

896

3

1,756

 1

1,700

 1

2,196

2

Leave and other entitlements

390

1

969

 -

300

 -

 

 

Incentive compensation

3,759

13

 

 

 

 

4,318

1

Recruitment costs

415

1

 

 

 

 

 

 

Other expenses

120

-

 

 

 

 

3,170

3

Total Staff Employment Related Expenses

17,693

59

33,112

10

19,400

10

35,800

36

 

CEFC

2015–16

Future Fund
2014–15 (c)

EFIC
2014–15 (c), (d)

GIB
2015–16 (e)

$’000

%

$’000

%

$’000

%

$’000

%

Board Expenses

Wages and salaries

376

1

789

-

 

 

 

 

Superannuation

36

-

75

-

 

 

 

 

Other expenses

40

1

 

 

 

 

 

 

Total Board Expenses

535

2

864

0

-

0

652

1

Other Costs

 

 

 

 

 

 

 

 

Interest expense

-

-

 

 

140,600

78

 

 

Provision for impairment and irrevocable loan commitments

(95)

-

 

 

14,400

5

8,992

9

Concessional loan discount (b)

6,876

23

 

 

 

 

 

 

Consultants fees and expenses

692

2

 

 

 

 

 

 

Professional fees

362

1

246,326

78

1,700

1

9,045

9

Other investment portfolio expenses

319

1

16,300

5

400

-

20,589

21

Travel and incidentals

566

2

 

 

1,100

1

 

 

Office facility costs

1,036

3

 

 

1,500

1

2,824

3

Marketing and communications

287

1

 

 

2,100

1

 

 

Depreciation and amortisation

534

2

1,271

-

3,500

2

10,005

10

Auditors’ remuneration

153

1

230

-

220

-

1,148

1

Administrative, IT and
other expenses

792

3

17,564

3

2,580

1

10,678

11

Total Expenses

29,750

100

315,667

100

187,500

100

99,733

100

 

CEFC

2015–16 (Actual)

Future Fund

2015–16 (Estimate) (f)

$’000

%

$’000

%

Employee benefits  

17,570

59

36,112

 8

Supplier costs  

4,865

16

431,003

92

Depreciation and amortisation   

534

2

1,273

-

Concessional loan discount (b)

6,876

23

 

 

Allowance for impairment of assets and
irrevocable loan commitments

(95)

-

 

 

Total Expenses

29,750

100

468,388

100%

Notes:

(a) Like for like comparisons are not strictly possible since different entities group and report costs differently

(b) Non-cash charge that reverses over the life of the underlying loans

(c) From 2014-15 Annual Report since 2015–16 information is not available at the time of finalising this report for publication

(d) Costs are shown gross before National Interest Account allocation

(e) Green Investment Bank Group for twelve months ended 31 March 2016. Amounts converted at 30-6-16 average exchange rate of 1 GBP = 2.0389 AUD

(f) From 2016-17 Portfolio Budget Statements (Departmental + Administered)

(g) EFIC does not appear separately in the 2016-17 Portfolio Budget Statements and its 2015–16 Corporate Plan does not provide this level of detail.