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CEFC investments in focus

Green MVE sets sights on ASX 300

Investment funds

The CEFC has committed up to $50 million to AB Managed Volatility Equities – Green (Green MVE), our first investment in listed equities. Portfolio manager, AllianceBernstein, aims to set a new standard in low carbon investing, with Green MVE focused on some 70 ASX 300 listed companies. The active investment strategy starts by anchoring the portfolio in low-volatility equities, and then by applying a ‘price on carbon’ during the stock selection process to help reduce the emissions associated with the portfolio holdings. Green MVE aims to make the portfolio carbon neutral by offsetting the emissions, attracting interest from institutional investors, family offices and insurers who are increasingly preferencing low carbon assets.

Equity boost for storage, hydro

Renewable energy

In our largest equity investment in renewables, we have committed up to $100 million in the Australian Renewables Income Fund (ARIF), managed by Infrastructure Capital Group. ARIF will acquire and develop large-scale wind and solar developments, as well as energy-from-waste projects, large-scale battery storage and pumped hydro opportunities. The CEFC commitment is directed towards further renewable energy asset acquisitions, including yet-to-be-developed large-scale assets, as well as operating projects. Based on previous investment experience, we expect the investment to contribute to the development of some 260MW in renewable generation assets, with the potential to deliver carbon abatement of about 630,000 tonnes per year.

GreenSync Cleantech 100

Cleantech innovation

Australia’s GreenSync was named in the prestigious 2019 Global Cleantech 100, an annual guide to the leading companies and trends in sustainable innovation, featuring private, independent, for-profit companies best positioned to solve the world’s clean technology challenges. The Innovation Fund has an equity stake in GreenSync, a Melbourne-based global energy-tech company that is pushing the boundaries towards more flexible and decentralised grids, keeping grids stable and efficient while absorbing more renewable energy.

Omni Tanker sets sail

Innovation

Award-winning Australian manufacturer Omni Tanker Holdings, which produces innovative carbon fibre tank containers, is expanding its business to meet international shipping demand, drawing on a $4 million equity investment from the Innovation Fund. Omni Tanker’s carbon fibre tank containers are six times the strength of steel tankers, and more than 35 per cent lighter. They can transport a wide range of corrosive liquids and high purity chemicals. The combination of these light weight and chemical resistant properties means transporting the tankers requires less energy and produces lower emissions. Omni Tanker’s core business is based on a patented technology invented by the late William (Bill) Rodgers.

Carbon Revolution wheels are turning

Innovation

High tech manufacturer Carbon Revolution raised almost $75 million in additional capital during the year, receiving strong support from key Australian institutional investors. Carbon Revolution produces the world’s only mass produced one-piece carbon fibre car wheel. The unique carbon fibre wheels are typically 40 to 50 per cent lighter than comparable aluminium wheels, reducing vehicle weight and therefore fuel consumption and carbon emissions. The wheels are produced at Carbon Revolution’s state-of-the-art purpose-built factory at the Deakin University campus in Geelong. The CEFC invested $10 million in equity in Carbon Revolution in 2016, and was pleased to extend this by a further $2 million in 2018–19.

Harvesting clean energy benefits

Agribusiness

The CEFC continued our strong association with the agribusiness sector in Australia throughout 2018–19. Through our co-finance programs, we support investment in smaller-scale transactions to enable farmers to benefit from clean energy technologies while lowering their carbon footprint. The agribusiness sector is the largest single user of these co-finance programs, with agricultural technologies accounting for 33 per cent of projects financed to date, drawing on more than $350 million in CEFC finance. Projects financed include updates to energy efficient on-farm equipment; improvements to on-farm buildings; energy and water efficienc irrigation equipment; and the installation of small-scale solar generation. The co-finance programs are an efficient and effective way to encourage investment in clean energy technologies, incentivising borrowers to preference best-in-class clean energy assets when considering new equipment purchases.

Collaboration gets practical

Agribusiness

In an Australian first, in 2018–19 the CEFC and the National Farmer's Federation (NFF) collaborated to back ready-made clean energy solutions for Australian farmers, with the twin goals of increasing on-farm efficiency and cutting greenhouse gas emissions. In a practical new guide for Australia’s 85,000 farming enterprises, the CEFC and the NFF identified 51 opportunities where farmers can reduce their energy bills by improving energy efficiency and switching to renewables. The investment commitments start at under $10,000, making them cost effective at a time of farm stress and drought. The potential energy efficiency technologies range from variable speed drives and smart controls to best-in-class tractors and refrigeration equipment. Renewable energy solutions include increasingly cost-effective solar PV as well as on-farm microgrids, which are particularly relevant in remote areas.

Iconic assets lock in targets

Infrastructure

Household infrastructure names in Australia – including Ausgrid, Melbourne Airport, Brisbane Airport, NSW Ports, the Port of Brisbane, Melbourne’s Southern Cross Station and Northern Territory Airports – have adopted their first emissions reduction targets. The targets will see emissions reduced by more than 200,000 tonnes CO2-e annually by 2030 – preventing millions of tonnes of carbon entering the environment over the life of the assets. IFM Investors owns or co-owns the assets on behalf of its industry super fund owners, other like-minded institutional investors and the millions of beneficiaries they represent. This significant piece of work gained momentum with a $150 million equity commitment from the CEFC.

Clean energy at home

Built environment

CEFC commitments of more than $530 million are targeting the delivery of clean energy solutions to a diverse range of communities, from seniors’ living to community housing and student accommodation. All projects are targeting substantial reductions in emissions. In Perth, Curtin University is drawing on CEFC finance to deliver 1,000 new student accommodation beds, a 60-room boutique hotel and 38 apartments. In Canberra, our finance is helping LDK Healthcare transform a disused office park into an energy efficient seniors’ living village. In regional NSW, we’re helping finance energy efficient homes for 220 low income families. And in South Australia, some 40,000 households can draw on CEFC finance to install home solar and battery storage systems as part of the SA Government Home Battery Scheme.

Big city sustainability

Built environment

Melbourne’s distinctive Collins Arch building is set to be a landmark in urban sustainability, targeting industry leading energy efficiency standards in a mixed-use building development. The twin towers of the 47-level Collins Arch building (linked by an impressive skybridge) are designed to achieve a 5.5 star NABERS Energy rating for its premium commercial office space; a 4.5 star NABERS Energy rating for the W Hotel and a 7 star average NatHERS rating across the residential apartments. The clean energy initiatives, drawing on $100 million in CEFC finance, are expected to deliver a minimum 20 to 25 per cent improvement on the development’s carbon footprint. The development will feature high-efficiency air conditioning, façade fabric insulation, real-time energy monitoring and the potential for electric vehicle charging.

Renewable energy milestones

The CEFC is an active investor in the development of Australia’s considerable renewable energy resources, with our maturing portfolio featuring a combined 2.7GW of generating capacity at 30 June 2019.

Working alongside a diverse range of global and Australian investors, we have helped deliver 39 large-scale solar and wind projects Australia-wide since inception. Of these, 30 projects are now generating energy to the grid, reflecting the relatively contained development timeframes of these large and long-dated assets. We are pleased to report that CEFC finance has been repaid on three solar and five wind projects, with this finance now available for reinvestment by the CEFC.

We note AEMO’s view that solar and wind energy – complemented by 17GW of storage – offer the lowest cost replacement for retiring fossil fuel capacity. CEFC finance remains central to this evolution.

While large-scale solar and wind opportunities are showing increasing maturity – with the ability to tap a strong market for equity and debt – the investor appetite for projects with material levels of uncontracted power or “merchant risk” remains limited. In addition, projects have met challenges during the construction and connection process, including rapidly-changing marginal loss factors which have adversely impacted project revenues.

Together, these issues are placing a potential brake on continued market growth in the face of an ageing, constrained transmission network and a systems architecture that is due for fundamental change. Similarly, while early progress on potential storage-related investments was welcome in 2018–19, this market is also still evolving, with fully commercial models yet to develop.

At 30 June 2019, the CEFC large-scale solar portfolio (excluding fully repaid investments) included 22 debt-financed solar projects and two equity transactions. Together, these represent $1.1 billion in CEFC investment commitments, in projects with a total value of $3.2 billion and a generating capacity of 1.6GW. These projects, when operating at capacity, would abate some three million tonnes of CO2-e annually, or 58 million tonnes over their operating lifetime.

At 30 June 2019, the CEFC wind portfolio (excluding fully repaid investments) included seven debt-financed wind farms. Together these represent some $740 million of CEFC investment commitments, in projects with a total value of $2.3 billion and a generating capacity of 1.1GW. These projects, when operating at capacity, would abate some 2.9 million tonnes of CO2-e annually, or nearly 62 million tonnes over their operating lifetime.

New shoots for green bonds

Green bonds

The CEFC has invested almost $520 million in 12 Australian green bonds, supporting many inaugural issuances from banks, universities, energy, property, retail and renewable projects. We give potential issuers an early commitment to transactions, acting as a cornerstone investor to build market demand. The Australian market is increasingly considering the benefits and flow-on impacts offered by green bonds. These range from access to a broader pool of investors, the ability of issuers to give additional momentum to business sustainability goals and to bring innovative transactions to the market. This may include developing and acquiring assets to support green bond issuances.

Fresh approach from Woolworths

Green bonds

The CEFC secured a $30 million tranche of Woolworths Group’s green bond – the first to be issued by a supermarket business and one which sets new standards and expectations for the retail industry. Woolworths Group includes well known Australian and New Zealand brands Woolworths, Countdown, Dan Murphy’s, BWS and BIG W. The green bond creates a new asset class for institutional investors who have an increasing appetite for products that meet environmental, social and governance (ESG) requirements.

Red bins find their super power

Waste

Australia’s first large-scale energy-from-waste project – a 36MW plant at Kwinana in Western Australia – is expected to power up to 50,000 homes using household waste. When built, the $700 million Avertas Energy project will be able to process around 400,000 tonnes of domestic “red bin” and commercial and industrial residual waste per year. By processing household waste from local councils, it will produce cost-competitive baseload renewable energy. It is also expected to reduce CO2-e emissions by more than 400,000 tonnes per year, the equivalent of taking 85,000 cars off the road. The CEFC has committed up to $90 million in the innovative project.

Second life for kerbside waste

Waste

Melbourne’s South Eastern Organics Processing Facility is on track to convert around 12,000 truckloads of household garden and food waste, drawn from council kerbside green waste collections, into up to 50,000 tonnes of high-grade compost each year. By treating the organic waste produced by eight Melbourne councils, the plant is expected to abate more than 65,000 tonnes of carbon emissions annually. The Sacyr Group opened the plant in May 2019, drawing on $38 million in CEFC finance. The fully enclosed in-vessel aerobic composting and maturation plant is expected to operate for 15 years. It will produce compost for use in local parks and gardens, as well as in horticulture, landscaping and agriculture, substantially reducing landfill and emissions.

Warada joint venture blossoms

Investment funds

Warada Capital is a new, integrated development and fund management company created as a specialist joint venture between the CEFC and ICA Partners (previously Ironstone Capital Advisory). Drawing on the established experience and networks of its two founders, Warada Capital aims to give the investment community access to a strong pipeline of early-stage or pre-financial close clean energy investment opportunities, particularly those with an appropriate balance between investment returns, innovation and decarbonisation. The CEFC has a 50 per cent equity stake in Warada Capital and will make up to $100 million available for potential investment opportunities. Warada is an Indigenous word for Waratah, the iconic Australian flower.

Qube marks major milestone

Infrastructure

Qube Holdings has completed construction of a 40,000 square metre warehouse, incorporating a 3MW rooftop solar system, in the first stage of the landmark Moorebank Logistics Park in Sydney. Work has also been completed on a rail access link and associated infrastructure to connect a planned import-export terminal to the existing freight line. Construction has included use of an onsite concrete crusher to recycle demolition concrete waste into paving material, reducing demand for new concrete as well as cutting the emissions associated with transporting the waste off-site. The CEFC has committed $150 million in debt finance to the project.

Welding on productivity

Manufacturing

In Queensland, CSF Steel has cut its energy costs, improved its productivity and reduced its carbon footprint after installing a new welding system at its Cairns workshop. CSF Steel’s business handles steel fabrication, detailing, processing, blasting and painting and installation. It estimates the new welders will improve productivity by around 30 per cent and deliver energy savings of around 21 per cent. CSF Steel drew on CEFC finance through the Westpac Energy Efficient Finance program.

Sustainable on-farm management

Together with the CSIRO and Macquarie Infrastructure and Real Assets (MIRA), we were pleased to progress our work in identifying sustainable on-farm management practices in 2018–19. The joint Energy, Emissions and Efficiency Advisory Committee (3EAC) was established as part of the CEFC’s equity investment in one of MIRA’s agricultural portfolios.

During 2018–19, the 3EAC focused on projects to lower emissions and improve on-farm performance through three priority pathways. See Figure 17.

This work is designed to be applicable across multiple climatic zones, production regions and end markets. As these activities are further developed, they will be shared with the broader farming community – including through field days, trials and information sessions. The work will also deliver a benchmarking tool which will enable farmers throughout Australia to develop a baseline for the energy efficiency of the output from their farms, and track improvements on a yearly basis.

Figure 17: Agriculture emissions pathways: 3EAC

Low emissions farming approaches

Viridis Ag, one of MIRA’s specialist cropping businesses, is trialling multiple low emissions farming approaches on its properties, including The Grange in WA. Farm practices trialled on The Grange are shared with the local Mingenew Irwin Group, which brings together around 200 businesses across some 320,000 hectares of farmland to support locally-driven research and development activities. MIRA has also committed to trialling innovative technology developments to improve on-farm efficiencies, such as analytics and robotics.

Mobile crane lifts performance

Manufacturing

In Western Australia, WA Universal Rigging & Cranes is capturing significant fuel and emissions savings thanks to its investment in a new energy efficient mobile crane. The new crane matches the load capacity and power of the existing unit while consuming 17 per cent less fuel, which also means it is producing fewer emissions. The third-generation family business drew on CEFC finance delivered through the ANZ Energy Efficient Asset Finance program.

All aboard for electric buses

Green vehicles

In Victoria, family-owned Latrobe Valley Bus Lines is on track to include 11 hybrid electric buses in its fleet by 2020, drawing on CEFC finance delivered through the ANZ Energy Efficient Asset Finance program. The new hybrid buses are expected to deliver a 35 per cent saving on fuel, a 30-40 per cent fall in carbon emissions and up to 50 per cent less nitrogen oxide and particulate emissions. Maintenance costs on the new buses are also expected to be lower.