03Financial Statements

CEFC ANNUAL REPORT / 2015–16

Note 7: Other Information

7.1: Reporting of Outcomes

The Corporation has one outcome – to 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

2016
$’000

Outcome 1

2015
$’000

Total

2016
$’000

Total

2015
$’000

Departmental

 

 

 

 

Expenses

29,750

23,622

29,750

23,622

Own-source income

50,887

54,777

50,887

54,777

Net return from outcome delivery

21,137

31,155

21,137

31,155

7.2: Budgetary Reports and Explanation of Major Variances

The following tables provide a comparison of the original budget as presented in the 2015-16 Treasury Portfolio Budget Statements (PBS) to the 2015-16 final outcome as presented in accordance with AAS for the Corporation. The Budget is not audited.

7.2A: Budgetary Reports

The budgeted financial statements for 2015-16 were prepared on the basis of the Australian Government’s intention to abolish the CEFC. Legislation to abolish the CEFC and transfer the CEFC’s existing assets and liabilities to the Commonwealth was before Parliament at that time. Given the uncertainty regarding the timing of the passage of legislation, the budgeted financial statements assumed the CEFC was to be abolished from 1 July 2015. Accordingly, the 2015-16 Budget assumed:

  • no new investments would be entered into by the CEFC post 30 June 2015;
  • revenue from those contracts planned to be executed prior to 30 June 2015 was forecast to continue through the life of the investments (including revenue associated with the unwind of previously recorded concessionality charges);
  • no additional concessionality charges were forecast to be incurred (consistent with the assumption of no new investments being entered into by the CEFC post 30 June 2015);
  • all operational expenses (employee benefits and supplier costs) were anticipated to cease effective 30 June 2015;
  • an allowance for possible loan impairment was provided in each period of the forward estimates in relation to the existing investment portfolio; and
  • all outstanding liabilities to suppliers and employees were assumed to be settled at 30 June 2015.

The Corporation was not abolished at 1 July 2015, and therefore has continued to fulfil its obligation to invest in accordance with the CEFC Act. There has been no material change in the approach of the Corporation or the operations of the Corporation during the 2015-16 financial year, and as a consequence there are a large number of material variances to a budget that was based on assumption of abolition on the first day of the financial period. In explaining variances to the budget, the Corporation has therefore focussed on those items which are considered of most significance to the operations of the CEFC.

Statement of Comprehensive Income

for the period ended 30 June 2016

 

Actual

$’000

Budget1

$’000

Variance2

$’000

NET COST OF SERVICES

EXPENSES

 

 

 

Employee benefits

17,570

9,435

8,135

Suppliers

4,865

3,764

1,101

Depreciation and amortisation

534

624

(90)

Concessional loan charges

6,876

-

6,876

Write-down and impairment of assets

83

4,761

(4,678)

Provision for irrevocable loan commitments

(178)

-

(178)

Total expenses

29,750

18,584

11,166

Own-Source Income

 

 

 

Own-source revenue

 

 

 

Interest and loan fee revenue

51,013

49,250

1,763

Other revenue

30

-

30

Total own-source revenue

51,043

49,250

1,793

Gains

 

 

 

Other (losses) / gains

(156)

-

(156)

Total (losses) / gains

(156)

-

(156)

Total own-source income

50,887

49,250

1,637

Net contribution by / (cost of) services

21,137

30,666

(9,529)

Revenue from Australian Government

-

-

-

Surplus from continuing operations

21,137

30,666

(9,529)

 

Actual

$’000

Budget1

$’000

Variance2

$’000

OTHER COMPREHENSIVE INCOME

Items subject to subsequent classification to net cost of services

 

 

 

Gains on available-for-sale financial assets

5,885

-

5,885

Total other comprehensive income

5,885

-

5,885

Total comprehensive income

27,022

30,666

(3,644)

  1. The Corporation’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the Corporation’s appearance in the 2015-16 Treasury PBS).
  2. Difference between the actual and original budgeted amounts for 2015-16. Explanations of major variances are provided further below.

Statement of Financial Position

as at 30 June 2016

 

Actual

$’000

Budget1

$’000

Variance2

$’000

ASSETS

Financial assets

 

 

 

Cash and cash equivalents

232,778

-

232,778

Trade and other receivables

3,853

2,991

862

Loans and receivables at amortised cost

402,225

530,115

(127,890)

Available for sale financial assets

277,694

118,045

159,649

Other financial assets

306,594

330,033

(23,439)

Total financial assets

1,223,144

981,184

241,960

Non-financial Assets

 

 

 

Property, plant and equipment

1,021

269

752

Computer software

509

177

332

Prepayments

539

-

539

Total non-financial assets

2,069

446

1,623

Total assets

1,225,213

981,630

243,583

 

Actual

$’000

Budget1

$’000

Variance2

$’000

LIABILITIES

Payables and unearned income

 

 

 

Suppliers

1,324

-

1,324

Unearned income

5,536

7,364

(1,828)

Other payables

4,588

-

4,588

Total payables and unearned income

11,448

7,364

4,084

Provisions

 

 

 

Employee provisions

1,199

-

1,199

Other provisions

13,435

-

13,435

Total provisions

14,634

-

14,634

Total liabilities

26,082

7,364

18,718

Net assets

1,199,131

974,266

224,865

EQUITY

 

 

 

Contributed equity

1,108,363

879,819

228,544

Reserves

7,023

2,793

4,230

Retained surplus

83,745

91,654

(7,909)

Total equity

1,199,131

974,266

224,865

  1. The Corporation’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the Corporation’s appearance in the 2015-16 Treasury PBS).
  2. Difference between the actual and original budgeted amounts for 2015-16. Explanations of major variances are provided further below.

Statement of Changes in Equity

for the period ended 30 June 2016

 

Retained Surplus

Reserves

Contributed Equity

Total Equity

 

Actual

$’000

Budget1

$’000

Variance2

$’000

Actual

$’000

Budget1

$’000

Variance2

$’000

Actual

$’000

Budget1

$’000

Variance2

$’000

Actual

$’000

Budget1

$’000

Variance2

$’000

Opening balance

 

 

 

 

 

 

 

 

 

 

 

 

Balance carried forward from previous period

62,608

60,988

1,620

1,138

2,793

(1,655)

1,168,363

1,168,362

1

1,232,109

1,232,143

(34)

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

Surplus for the period

21,137

30,666

(9,529)

-

-

-

-

-

-

21,137

30,666

(9,529)

Other comprehensive income

-

-

-

5,885

-

5,885

-

-

-

5,885

-

5,885

Total comprehensive income

21,137

30,666

(9,529)

5,885

-

5,885

-

-

-

27,022

30,666

(3,644)

Transactions with owners

 

 

 

 

 

 

 

 

 

 

 

 

Distributions to owners

 

 

 

 

 

 

 

 

 

 

 

 

Return of equity to
Special Account

-

-

-

-

-

-

(60,000)

(288,543)

228,543

(60,000)

(288,543)

228,543

Contributions by owners

 

 

 

 

 

 

 

 

 

 

 

 

Equity injection from
Special Account

-

-

-

-

-

-

-

-

-

-

-

-

Total transactions with owners

-

-

-

-

-

-

(60,000)

(228,543)

228,543

(60,000)

(288,543)

228,543

Closing balance as at 30 June

83,745

91,654

(7,909)

7,023

2,793

4,230

1,108,363

879,819

228,544

1,199,131

974,266

224,865

  1. The Corporation’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the Corporation’s appearance in the 2015-16 Treasury PBS).
  2. Difference between the actual and original budgeted amounts for 2015-16. Explanations of major variances are provided further below.

Cash Flow Statement

for the period ended 30 June 2016

 

Actual
$’000

Budget1
$’000

Variance2
$’000

OPERATING ACTIVITIES

 

 

 

Cash received

 

 

 

Interest and fees

45,254

44,925

329

Distributions from equity investments

9

-

9

Total cash received

45,263

44,925

338

Cash used

 

 

 

Employees

16,186

9,434

6,752

Suppliers

4,133

7,611

(3,478)

Total cash used

20,319

17,045

(3,274)

Net cash from operating activities

24,944

27,880

(2,936)

INVESTING ACTIVITIES

 

 

 

Cash received

 

 

 

Principal loan repayments received

133,680

204,349

(70,669)

Redemption of short-term investments

200,000

100,000

100,000

Redemption of other financial assets

453,226

166,836

286,390

Redemption of AFS financial assets

434

-

434

Total cash received

787,340

471,185

316,155

Cash used

 

 

 

Purchase of property, plant and equipment

971

-

971

Purchase of computer software

452

-

452

Loans made to other parties

208,015

219,986

(11,971)

Purchase of AFS financial assets

197,645

20,000

177,645

Purchase of short-term investments

100,000

-

100,000

Acquisition of other financial assets

162,000

-

162,000

Total cash used

669,083

239,986

429,097

Net cash from investing activities

118,257

231,199

(112,942)

FINANCING ACTIVITIES

 

 

 

Cash used

 

 

 

Return of equity

60,000

288,543

(228,543)

Total cash used

60,000

288,543

(228,543)

Net cash used by financing activities

(60,000)

(288,543)

228,543

 

Actual

$’000

Budget1

$’000

Variance2

$’000

Net increase in cash held

83,201

(29,464)

112,665

Cash and cash equivalents at the beginning of the
reporting period

149,577

29,464

120,113

Cash and cash equivalents at the end of the
reporting period

232,778

-

232,778

  1. The Corporation’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the Corporation’s appearance in the 2015-16 Treasury PBS).
  2. Difference between the actual and original budgeted amounts for 2015-16. Explanations of major variances are provided further below.

7.2B: Major Budget Variance for 2015-16

Affected Line Items

Explanations of Major Variances

Statement of Comprehensive Income:

Employee Benefits

Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), employee benefit costs were incurred for the full 2015-16 financial year. In order to meet the obligations of the CEFC Act, it was necessary for the Corporation to continue to employ executives and staff across all key functions including investment, legal, risk management, finance, corporate affairs, human resources, etc.

Suppliers

Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), supplier costs were incurred in the normal course of operations of the Corporation for the full 2015-16 financial year.

Concessional loan charges

Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), additional concessional loan charges were incurred on a number of new investments made during the 2015-16 financial year. The budget had assumed that no new investments would be made after 1 July 2015.

Write-down and impairment of assets

During the 2015-16 financial year a number of long term loans in the CEFC portfolio were refinanced by the private sector. The loans that were refinanced tended to be the higher yielding facilities, but consequently also the higher risk facilities, including a significant portion of sub-debt. In addition, the Corporation has invested in a higher proportion of AFS financial assets in the 2015-16 financial year and these are accounted for at fair value rather than amortised cost. With the removal of certain higher risk facilities from the Corporation’s portfolio and a larger proportion of new investments being made in AFS financial assets, the provision for impairment of assets has not had to increase at the rate forecast in the Budget.

Interest and loan fee revenue

Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the budget), the Corporation continued to make new investments to generate income for the Corporation that more than offset the reduction from facilities being refinanced unexpectedly during the financial year.

Changes in gains/(losses) on AFS financial assets

As stated above, the Corporation has invested in a significant number of AFS financial assets in the 2015-16 financial year and these are accounted for at fair value through other comprehensive income. The fall in interest rates during the 2015-16 financial year has also benefited the fair value of the AFS financial assets held by the Corporation as most of the Corporation’s AFS financial assets are fixed interest rate facilities.

Statement of Financial Position:

Cash and cash equivalents;
and short term investments

Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), funds held for new investments were not returned to the CEFC Special Account held by the Department of the Environment and Energy but instead were held to fund new investment commitments by the Corporation.

Loans and receivables at amortised cost

A number of significant investments made by the Corporation in prior years were able to be refinanced by third party commercial banks during the 2015-16 financial year.

Available for sale financial assets

Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), the Corporation continued to make new investments in 2015-16. As stated above, the Corporation has invested in a larger proportion of AFS financial assets in the 2015-16 financial year, so while loans and receivables were being refinanced by the private sector, new AFS financial assets were being brought onto the Corporation’s statement of financial position. The largest components of the variance to Budget in available for sale financial assets were investments made during 2015-16 in Climate Bonds issued by a major Australia bank and a corporate entity, together with longer tenor corporate bonds issued by the major banks which the Corporation acquired in conjunction with the targeted CEFC energy efficiency programs being deployed through these banks to their customers.

Other financial assets

The other financial assets are lower than Budget as new investments have been made a slower rate than the repayment of these facilities and a number have repaid more rapidly than forecast in 2015-16. This is because the Corporation has not been required to ‘cash back’ new loans to the same extent in 2015-16 given the greater certainty afforded through the decision by the Australian Government to retain the Corporation.

Non-financial assets

Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), new property, plant & equipment and computer software additions were purchased to enable the Corporation to continue operating effectively. Prepayments were also incurred in the normal course of operations.

Payables and unearned income

Since the Corporation was not abolished effective 30 June 2015
(as anticipated in the Budget), payables and unearned income both continued to be generated in the normal course of operations of the Corporation and remained outstanding at 2015-16 financial year.

Other provisions

The variance to Budget in other provisions is due to the status of various investments in the Corporation’s portfolio at 30 June 2016. Once an investment draws-down, the provision for concessionality is classified as an offset to the loan and receivable. In preparing a budget it is not possible to anticipate exactly at what stage each investment will be at at any given point in time.

Contributed equity

Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), funds held for new investments were not returned to the CEFC Special Account held by the Department of the Environment and Energy but instead were held to fund new investments by the Corporation. This meant that returns of equity to the CEFC Special Account held by the Department of the Environment and Energy were lower than budgeted.

Retained surplus

Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), it continued to incur costs associated with operations. The assumption in the Budget was that the Corporation would continue to generate income for the full year but the associated costs of managing the portfolio were not included in the Budget.

Statement of Changes in Equity:

Reserves

Since the Corporation was not abolished on 30 June 2015 (as anticipated in the Budget), it has invested in a significant number of AFS financial assets in the 2015-16 financial year and these are accounted for at fair value through other comprehensive income and reserves in the Statement of Financial Position. The fall in interest rates during the 2015-16 financial year has also benefited the fair value of the AFS financial assets held by the Corporation as most of the Corporation’s AFS financial assets are fixed interest rate facilities.

Contributed equity

Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), funds held for new investments were not returned to the CEFC Special Account held by the Department of the Environment and Energy but instead were held to fund new investments by the Corporation. This meant that returns of equity to the CEFC Special Account held by the Department of the Environment and Energy were lower than budgeted. The only return of equity in 2015-16 was an amount of $60 million from investments that had been realised during the normal course of operations.

Cash Flow Statement:

Employees

Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), employees were retained in the Corporation and employment related payments were made throughout the 2015-16 financial year in the normal course of the Corporation fulfilling its investment obligations under the CEFC Act.

Suppliers

Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), supplier costs were paid throughout the 2015-16 financial year for costs associated with operating the Corporation in the normal course.

Redemption of other financial assets; and acquisition of other financial assets

Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), the Corporation continued to make new investments in 2015-16 and this is reflected in the redemption and acquisition of other financial assets in the Cash Flow Statement.

Principal loan repayments received

A number of significant investments made by the Corporation in prior years were able to be refinanced by third party commercial banks during the 2015-16 financial year.

Loans made to other parties

A number of significant investments made by the Corporation in prior years were able to be refinanced by third party commercial banks during the 2015-16 financial year. This resulted in lower than budgeted draw-downs against contracted facilities for the year.

Purchase of AFS financial assets

Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), the Corporation continued to make new investments in 2015-16. A greater proportion of these new investments in 2015-16 involved the purchase of AFS financial assets.

Redemption of short-term investments; and purchase of short-term investments

Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), funds held for new investments were not returned to the CEFC Special Account held by the Department of the Environment and Energy but instead were used to fund short-term investments and then subsequently redeemed by the Corporation to funds loans made to other parties, purchases of AFS financial assets and acquisitions of other financial assets.

Return of equity; and cash and cash equivalents at the beginning of the reporting period

Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), funds held for new investments were not returned to the CEFC Special Account held by the Department of the Environment and Energy but instead were held to fund new investment commitments by the Corporation.