01Performance

CEFC ANNUAL REPORT / 2015–16

Clean energy commitments

INVESTMENT COMMITMENTS BY TECHNOLOGY

The CEFC Act requires the CEFC to invest in eligible clean energy technologies, including renewable energy, energy efficiency and low emissions technologies. These are defined in Figure 11:

Figure 11: Eligible clean energy technologies

RENEWABLE ENERGY TECHNOLOGIES

ENERGY EFFICIENCY TECHNOLOGIES

LOW EMISSIONS TECHNOLOGIES

Renewables, including bioenergy, geothermal, hydro, ocean, solar, waste‑to‑energy and wind.

Hybrids of renewables with other technologies.

Technologies, including enabling technologies, that are related to renewable energy, including supply of goods or services.

Energy efficiency, including energy conservation and demand management.

Technologies, including enabling technologies, that are related to energy efficiency, including supply of goods or services.

Technologies that reduce emissions that are not renewables or energy efficiency, including supply of goods or services*.

* May involve a threshold emissions intensity test against baseline activity to determine eligibility.

In 2015-16, there was increased diversity in CEFC investment commitments by technology compared with the previous year, including a very substantial increase in commitments to energy efficiency and continuing strength in renewables.

The CEFC’s commitment to energy efficiency reflects our co-financing model, which provides investment channels that allow the CEFC to efficiently deploy capital to clean energy activities we would otherwise be unable to reach, such as those undertaken by small businesses, agriculture and manufacturing.

The CEFC Act requires half of CEFC funds to be invested in renewable energy technologies by 1 July 2018. Significant investment commitments in energy efficiency through the CEFC co-financing model in 2015-16, and slower than expected market activity in large-scale renewables, led to renewable energy making up slightly less than 50 per
cent of CEFC investment commitments at June 30 2016.

The CEFC remains committed to supporting investments in eligible low emissions projects and we are continuing to engage with this technology sector, even though there were no new commitments to low emissions technologies in 2015-16. Our 2013 investment in Energy Developments Limited (EDL), for remote hybrid renewables projects and projects that generate energy from waste coal mine and landfill gas, remains our biggest investment in low emissions technology to date. The $75 million in finance was repaid in October 2015, when DUET Group successfully completed its acquisition of EDL.

Figure 12: CEFC investment commitments by technology

INVESTMENT COMMITMENTS BY GEOGRAPHY

The CEFC has a national focus and works to deploy finance Australia-wide, subject to investment opportunities. During the 2015-16 year, we substantially increased the national reach of our projects through co-financing arrangements. The CEFC’s state-based investments largely relate to the development and delivery of larger individual projects.

Figure 13: CEFC investment commitments portfolio Australia-wide  

Figure 14: CEFC investment commitments portfolio by state at 30 June 2016  

* SA finance repaid in 2015-16

INVESTMENT COMMITMENTS PORTFOLIO

Key movements in the CEFC investment commitments portfolio are detailed in Figure 15:

Figure 15:  Movements in CEFC investment commitments portfolio 2015-16

 

$m

CEFC INVESTMENT COMMITMENTS PORTFOLIO AT 30 JUNE 2015

1,206

Loans fully amortised, repaid or exited

-153

Expired undrawn commitments

-69

Cancelled undrawn commitments

-80

New investments contracted

837

CEFC INVESTMENT COMMITMENTS PORTFOLIO AT 30 JUNE 2016

1,741

INVESTMENT LEVERAGE

At the core of the CEFC’s investment activities is a commitment to catalyse or “crowd in” additional private sector capital to support increased investment and transformation of the clean energy sector. The CEFC does not seek to be the sole or even the largest investor in clean energy projects. Rather, we seek to use our finance, expertise and market reach to help drive additional investor interest and commitment to clean energy opportunities.

We were therefore pleased to achieve an investment leverage of $1.95 on the $837 million in new commitments in 2015-16. In other words, every dollar of CEFC investment helped catalyse an additional $1.95 from the private sector. Cumulative leverage across the overall portfolio was $1.85 at 30 June 2016.

This leverage is an important indicator of the contribution of the CEFC in building financing capability and expanding the scale of clean energy investment in Australia. It also indicates the willingness of private sector investors to work alongside the CEFC to develop and deliver clean energy projects and programs.

INVESTMENT YIELD

As an investor, the CEFC considers a range of factors in monitoring portfolio performance.

Forecast lifetime investment yield is an indicator of the return on the CEFC’s portfolio performance over time, once funds are fully deployed. At 30 June 2016, the $1.7 billion in portfolio investment commitments had a forecast lifetime investment yield of 5.2 per cent. This compares with the forecast lifetime investment yield of 6.1 per cent on the $1.2 billion in portfolio commitments at 30 June 2015. The reduced forecast lifetime investment yield is predominantly a reflection of the CEFC’s increased investment in lower risk, lower yielding new capital sources, where our credit risk exposure is typically to large, established financiers, with low credit risk.

INVESTMENT OPPORTUNITY PIPELINE

The CEFC maintains a strong pipeline of investment opportunities. The pipeline reflects our engagement  with  target client sectors, our origination programs and our proactive identification of emerging projects. The CEFC encourages interested parties to approach the CEFC with investment proposals, with a view to accelerating delivery wherever possible.

During 2015-16 we were pleased to see a substantial increase in the pipeline of potential investments. We received proposals seeking more than $7 billion in CEFC investments in 116 projects across our strategic priority areas, for a combined project value of more than $20 billion. The CEFC has not yet assessed these projects as to eligibility or potential investment.

The strength of the CEFC’s investment opportunity pipeline is an indicator of increased investor and developer confidence in the clean energy sector, and in the role of the CEFC in helping to provide the finance necessary to deliver on these opportunities.

Figure 16: Investment pipeline

INVESTMENT MANDATE

The CEFC’s Investment Mandate was amended under the direction of the responsible Ministers twice during the financial year, including a direction to establish the Clean Energy Innovation Fund from 1 July 2016. These changes are discussed in more detail in the Governance section of this Annual Report.