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Note 1: Overview

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1.1    Objectives of the Corporation

The Clean Energy Finance Corporation (‘CEFC’ or ‘the Corporation’) was established on 3 August 2012 under the Clean Energy Finance Corporation Act 2012 [Cth] (‘the CEFC Act’) and is classified as a corporate Commonwealth entity. It is a not-for-profit entity and, working with co-financiers, its objective is to facilitate increased flows of finance into the clean energy sector. The Corporation’s functions are to:

  1. Invest, directly and indirectly, in solely or mainly Australian-based clean energy technologies and projects, which can be any one or more of the following: 
    • Renewable energy technologies and projects, which include hybrid technologies that integrate renewable energy technologies and technologies (including enabling technologies) that are related to renewable energy technologies;
    • Energy efficiency technologies and projects, including technologies that are related to energy conservation technologies or demand management technologies (including enabling technologies); and
    • Low emissions technologies and projects.
  2. Liaise with relevant persons and bodies, including the Australian Renewable Energy Agency (‘ARENA’), the Clean Energy Regulator, other Commonwealth agencies and State and Territory governments, for the purposes of facilitating its investment function;
  3. Work with industry, banks and other financiers, and project proponents, to accelerate Australia’s transformation towards a more competitive economy in a carbon constrained world, by acting as a catalyst to increase investment in the clean energy sector; and
  4. Do anything incidental or conducive to the performance of the above functions.

Effective 10 January 2017, the Corporation was issued with the Clean Energy Finance Corporation Investment Mandate Direction 2016 (No.2) (‘Investment Mandate 2016 (No.2)’) which among other things, required the Corporation to make available up to: 

  • $1 billion of investment finance over 10 years for a Reef Funding Program
  • $1 billion of investment finance over 10 years for a Sustainable Cities Investment Program
  • $200 million for debt and equity investment through the Clean Energy Innovation Fund.  

1.2    Basis of Preparation of the Financial Statements

The consolidated financial statements of the Clean Energy Finance Corporation (the parent) and its subsidiary (collectively, the Group) are general purpose financial statements and are required by: 

  1. section 42 of the PGPA Act; and
  2. section 74 of the CEFC Act.

The consolidated financial statements of the Clean Energy Finance Corporation (the parent) and its subsidiary (collectively, the Group) are general purpose financial statements and are required by: 

  1. the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (‘FRR’); and
  2. Australian Accounting Standards (‘AAS’) and Interpretations – Reduced Disclosure Requirements (‘RDR’) issued by the Australian Accounting Standards Board (‘AASB’) that apply for the reporting period.

The consolidated financial statements have been prepared on an accrual basis and in accordance with the historical cost convention, except for certain financial assets and liabilities at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position. 

The consolidated financial statements are presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified.

1.3   Events after the Reporting Period

On 3 July 2017, the Corporation entered into a five year lease agreement in relation to new office space in Melbourne. The total five year commitment (net of landlord incentive) under this lease agreement is $431,000. In addition, the Corporation has also entered into a commitment to incur a total of approximately $383,000 in fit-out and office works for this site.

There have been no other significant events subsequent to balance date.

1.4   Taxation

The Corporation is exempt from all forms of taxation except Fringe Benefits Tax (FBT) and the Goods and Services Tax (GST). The Corporation’s wholly owned subsidiary, CEFC Investments Pty Limited, is not exempt from income tax, however, it has accumulated income tax losses at 30 June 2017, and no certainty as to whether any benefit from those losses would ever be realised as it has no income for the year ended 30 June 2017.

Revenues, expenses and assets are recognised net of GST except:

  1. where the amount of GST incurred is not recoverable from the Australian Taxation Office; and
  2. for receivables and payables.

The net amount of GST payable to the Australian Taxation Office is included as part of the payables or commitments.

The financial statements have been prepared on the basis that the Corporation is generally not entitled to input tax credits for GST included in the price of goods and services acquired because financial supplies, such as loans, are input taxed. 

1.5   New Accounting Standards

Adoption of New Australian Accounting Standard Requirements

No accounting standard has been adopted earlier than the application date as stated in the standard. 

The new/revised/amending standards and/or interpretations issued prior to the sign-off date and applicable to the current reporting period did not have a material effect, and are not expected to have a future material effect, on the Group’s financial statements.

Future Australian Accounting Standard Requirements

The following new standards that may have a material effect on the Group’s future financial statements were issued by the AASB prior to the signing of the statement by the Accountable Authority, Chief Executive and Chief Financial Officers:

Standard/
Interpretation
Application date for
the Corporation
Nature of impending change/s in accounting policy
and likely impact on initial application

AASB 9 Financial Instruments

1 July 2018

AASB 9 (December 2014) is a new Principal standard which replaces AASB 139 and includes a model for classification and measurement, a single forward-looking ‘expected loss’ impairment model and a substantially reformed approach to hedge accounting.

AASB 9 is effective for annual periods beginning on or after 1 January 2018. 

AASB 9 introduces a new expected-loss impairment model that will require more timely recognition of expected credit losses. Specifically, the new Standard will require the Group to account for expected credit losses from when financial instruments are first recognised and to recognise full lifetime expected losses on a more timely basis.

AASB 9 includes requirements for a simpler approach for classification and measurement of financial assets compared with the requirements of AASB 139.

The main changes impacting the Group are described below:

  1. Financial assets that are debt instruments will be classified based on (1) the objective of the entity’s business model for managing the financial assets; (2) the characteristics of the contractual cash flows.
  2. The standard allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument.

Consequential amendments were also made to other standards as a result of AASB 9, most notably revisions to AASB 7, including significant new disclosure requirements for each component of AASB 9.

The Group anticipates that upon adopting AASB 9, the majority of its loans and advances will continue to be held at amortised cost and some of its Available-for-Sale debt instruments will be reclassified and also held at amortised cost. The balance of loans and advances and Available-for-Sale instruments will likely be re-classified as fair value through P&L rather than amortised cost or fair value through other comprehensive income. This is expected to increase the volatility in reported results due to changes in fair value flowing through the income statement rather than equity. AASB 9 introduces changes to hedge accounting including the fact that only prospective testing will be performed. The Group also expects that, upon adopting AASB 9, there will be a larger provision for impairment and provision for irrevocable commitments based on the change to the expected-loss model.

AASB 16 Leases

1 July 2019

AASB 16 effectively does away with the distinction between an operating lease and a finance lease as lessees are required to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. 

The Group operates from leased premises and the application of AASB 16 will increase Fixed Assets and create a new Liability, on the Statement of Financial Position, and reduce Operating Expenses and increase Finance Charges on the Statement of Comprehensive Income.

Based on the operating leases that the Group has entered into as of the date of this report, when AASB 16 comes into effect on 1 July 2019, we expect to disclose both a right-to-use asset and a lease liability of approximately $6 million each. The maximum net impact to the income statement in a given year is expected to be approximately $0.25 million based on current interest rates. 

All other new/revised/amending standards and/or interpretations that were issued prior to the sign-off date and are applicable to future reporting periods are not expected to have a future material impact on the Group’s financial statements.

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