Analysis of Performance CriteriaDownload section
1. Investment in renewable energy, low emissions and energy efficiency technology
New investment commitments of nearly $2.1 billion were made during 2016-17, taking total CEFC commitments over the past four years to $4.3 billion. This was well above our target of $800 million to $1 billion for 2016-17.
CEFC commitments were made across 35 transactions, reflecting a strong increase in the level of investment in renewable energy in the Australian market and the increasing breadth of the CEFC’s operations.
More than half of new investment commitment amounts in 2016-17 were allocated to energy efficiency transactions that support reduced energy consumption and, in turn, lower carbon emissions across industry sectors. The 35 new transactions included the first investments made under the Clean Energy Innovation Fund, which committed $30 million to four innovative Australian businesses.
The development and execution of our strategy, which focusses on areas of the economy with high potential for emissions reduction, was supported by increasing organizational strength and capability to enable the strong investment performance in 2016-17.
2. Placement of funds into Australia’s clean energy sector
Total funds deployed were more than $900 million, which was well above the target of $450 million for 2016-17 and is correlated with the strong level of new investment commitments during the year. Our investments in 2016-17 made a significant contribution in facilitating Australia’s emissions reduction efforts, with CEFC investments in that year forecast to reduce emissions by more than 5 million tonnes per annum. As an investor, we achieved positive returns for each tonne of CO2-e abated.
In order to increase the flows of finance into the clean energy sector, it is important that others also invest in the sector, as reflected in the CEFC Mission. At the transaction level, we measure this through financial leverage. Actual leverage in CEFC transactions in 2016-17 was 1:2.1, above the target of 1:1, representing more than $2.00 in investment for every $1.00 of CEFC commitment.
3. Performance against portfolio benchmark return set by the Australian Government
At 30 June 2017, the CEFC portfolio return was 4.50 percent, against a Portfolio Benchmarket Return (PBR) target of 5.74-6.74 percent, over the medium to longer term, representing a net difference of 1.24 percent below the bottom end of the target range.
At 30 June 2016, the CEFC portfolio return was 4.65 percent against a PBR target of 5.95 percent, representing a net difference of 1.30 percent. While the improvement in the actual rate achieved was positive, the Board has previously advised that the PBR target is considered high, given the CEFC’s narrow investment universe, risk profile and public policy purpose. Every transaction entered into by the CEFC (even after providing for concessionality) is at a rate of return that exceeds the five-year Government bond rate.
Financial sustainability is important as we pursue our public policy purpose. The level of expenditure we incur is an important indicator. For the 2016-17 year, our operating expenses before concessionality and impairment were $28.8 million, against a target of less than $31.3 million. This contributed to the healthy net surplus from operations of $21.7 million.
4. Dissemination of information to industry stakeholders and building industry capacity
The 2016-17 year saw significant external debate about the future of Australia’s energy sector, and the potential role of clean energy solutions in the context of energy affordability, security and reliability. As an active investor seeking to catalyse additional finance into the clean energy sector, we retain a strong focus on sharing our experience and insights on the energy and other industry markets.
The CEFC participated in high-value targeted engagement activities, contributing to a better informed external discourse around policy solutions through submissions, ministerial, parliamentary and stakeholder engagement, and media activities. We strengthened our offer to the agribusiness sector by forming a collaboration with the Department of Agriculture and Water Resources to promote the CEFC’s offer to the sector.
We also broadened our presence at external industry forums, including major presentations in the property, infrastructure and mining sectors, in addition to continued strong engagement with the clean energy sector. We also more actively leveraged the strength and reputation of the CEFC to host industry events and fostering opportunities to connect investors and CEFC finance, as demonstrated through the successful Innovators Demo Day, and property-sector roundtables to canvass energy efficiency opportunities in the property sector.
There was considerable effort to promote the Reef Funding Program, including extensive consultation and briefings to relevant government agencies, with industry groups in the Reef catchment area and in external client meetings. We also worked with the Department to conduct initial stakeholder engagement and develop our offer to the market.
CEFC participation in industry events and conferences, along with our media outreach, increased by more than 17.5 percent compared with the previous year.
Reflecting the increasing maturity of the organization, and the accelerated breadth and scope of investment activities, we also substantially strengthened essential brand-related assets, including increasing the visual impact of the CEFC logo, digital channels, and visual materials. Considerable work on driving consistency in CEFC messaging and impact was supported by storytelling workshops for staff, the creation of ready-made presentation materials and best practice design and messaging across Twitter, LinkedIn and the CEFC website: cefc.com.au. Our social media audience increased 45 percent during 2016-17.
Green Bank Network
The CEFC is a foundation member of the Green Bank Network (GBN), an international membership organisation formed to foster collaboration and knowledge exchange among existing ‘Green Banks’, enabling them to share their experiences, best practices and lessons learned. The GBN also aims to serve as a source of knowledge and a network for jurisdictions that seek to establish their own form of ‘green bank’. Other members include organisations in the US, UK, Malaysia and Japan.
During the year we were pleased to receive external recognition for our activities:
- The industry leading partnership between CEFC and community housing provider SGCH was recognised at the PowerHousing Australia Awards, with the CEFC receiving the Business Partner Award.
- The CEFC won the Online Reporting category for our 2016 Annual Report at the Australasian Reporting Awards, which benchmark us against listed companies and business organisations. We also received a Silver Award for the printed version of our report, for the second consecutive year.
Business Asset Finance
The CEFC works with banks, energy providers and other financiers to provide a range of cost-effective financing solutions to help businesses, including SME’s and agribusinesses, to invest in clean energy assets and technologies to reduce their energy costs, improve their productivity and reduce emissions.
In 2016-17, the CEFC committed an additional $300 million to three co-financing programs, taking total CEFC commitments to these unique programs to almost $1 billion since inception. Through these programs, the CEFC has contributed $250 million to more than 2,000 individual clean energy projects.
The pipeline of investment opportunities increased from around $7 billion to more than $9 billion at 30 June 2017. This growth reflects increased interest in clean energy investment, coupled with a broader understanding of the role of the CEFC in working with investors and project developers across a range of eligible clean energy investments.