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Clean Energy Finance Corporation Annual Report 2018–19

Note 8: Other Information

8.1: Aggregate Assets and Liabilities

The following table represents further analysis of the Group’s aggregate assets and liabilities.

	2019 $’000	2018 $’000
Assets expected to be recovered in:
No more than 12 months	1,220,672	924,705
More than 12 months	3,670,703	3,162,097
Total Assets	4,891,375	4,086,802
Liabilities expected to be settled in:
No more than 12 months	29,442	26,078
More than 12 months	41,864	30,499
Total Liabilities	71,306	56,577

8.2: Budgetary Reports and Explanation of Major Variances

The following tables provide a comparison of the original Budget for the Group, as presented in the 2018–19 Portfolio Budget Statements (PBS) for the Environment and Energy Portfolio, to the Actual 2018–19 outcome as presented in accordance with AAS for the Group. The Budget is not audited.

8.2A: Budgetary reports

Clean Energy Finance Corporation

Consolidated Statement of Comprehensive Income
for the year ended 30 June 2019

	Actual $’000	Budget ¹ $’000	Variance ² $’000
NET COST OF SERVICES
EXPENSES
Employee benefits	27,827	34,966	(7,139)
Suppliers	10,215	13,355	(3,140)
Depreciation and amortisation	1,031	969	62
Concessional loan charges	3,922	25,000	(21,078)
Impairment loss allowance on financial instruments	23,099	25,000	(1,901)
Total expenses	66,094	99,290	(33,196)
OWN-SOURCE INCOME
Own-source revenue
Interest and loan fee revenue	177,141	151,413	25,728
Distributions from trusts and equity investments	14,162	17,377	(3,215)
Total own-source revenue	191,303	168,790	22,513
Gains and losses
Fair value losses on financial instruments	(15,427)	(15,000)	(427)
Fair value gains on financial instruments	95,775	15,000	80,775
Profit on sale of assets	11,230	–	11,230
Total gains	91,578	–	91,578
Total own-source income	282,881	168,790	114,091
Net contribution by/(cost of) services	216,787	69,500	147,287
Share of associates and joint ventures	2,051	(500)	2,551
Surplus/(deficit) from continuing operations	218,838	69,000	149,838
OTHER COMPREHENSIVE INCOME
Items subject to subsequent reclassification to net cost of services
Net fair value gain taken to equity on cash flow hedge	(162)	–	(162)
Total other comprehensive income	(162)	–	(162)
Total comprehensive income	218,676	69,000	149,676

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 2018–19 PBS for the Environment and Energy Portfolio). Some line items that were netted in the published budget have been grossed-up in this presentation to better align with the actual disclosures under Australian Accounting Standards.

² Difference between the actual and original budgeted amounts for 2018–19. Explanations of major variances are provided further below.

Clean Energy Finance Corporation

Consolidated Statement of Financial Position
as at 30 June 2019

	Actual $’000	Budget ¹ $’000	Variance ² $’000
ASSETS
Financial assets
Cash and cash equivalents	350,761	237,780	112,981
Trade and other receivables	18,479	7,082	11,397
Loans and advances	2,569,117	2,523,005	46,112
Other debt securities	1,308,708	1,164,847	143,861
Equities and units in trusts	487,264	685,550	(198,286)
Equity accounted investments	153,631	326,943	(173,312)
Total financial assets	4,887,960	4,945,207	(57,247)
Non-financial Assets
Property, plant and equipment	1,039	1,130	(91)
Computer software	450	874	(424)
Prepayments	552	646	(94)
Total non-financial assets	2,041	2,650	(609)
Assets held for sale	1,374	–	1,374
Total assets	4,891,375	4,947,857	(56,482)
LIABILITIES
Payables and deferred revenue
Suppliers	3,660	2,185	1,475
Deferred revenue	43,686	31,920	11,766
Other payables	8,293	6,000	2,293
Derivative financial liabilities	1,514	–	1,514
Total payables and deferred revenue	57,153	40,105	17,048
Provisions
Employee provisions	2,546	1,981	565
Other provisions	11,607	11,129	478
Total provisions	14,153	13,110	1,043
Total liabilities	71,306	53,215	18,091
Net assets	4,820,069	4,894,642	(74,573)
EQUITY
Contributed equity	4,408,363	4,638,363	(230,000)
Reserves	78	29,363	(29,285)
Retained surplus	411,628	226,916	184,712
Total equity	4,820,069	4,894,642	(74,573)

² Difference between the actual and original budgeted amounts for 2018–19. Explanations of major variances are provided further below.

Clean Energy Finance Corporation

Consolidated Statement of Changes in Equity
for the year ended 30 June 2019

Retained Surplus

Reserves

Contributed Equity

Total Equity

Actual

$’000

Budget ¹

$’000

Variance ²

$’000

Actual

$’000

Budget ¹

$’000

Variance ²

$’000

Actual

$’000

Budget ¹

$’000

Variance ²

$’000

Actual

$’000

Budget ¹

$’000

Variance ²

$’000

Opening balance

Balance carried forward from previous year

179,071

157,916

21,155

42,791

29,363

13,428

3,808,363

4,108,363

(300,000)

4,030,225

4,295,642

(265,417)

Change on initial application of AASB 9

13,719

–

13,719

(42,551)

–

(42,551)

–

(28,832)

–

(28,832)

192,790

157,916

34,874

240

29,363

(29,123)

3,808,363

4,108,363

(300,000)

4,001,393

4,295,642

(294,249)

Comprehensive income

Surplus for the year

218,838

69,000

149,838

–

218,838

69,000

149,838

Other comprehensive income

–

(162)

–

(162)

–

(162)

–

(162)

Total comprehensive income

218,838

69,000

149,838

(162)

–

(162)

–

218,676

69,000

149,676

Transactions with owners

Contributions by owners

Equity injection from

Special Account

–

600,000

530,000

70,000

600,000

530,000

70,000

Total transactions with owners

–

600,000

530,000

70,000

600,000

530,000

70,000

Closing balance as at 30 June

411,628

226,916

184,712

29,363

(29,285)

4,408,363

4,638,363

(230,000)

4,820,069

4,894,642

(74,573)

² Difference between the actual and original budgeted amounts for 2018–19. Explanations of major variances are provided further below.

Clean Energy Finance Corporation

Consolidated Cash Flow Statement
for the year ended 30 June 2019

	Actual $’000	Budget ¹ $’000	Variance ² $’000
OPERATING ACTIVITIES
Cash received
Interest and fees	147,288	144,308	2,980
Distributions from trusts and equity investments	14,748	17,377	(2,629)
Total cash received	162,036	161,685	351
Cash used
Employees	25,834	34,080	8,246
Suppliers	9,806	13,320	3,514
Total cash used	35,640	47,400	11,760
Net cash from operating activities	126,396	114,285	12,111
INVESTING ACTIVITIES
Cash received
Principal loan repayments received	196,818	381,571	(184,753)
Sale of other debt securities	83,711	9,534	74,177
Sale of equities and units in trusts	24,213	–	24,213
Sale of investment in associates and joint ventures	40,667	–	40,667
Distributions from associates and joint ventures	4,199	–	4,199
Total cash received	349,608	391,105	(41,497)
Cash used
Loans made to other parties	682,591	519,286	(163,305)
Purchase of other debt securities	278,937	110,000	(168,937)
Purchase of equities and units in trusts	79,751	243,307	163,556
Investment in associates and joint ventures	171,007	147,250	(23,757)
Purchase of property, plant, equipment and computer software	711	1,250	539
Total cash used	1,212,997	1,021,093	(191,904)
Net cash from/(used by) investing activities	(863,389)	(629,988)	(233,401)
FINANCING ACTIVITIES
Cash received
Contributed equity	600,000	530,000	70,000
Total cash received	600,000	530,000	70,000
Net cash from financing activities	600,000	530,000	70,000
Net increase/(decrease) in cash held	(136,993)	14,297	(151,290)
Cash and cash equivalents at the beginning of the reporting period	487,754	223,483	264,271
Cash and cash equivalents at the end of the reporting period	350,761	237,780	112,981

² Difference between the actual and original budgeted amounts for 2018–19. Explanations of major variances are provided further below.

8.2B: Major budget variance for 2018–19

Affected Line Items	Explanations of Major Variances
Consolidated Statement of Comprehensive Income:
Employee benefits	The Group has spent $7.1 million less than budget on employee benefits. This is largely a result of hiring fewer new staff than budgeted as well as timing differences with new hires being made and targeted salary increases being awarded later in the financial year than budgeted.
Concessional loan charges	Concessional loan charges of $3.9 million are $21.1 million lower than budget notwithstanding the actual loans made and debt securities purchased during the year are higher than budgeted. The mix of transactions undertaken this year, the compression in market margins and lower overall interest rate environment generally, have reduced the need for and benefit from providing as much concessionality as was anticipated. In most instances, the Group has 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. Previously recorded concessional charges were also reversed upon the early repayment/refinance or lower-than-anticipated utilisation of concessional loans and debt securities contracted in prior years.
Interest and loan fee revenue	Interest and loan fee revenue has a $25.7 million favourable variance to budget principally as a result of above-budget volume of loans made and debt securities purchased in the year. The budget had also assumed that the Group would be refinanced out of two large loans early in the financial year; due to the borrower’s then-stated intentions to list on the stock exchange, which did not occur.
Fair value gains on financial instruments	The positive variance of $80.8 million relates primarily to mark-to-market valuation of the Group’s investment in fixed interest bonds, included in Other debt instruments, held at FVTPL which have increased in value as a result of declining market interest rates. The budget did not contemplate any mark-to-market changes in the value of Other debt instruments as these are a function of external market factors.
Profit on sale of assets	The positive variance of $11.2 million relates primarily to the opportunistic sale of an equity interest in the Granville Harbour wind farm, a partial sell down of an interest in a property trust and the earlier than forecast sale of a bank bond.
Consolidated Statement of Financial Position and Consolidated Statement of Changes in Equity:
Cash and cash equivalents	Cash and cash equivalents are $113 million higher than budget, largely as a result of the Group’s committed equity investment into an infrastructure fund not yet being drawn.
Trade and other receivables	Trade and other receivables, mainly accrued interest and fees, are $11.4 million higher than budget due to timing differences in when interest payments are due under loan agreements and bond facilities compared with the budget assumptions. While most loans have contractual interest payment dates coinciding with calendar quarters, three large loans, including two which the budget had assumed would refinance early, have their interest payment date in July.
Loans and advances	Loans and advances are $46.1 million higher than budget due to the budgeted repayment of two large loans early in the year; due to the borrower’s then-stated intentions to list on the stock exchange, not occurring.
Other debt securities	Other debt securities are $143.9 million higher than budget due to fair value gains of $71.2 million on bonds held at FVTPL as a result of the lower market interest rates; purchase of the first green bond issued by a major retail group; and the earlier than budgeted purchase of bank bonds as a result of the bank aggregation partners’ originating green loans to SME borrowers faster than originally anticipated. These were partly offset by the sale of a green bond, following a corporate restructure by the issuer group, and a bank bond in connection with amortisation of that bank’s on-lending to SME borrowers under their aggregation programme.
Equities and units in trusts	Equities and units in trusts are $198.3 million lower than budget primarily as a result of the Group’s committed $150 million equity investment into an infrastructure fund not yet being drawn.
Equity accounted investments	Equity accounted investments are $173.3 million lower than budget due to committed investments, classified as Associates and Joint Ventures, calling for funds at a slower rate than anticipated in the budget.
Deferred revenue	Deferred revenue is $11.8 million higher than budget as a greater number of new loans than was forecast reached financial close in the financial year, which triggered the payment of establishment fees to the CEFC by the borrowers, and two deals that were budgeted to refinance (which would have resulted in the deferred revenue being recognised) did not. Since the establishment fees are deferred and recognised using the effective interest rate method over the loan tenor which spans a number of years, the majority of the fees received remain in deferred revenue at 30 June 2019.
Contributed equity	The Corporation drew $70 million more than was budgeted from the CEFC Special Account in the current year but $300 million less than had been anticipated in the 2017–18 financial year (due to investment delays described in that year’s variance comments), resulting in a net variance of $230 million.
Reserves	Reserves are $29.3 million lower than budget due to the fair value gains booked to 30 June 2018 being reclassified to Retained Surplus upon adoption of the new accounting standard AASB 9.
Retained Surplus	The retained surplus at 30 June 2019 is $184.7 million higher than budget with: $149.8 million due to the higher than budgeted surplus generated in the year, discussed under Consolidated Statement of Financial Income above; $13.7 million due to the opening balance impact of adopting AASB 9; and $21.1 million due to the higher than budgeted opening balance.
Total equity	Total Equity at 30 June 2019 is $74.6 million lower than budget due to: Contributed equity $230.0 million and Reserves $29.3 million lower than budget partly offset by Retained surplus exceeding budget by $184.7 million.
Consolidated Cash Flow Statement:
Net cash from operating activities	The $12.1 million positive variance to budget is largely a reflection of the lower than budgeted employment related costs in the financial year.
Principal loan repayments received	The $184.8 million shortfall to budget is principally a result of the budget assuming that the Group would be refinanced out of two large loans early in the year, due to the borrower’s then-stated intentions to list on the stock exchange which did not occur.
Sale of other debt securities	The $74.2 million increase, compared to budget, includes the sale of a green bond, following a corporate restructure by the issuer group, and a bank bond no longer required to support one bank’s on-lending to SME borrowers under its aggregation program due to amortisation of the underlying loans.
Sale of equities and units in trusts	The $24.2 million variance relates to the sale of units in a property trust, under a liquidity window announced by the issuer, in order to realise some of the valuation gains.
Sale of investment in associates and joint ventures	The $40.7 million includes the proceeds on sale of the Group’s interest in a wind farm development and equalisation payments received from an agriculture fund, where the Group was a cornerstone investor, upon that fund attracting additional investors.
Loans made to other parties	Cash used to fund loans made to other parties is $163.3 million ahead of budget largely due to loans which had been budgeted to draw down in the financial year ended 30 June 2018 being delayed into the financial year ended 30 June 2019.
Purchase of other debt securities	The amount invested in other debt securities during the year exceeds budget by $168.9 million largely as a result of the purchase of the first green bond issued by a major retail group and timing differences on the purchase of bank bonds, as a result of bank aggregation partners originating green loans to SME borrowers faster than originally anticipated.
Purchase of equities and units in trusts	The amount invested is $163.6 million lower than budget largely as a result of the Group’s committed $150 million equity investment into an infrastructure fund not yet being drawn.
Contributed equity	The Corporation drew $70.0 million less than budgeted from the CEFC Special Account as a result of the higher than budgeted cash balance at 1 July 2018 and the higher than budget cash inflow from operating activities exceeding the higher than budgeted net cash outflow for investing activities.
Cash and cash equivalents at the beginning of the reporting period	Cash and cash equivalents at 1 July were $264.3 million higher than budget as investments that were expected to reach financial close and draw down in June 2018 were delayed.
Cash and cash equivalents at the end of the reporting period	Cash and cash equivalents at 30 June 2019 are $113 million higher than budget, largely as a result of the Group’s committed equity investment into an infrastructure fund not yet being drawn.

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Clean Energy Finance Corporation Annual Report 2018–19

Note 8: Other Information

8.1: Aggregate Assets and Liabilities

8.2: Budgetary Reports and Explanation of Major Variances

8.2A: Budgetary reports

8.2B: Major budget variance for 2018–19

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