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From our Chair

I am pleased to commend the 2018–19 Annual Report of the Clean Energy Finance Corporation.

After another strong year of investment, the CEFC continued to be an important catalyst in building Australia’s clean energy economy, consolidating its position as a reliable financial institution and prudent steward of Australian taxpayers’ money. The CEFC was pleased recently to be described by the Prime Minister, the Hon Scott Morrison MP as “the world’s most successful green bank”. It has every intention of maintaining its reputation as a considered investor and market instigator.

The CEFC’s careful investment over six years reflects its ability to independently implement Australian Government directions under its Investment Mandate. This is further supported by its pillars of good governance, responsible client selection and considered risk management, an approach which continues to give confidence to private sector market participants to follow its lead.

A condition of all CEFC investments is that they advance the Australian Government’s goals, over time, to decarbonise the economy and meet Australia’s international commitments, including the Paris Agreement targets

Steven Skala AO
Chair, CEFC

A condition of all CEFC investments is that they advance the Australian Government’s goals, over time, to decarbonise the economy and meet Australia’s international commitments, including the Paris Agreement targets by 2030 to reduce emissions on 2005 levels by 26–28 per cent.

In an area where prediction is both difficult and often unreliable, one thing is clear: Australia is on the path to decarbonisation. The question is not whether as a nation we continue in that direction but rather, how quickly and effectively we do so, and how well we adapt to new energy mixes as part of that journey.

Energy use is linked to growth and prosperity – where it is curtailed, so too is GDP and productivity. The CEFC values its role in identifying ways to support clean energy generation and its consumption as a significant part of Australia’s orderly transition to a sustainable low emissions economy.

The CEFC was established to catalyse private investment in the nation’s fledgling clean energy sector, while achieving reasonable returns for Australian taxpayers. This is at the core of all CEFC activities.

Its success in drawing private investments into clean energy can be measured by the rate at which the CEFC leverages additional private capital into the sector. In 2018–19, every CEFC dollar invested was matched by more than $3 in private finance, up from $1.80 in 2017–18. Since inception, every $1 of CEFC finance has been matched by more than $2 from the private sector.

This point is verified by the independent statutory review into the CEFC completed by Deloitte in this reporting year. Deloitte concluded that the CEFC “has been effective in facilitating increased flows of finance into the clean energy sector projects it supported” and that “in the absence of the CEFC a range of projects it supported may not have proceeded”.

In 2018–19, $321 million was repaid or returned to the CEFC. Since inception, $718 million has been repaid or returned. This is further evidence of the prudent approach of the organisation, and a demonstration of the commercial rigour that underpins its investments.

In considering the CEFC’s results this financial year, it is important to note that the CEFC holds substantial amounts of long-term fixed rate bonds. Falling interest rates during the year, and the introduction of the Accounting Standard AASB9, have meant the mark-to-market value of these bonds has increased materially in our accounts. This has resulted in a sharp increase in operating profit (described in the accounts as “surplus from continuing operations”) of $218.8 million that would not have occurred if interest rates were stable or increasing. The $143.6 million of normalised surplus from operations of the CEFC nevertheless reflects a sound return for the Australian Government.1

Even after implying a cost of capital of 2.5 per cent based on the weighted average of the five-year Australian Government bond rate on each tranche of capital that the CEFC has drawn from the CEFC Special Account, the net return to the Commonwealth remains positive and means that the CEFC is more than paying for itself – a notable achievement given the purposive nature of its formation and objectives.

In this financial year, the Australian Government issued a new Investment Mandate Direction. This required the CEFC to consider the potential effects on reliability and security of supply when evaluating potential renewable generation investments. It also encouraged priority to be given to investments that will support reliability and security of electricity supply.

Accordingly, in supplementation of reliability and security-related investments already in place, the CEFC is further increasing its focus on grid augmentation and interconnection, addressing market constraints and marginal loss factors and harnessing a rapidly growing distributed energy market. It is also pursuing additional opportunities in firming technologies and services, large and small batteries, and projects that can solve several problems at once.

New opportunities may lie in hydrogen, electric vehicles, the internet of things and artificial intelligence. The CEFC looks to all these as important, challenging and exciting opportunities that are consistent with its core objectives and will continue to work closely with investors to further consolidate its healthy pipeline of investment opportunities, including in response to the current Mandate Direction. The CEFC’s strong portfolio enables it strategically to seek to stimulate economic activity in areas such as energy storage and the required improvements to the grid, as well as to support early-stage developments and technologies while they build commercial traction with private investors.

The CEFC operates in an energy space that is constantly evolving, often at considerable speed. As an independent statutory corporation, the CEFC is a prudent investor of Commonwealth funds. It will pursue changes of direction in accordance with its underpinning legislation, and with the same considered and analytical approach that has been the hallmark of its six years of operation.

New technologies and emerging sectors take time to develop their full potential. The CEFC’s experience in solar and wind, and its success in helping build this sector, demonstrates the value of the CEFC’s model. Of course, this model necessarily is evolving and includes consideration within its strategy as to where new resources in staff, skills and experience are required to make the most of these possibilities.

The CEFC enjoys close working relationships with the Australian Government. In this regard, it thanks the Minister for Energy and Emissions Reduction, Hon Angus Taylor MP and the Minister for Finance, Senator the Hon. Mathias Cormann and their staff and expresses confidence in the continuity of good working relationships with them. The CEFC is also grateful for the support of the Department of the Environment and Energy.

The CEFC Board thanks our CEO Ian Learmonth, the Executive, and all the staff who are dedicated to helping the CEFC invest in Australia’s clean energy transition. They know how important their work is and this is reflected in everything they do.

Steven Skala AO


  1. The normalised surplus from operations excludes gains brought to account through holding bonds and loans at fair value, together with the non-cash expense and revenue related to concessional loan charges.