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Note 8: Other Information

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8.1: Budgetary Reports and Explanation of Major Variances

The following tables provide a comparison of the original Budget, as presented in the 2016-17 Portfolio Budget Statements (PBS) for the Environment Portfolio, to the Actual 2016-17 outcome as presented in accordance with AAS for the Group. The Budget is not audited.

8.1A: Budgetary Reports

Consolidated Statement of Comprehensive Income

for the period ended 30 June 2017
  Actual
$’000
Budget1
$’000
Variance2
$’000
NET COST OF SERVICES

Expenses

 

 

 

Employee benefits

21,058

22,393

(1,335)

Suppliers

6,544

8,205

(1,661)

Depreciation and amortisation

745

742

3

Concessional loan charges

11,433

21,400

(9,967)

Write-down and impairment of assets

2,129

3,508

(1,379)

Provision for irrevocable loan commitments

292

254

38

Total expenses

42,201

56,502

(14,301)

Own-source income

 

 

 

Own-source revenue

 

 

 

Interest and loan fee revenue

59,275

54,741

4,534

Distributions from trusts and equity investments

5,328

-

5,328

Total own-source revenue

64,603

54,741

9,862

Gains and losses

 

 

 

Other (losses) / gains

(92)

-

(92)

Total (losses) / gains

(92)

-

(92)

Total own-source income

64,511

54,741

9,770

Net contribution by / (cost of) services

22,310

(1,761)

24,071

Share of associates and joint ventures

(639)

(625)

(14)

Surplus / (deficit) from continuing operations

21,671

(2,386)

24,057

OTHER COMPREHENSIVE INCOME

Items subject to subsequent reclassification to net cost of services

 

 

 

Gains on Available-for-Sale financial assets

7,674

78

7,596

Net fair value loss taken to equity on cash flow hedge

(42)

-

(42)

Total other comprehensive income

7,632

78

7,554

Total comprehensive income / (loss)

29,303

(2,308)

31,611

  1. The Group’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the CEFC section in the 2016-17 PBS for the Environment Portfolio).
  2. Difference between the actual and original budgeted amounts for 2016-17. Explanations of major variances are provided further below.

Consolidated Statement of Financial Position

as at 30 June 2017
  Actual
$’000
Budget1
$’000
Variance2
$’000
ASSETS

Financial assets

 

 

 

Cash and cash equivalents

401,974

150,068

251,906

Trade and other receivables

8,227

3,710

4,517

Loans and advances

771,202

872,479

(101,277)

Available-for-Sale financial assets

802,945

189,703

613,242

Other financial assets

278,380

254,492

23,888

Equity accounted investments

8,401

-

8,401

Derivative financial assets

225

-

225

Total financial assets

2,271,354

1,470,452

800,902

Non-financial assets

 

 

 

Property, plant and equipment

944

540

404

Computer software

484

260

224

Prepayments

504

559

(55)

Total non-financial assets

1,932

1,359

573

Total assets

2,273,286

1,471,811

801,475

LIABILITIES

Payables and unearned income

 

 

 

Suppliers

2,162

1,245

917

Unearned income

15,678

5,696

9,982

Other payables

5,106

507

4,599

Total payables and unearned income

22,946

7,448

15,498

Provisions

 

 

 

Employee provisions

1,660

4,738

(3,078)

Provision for concessional loans

19,505

33,472

(13,967)

Other provisions

741

129

612

Total provisions

21,906

38,339

(16,433)

Total liabilities

44,852

45,787

(935)

Net assets

2,228,434

1,426,024

802,410

EQUITY

Contributed equity

2,108,363

1,348,363

760,000

Reserves

14,655

3,321

11,334

Retained surplus

105,416

74,340

31,076

Total equity

2,228,434

1,426,024

802,410

  1. The Group’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the CEFC section in the 2016-17 PBS for the Environment Portfolio).
  2. Difference between the actual and original budgeted amounts for 2016-17. Explanations of major variances are provided further below. 

Consolidated Statement of Changes in Equity

for the period ended 30 June 2017

 

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

83,745

76,726

7,019

7,023

3,243

3,780

1,108,363

1,008,363

100,000

1,199,131

1,088,332

110,799

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

Surplus / (deficit) for the period

21,671

(2,386)

24,057

-

-

-

-

-

-

21,671

(2,386)

24,057

Other comprehensive income

-

-

-

7,632

78

7,554

-

-

-

7,632

78

7,554

Total comprehensive income

21,671

(2,386)

24,057

7,632

78

7,554

-

-

-

29,303

(2,308)

31,611

Transactions with owners

 

 

 

 

 

 

 

 

 

 

 

 

Contributions by owners

 

 

 

 

 

 

 

 

 

 

 

 

Equity injection from Special Account

-

-

-

-

-

-

1,000,000

340,000

660,000

1,000,000

340,000

660,000

Total transactions with owners

-

-

-

-

-

-

1,000,000

340,000 

660,000

1,000,000

340,000

660,000

Closing balance as at 30 June

105,416

74,340

31,076

14,655

3,321

11,334 

2,108,363

1,348,363

760,000

2,228,434

1,426,024

802,410

  1. The Group’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the CEFC section in the 2016-17 PBS for the Environment Portfolio).
  2. Difference between the actual and original budgeted amounts for 2016-17. Explanations of major variances are provided further below.

Consolidated Cash Flow Statement

for the period ended 30 June 2017

 

Actual
$’000
Budget1
$’000
Variance2
$’000
OPERATING ACTIVITIES

Cash received

 

 

 

Interest and fees

62,744

50,977

11,767

Distributions from trusts and equity investments

3,437

-

3,437

Total cash received

66,181

50,977

15,204

Cash used

 

 

 

Employees

20,186

21,757

(1,571)

Suppliers

5,668

8,204

(2,536)

Total cash used

25,854

29,961

(4,107)

Net cash from operating activities

40,327

21,016

19,311

INVESTING ACTIVITIES

Cash received

 

 

 

Principal loan repayments received

21,858

60,482

(38,624)

Redemption of short-term investments

90,000

-

90,000

Redemption of other financial assets

249,427

26,924

222,503

Redemption of AFS financial assets

12,366

194

12,172

Total cash received

373,651

87,600

286,051

Cash used

 

 

 

Purchase of property, plant and equipment

283

315

(32)

Purchase of computer software

360

200

160

Loans made to other parties

391,150

420,370

(29,220)

Purchase of AFS financial assets

532,910

25,000

507,910

Purchase of short-term investments

90,000

-

90,000

Acquisition of other financial assets

221,212

-

221,212

Investment in associates and joint ventures

8,867

-

8,867

Total cash used

1,244,782

445,885

798,897

Net cash from / (used by) investing activities

(871,131)

(358,285)

(512,846)

FINANCING ACTIVITIES

Cash received

 

 

 

Contributed equity

1,000,000

340,000

660,000

Total cash received

1,000,000

340,000

340,000

Net cash from financing activities

1,000,000

340,000

660,000

Net increase in cash held

169,196

2,731

166,465

Cash and cash equivalents at the beginning of the
reporting period

232,778

147,337

85,441

Cash and cash equivalents at the end of the
reporting period

85,441

150,068

251,906

  1. The Group’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the CEFC section in the 2016-17 PBS for the Environment Portfolio).
  2. Difference between the actual and original budgeted amounts for 2016-17. Explanations of major variances are provided further below.

8.1B: Major Budget Variance for 2016-17

Affected Line Items Explanations of Major Variances
Consolidated Statement of Comprehensive Income:

Employee Benefits

The budget for employee benefits anticipated an increase in salaries approximating CPI effective 1 July 2016, however, there were very limited salary adjustments made in January 2017, resulting in lower than budget costs.

Suppliers

With the introduction of the Clean Energy Innovation Fund, that was anticipated to be a $1bn fund at the time the 2016-17 budget was prepared, we expected to incur substantial legal and consultant costs on evaluating early stage investments. With the reduction in the size of the Innovation Fund (to $200m) and the fact that we have been able to recover the majority of transaction related costs on those investments completed, we have achieved a lower than forecast supplier cost for 2016-17.

Concessional loan charges

Concessional loan charges are significantly lower than budget notwithstanding the actual investments made during the year are higher than budgeted. This is due to:

  1. the mix in investments which saw less loans written than budgeted and more AFS securities (including a number of large equity investments) purchased;
  2. lower concessional charges on a number of the aggregation arrangements as the tenor of the underlying loans being written by the aggregators was shorter than anticipated;
  3. The compression in margins and lower overall rate environment generally have reduced the need for the CEFC to provide as much concessionality as anticipated in many instances, as we have been able to be appropriately compensated for the longer tenor or fixed rate aspects of the loans written, without jeopardising the project economics of the transactions; and
  4. a facility with one of the major Australian banks expired during the period and was replaced with a different (less concessional) aggregation facility. 

Write-down and impairment of assets

Write-down and impairment of assets is lower than budget as the calculated impairment provision is lower than budget as a result of the Group investing in a higher proportion of AFS financial assets, than Loans and Advances, in the 2016-17 financial year. AFS financial assets are accounted for at fair value rather than amortised cost and are not generally subject to the same credit exposure as typical loans and advances.

Interest and loan fee revenue

Interest and loan fee revenue

  1. commitment fees were higher than forecast due to some borrowers not drawing or drawing more slowly than expected;
  2. higher than anticipated interest income on secured funding accounts established for some major renewables construction contracts; 
  3.  higher average bank account balances than originally anticipated; and 
  4. an improved interest rate negotiated with a major Australian bank on short-term cash holdings.

Distributions from trusts and equity investments

CEFC had not forecast any distributions from trusts and equity investments as the budget anticipated that all investments providing a significant return would be by way of loans and advances in 2016-17. However, a number of new investments have been in the form of units in trusts and equity investments which have current period earnings, and have therefore provided distributions during the 2016-17 financial year.

Other Comprehensive Income

Other comprehensive income relates entirely to market movements in the fair value of AFS securities. This is typically a result of a change in the market interest rates on bonds (given CEFC is a fixed rate lender) or a change in the market value of underlying assets of a trust in which CEFC holds an investment. It is not possible to accurately forecast the change in the fair value of AFS investments that may arise from a change in market conditions.

Consolidated Statement of Financial Position:

Cash and cash equivalents

Cash and cash equivalents are $252 million higher than budget as the CEFC drew down an additional $660 million from the CEFC Special Account, over and above what was budgeted, to meet its funding obligations under the contracts entered into during 2016-17. Two specific investments that were expected to reach financial close and draw down in June 2017, when the CEFC Special Account funds were withdrawn, have experienced minor delays and are now expecting to reach financial close and draw down within 60-90 days of their original dates.

Loans and advances

When the budget was prepared the CEFC expected the majority of new investments to take the form of loans and advances. However, as the year evolved, a substantial number of new investments were in the form of AFS securities. The increase in AFS more than offsets the lower than budget loan and advance balances.

Available for sale financial assets 

As stated above, when the budget was prepared the CEFC expected the majority of new investments to take the form of loans and advances. However, as the year evolved, a substantial number of new investments were in the form of AFS securities. This includes quoted debt securities such as climate bonds and longer tenor bank bond arrangements as part of the aggregation facilities, unquoted units in trusts as well as unquoted equity investments. The change to bonds rather than term deposits in support of aggregation facility arrangements was to achieve longer tenor and a better return on investment. The opportunity to influence the carbon intensity of entire property funds through small equity investments rather than single properties by way of concessional loans was a key driver in the decision to pursue certain unquoted equity investments rather than solely unquoted debt arrangements which are classified as loans and advances. 

Payables and unearned income 

Unearned income is significantly higher than budget as a substantial number of new loans reached financial close in the last 3-6 months of the financial year which triggered substantial establishment fees payable to the CEFC by these customers. While the facilities have reached financial close, they have not drawn down significant amounts by 30 June 2017 as we typically require the equity investors to fund the initial construction before drawing on the debt facilities. Since the establishment fees are deferred and recognised using the effective interest rate method, the majority of the fees sat in unearned income at 30 June 2017.

Provision for concessional loans

The provision for concessional loans was significantly lower than budget at 30 June 2017 as the CEFC had not provided the extent of concessionality during 2016-17 that it budgeted to provide. Refer to the explanation of lower concessional loan charges under the Statement of Comprehensive Income explanations above for further details. In addition, a facility with one of the major Australian banks expired during the period and was replaced with a different (less concessional) aggregation facility.

Contributed equity

The Corporation drew an additional $660 million from the CEFC Special Account and returned $100m less than forecast in the prior financial year as a result of the very large number of transactions that have been contracted in 2016-17. In 2016-17 in excess of $2 billion of new investments were contractually committed. Some of these new investments were funded during 2016-17 (using the additional monies from the CEFC Special Account) and additional amounts will continue to be funded under these contractual commitments during the 2017-18 financial year. 

Retained Surplus

The retained surplus is significantly higher than budgeted due to the higher than budgeted surplus that was generated in 2016-17 off the back of a significantly higher than budgeted asset base.

Consolidated Statement of Changes in Equity:

Reserves

Reserves relate entirely to market movements in the fair value of AFS securities. This is typically a result of a change in the market interest rates on bonds (given CEFC is a fixed rate lender) or a change in the market value of underlying assets of a fund in which CEFC holds an equity investment. It is not possible to accurately forecast/budget for the change in the fair value of AFS investments that may arise from a change in market conditions.

Contributed equity

The Corporation drew an additional $660 million from the CEFC Special Account and returned $100 million less than forecast in the prior financial year as a result of the very large number of transactions that have been contracted in 2016-17.

Consolidated Cash Flow Statement:

Operating cash received

The positive variance to budget is a direct reflection of the higher than budgeted earnings off a higher than budgeted asset base in the 2016-17 financial year.

As mentioned above, interest and fee revenue as well as equity distributions have a favourable variance to budget as:

  1. commitment fees were higher than forecast due to some borrowers not drawing or drawing more slowly than expected;
  2. higher than anticipated interest income on secured funding accounts established for some major renewables construction contracts; 
  3. higher average bank account balances than originally anticipated;  
  4. an improved interest rate negotiated with a major Australian bank on short-term cash holdings, and
  5. a number of new property trust investments had current period earnings and have therefore provided distributions to the CEFC during the 2016-17 financial year.

Principal loan repayments received

In the budget, CEFC had anticipated being re-financed out of one of its wind farm debt facilities during the 2016-17 financial year. This did not occur during the 2016-17 financial year but is still being considered by the equity sponsor. The break costs, related to the other debt providers in the syndicate, are prohibitively expensive at this time, so the owners have deferred their refinancing considerations at least in the short term.

Redemption and Purchase of short term investments

The $90m positive variance to budget in both purchase and redemption of short term investments is a result of CEFC retaining an additional $100m from the CEFC Special Account in the prior financial year. The majority of this ($90m) was invested as a short-term investment to maximise the return on these funds until such time as they were drawn down by the CEFC’s customer.

Redemption of other financial assets; and Acquisition of other financial assets

The redemption and acquisition of other financial assets is a gross-up to show the gross inflows/outflows related to the secured funding accounts. These were budgeted on a net basis as it is not possible during the budget process to estimate the number of times particular term deposits will be rolled, as it depends on the construction draw-down timetable as well as the forward rate curve for term deposits at the time each deposit is rolled. The net variance to budget of these two items is only $1.3 million.

Loans made to other parties

Loans made to other parties are lower than forecast as some investments which were forecast as loans, were completed as AFS securities instead.

Purchase of AFS financial assets

As stated above, when the budget was prepared the CEFC expected the majority of new investments to take the form of loans and advances. However, as the year evolved, a substantial number of new investments were in the form of AFS securities. This includes quoted debt securities such as climate bonds and longer tenor bank bond arrangements as part of the aggregation facilities, unquoted units in trusts as well as unquoted equity investments.

Contributed equity

As stated above, the Corporation drew an additional $660 million from the CEFC Special Account (in addition to the $340 million budgeted) as a result of the very large number of investment transactions that have been contracted in 2016-17.

Cash and cash equivalents at the beginning of the reporting period

The Corporation had budgeted to return $100 million of funds at 30 June 2016 to the CEFC Special Account, however, these were retained due to transactions that needed to be funded shortly after the end of the 2015-16 financial year, causing the cash and cash equivalents at the beginning of the reporting period to be $85 million higher than the budget had anticipated. 

Cash and cash equivalents at the end of the reporting period

As stated above, cash and cash equivalents at the end of the reporting period are $252 million higher than budget as the CEFC drew down an additional $660 million from the CEFC Special Account, over and above what was budgeted, to meet its funding obligations under the contracts entered into during 2016-17. Two specific investments that were expected to reach financial close and draw down in June 2017 when the CEFC Special Account funds were withdrawn have experienced minor delays and are now expecting to reach financial close and draw down within 60-90 days of their original dates.

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