I was appointed CEO in May this year, as the CEFC enters its fifth year of operations. I would like to acknowledge our founding CEO, Oliver Yates, for his leadership in guiding the CEFC to reach scale since its inception in 2013.
The CEFC continues to make a substantial contribution to Australia’s transition to a low carbon economy and the 2016-17 financial year was our most successful to date. Our investments across the year were notable for their scale, their breadth and their diversity. Working with private sector investors – both large and small – we saw CEFC capital put to work across many ‘firsts’, providing a real-world demonstration of the positive role of clean energy investment in addressing Australia’s emissions reduction challenge.
Within the year we finalised 35 individual transactions, exceeding the combined transactions of the previous three years. We committed more than $2 billion in CEFC capital, to projects valued at $6.5 billion. Cumulative leverage across the portfolio was more than $2.10 at 30 June 2017, with each $1.00 of CEFC investment since 2013 helping catalyse an additional $2.10 from the private sector. Equally important, our current investments, upon financial close will fund projects that are estimated to achieve annual abatement of almost 7.3 million tonnes CO2-e, or more than 121 million tonnes CO2-e over their lifetimes.
The CEFC Act makes clear that these investments are to deliver a positive return to the taxpayer. We are pleased to report that, at 30 June 2017, our $3.4 billion portfolio of investment commitments had a forecast lifetime investment yield of more than five per cent.
Australia’s energy sector
The future shape of Australia’s energy sector remains a matter of intense public debate. Given the central role of energy in all areas of economic and social activity, this is perhaps not surprising. In our daily engagement with the business sector, we are aware of the widespread desire for affordability, secure and reliable energy and, importantly, sustainability. Equally, we continue to witness a growing appetite for investments that will deliver lower energy consumption, lower emissions and heightened productivity. These trends are evidenced across a number of CEFC investment commitments in 2016-17, including our first large-scale infrastructure investment and our first investment in a mine to produce lithium – a central component of battery storage.
The CEFC is rightly recognised as a major investor in renewable energy. In fact, in the past year we were the single largest debt financier of large-scale solar, bringing new domestic and international financiers to these major renewable energy projects. We recognise integrated battery storage as an important emerging investment priority. Perhaps not as well recognised is our continued investment support for energy efficiency projects, which play an exciting role in business productivity and competitiveness. Notably, more than 60 per cent of emissions come from sectors outside electricity and gas, including primary industries, manufacturing, services, construction, transport and the residential sector.
Likewise, we have also confirmed our position as a major investor in clean energy innovation, not least through the first four transactions delivered via the Clean Energy Innovation Fund. These companies represent a new breed of entrepreneurs and businesses using technology to play an important role in a low carbon economy.
The CEFC team
As a specialist financier, we consciously build our reputation around being expert, commercial, transformative and innovative. These factors help open doors with clients and investors, build confidence in transaction decisions and are important in our ability to operate with commercial rigour. I’d like to recognise my colleagues at the CEFC for their continued commitment, hard work and innovation across the year. The culture, professionalism and enthusiasm of our team is a core strength of the organisation.
As stewards of taxpayer finance, the CEFC has a heightened sense of responsibility in our activities. This tone has been clearly set by our Board members, whose guidance and insights have made an important contribution to our performance. The CEFC recognises our debt of gratitude to our founding Board members, including our Chair, Jillian Broadbent AO, whose unwavering vision for our organisation enabled us to reach scale in a relatively short period. Jillian’s five-year tenure on the Board has now been reached, along with those of fellow founding Board members Ian Moore, Anna Skarbek and Andrew Stock. We thank them for their guidance and wish them continued good fortune. Equally, we welcome our new Board members, including chair Steven Skala AO, and fellow appointees Leeanne Bond, Samantha Tough and Nicola Wakefield Evans. Working alongside continuing Board members Paul Binsted and Martijn Wilder, we have confidence about the continued strong governance of our organisation.
We have been pleased with the support of our responsible Ministers during the year, the Minister for the Environment and Energy, the Hon Josh Frydenberg, and the Minister for Finance, Senator the Hon Mathias Cormann. We also welcome the interest in our activities from other members of the Australian Parliament, as well as State and Territory Parliaments around Australia.
Looking to the future
The CEFC is now well established, with a clear investment focus and a substantial and growing portfolio. Our own days as a ‘start up’ organisation are behind us, as we deepen our exposure across the economy, and seek to apply CEFC capital to areas where we can have the greatest impact on decarbonisation – whether in supporting cleaner electricity, ambitious energy efficiency or electrification and fuel switching of our transport sector in particular. We continue to also seek the best financial return possible for the taxpayer whilst ensuring our portfolio risk is appropriate and continues to be well managed.
For the future, the organisation will continue to match commercial rigour with our public policy purpose. We anticipate working in even more diverse areas of the energy space. Distributed energy, energy storage, improved grid transmission, network security and demand response management are all areas that require greater investment. They also have a central role to play in reducing carbon emissions, by ensuring the benefits of cleaner generation are delivered across the economy, alongside a much stronger focus on reduced energy consumption.
The CEFC is actively looking for investment opportunities in these areas, encouraging additional private sector capital, as we continue the vital effort to accelerate the decarbonisation of our economy. We look forward to working with existing businesses, entrepreneurs and developers right across the private sector in capitalising on these opportunities for the benefit of the Australian community.