Appendix C: Summary of operating costs and expenses and benchmark
Introduction
Under the CEFC Act, the Corporation must include in its Annual Report:
- the Corporation’s operating costs and expenses for the financial year; and
- a benchmark of the Corporation’s operating costs and expenses for the financial year against the operating costs and expenses of other comparable entities for that financial year.
The Corporation’s operating costs and expenses for the financial year are reported in the Financial Statements and Notes, and are also reproduced below in extract for convenience.
About the CEFC structure
The CEFC is a corporate Commonwealth entity with an independent Board that makes investment decisions to invest in renewable energy, energy efficient and low emissions technologies according to the CEFC Act and ministerial directions supplied by an Investment Mandate. The CEFC’s investment focus is on debt and equity that is solely or mainly Australian-based. The CEFC cannot invest directly in non-financial assets and does not have a large cash investment function. At 30 June 2019, the CEFC had 101 employees (99.59 full-time equivalent), based in Sydney (headquarters), Brisbane, Melbourne and Perth. The CEFC has drawing rights against the Clean Energy Finance Corporation Special Account maintained by the Department of the Environment and Energy.
Note on comparisons
Direct comparisons of the CEFC with other entities are difficult because:
- there are very few Government-owned public purpose entities that perform the type of function the CEFC does at a similar scale;
- current financial year data on other entities is not necessarily readily available; and
- data is not always reported using the same expense categories across different entities.
Entities chosen for the purposes of comparison
In order to provide some meaningful comparison as required under section 74 of the CEFC Act, the CEFC has compared its consolidated 2018–19 operating costs and expenses against the latest publicly available information for three Government owned entities which were formed for public purpose with a commercial mode of operation:
- Future Fund Board of Guardians as supported by the Future Fund Management Agency: Future Fund
- Export Finance and Insurance Corporation, trading as Export Finance Australia from 1 July 2019: Efic
- Northern Australia Infrastructure Fund: NAIF
Future Fund Management Agency (Future Fund) – structure
The Future Fund was established under Division 2 of Part 5 of the Future Fund Act 2006 and is governed by an independent Board, which makes investment decisions according to ministerial directions supplied by an Investment Mandate.
The Future Fund is neither geographically nor sector limited to renewable and low carbon technology in the same way as the CEFC, and pursues a broad sectoral spread in a range of investments. At 31 March 2019 these were: Australian equities (6.5 per cent), global equities (26.4 per cent), private equity (15.4 per cent), property (7.0 per cent), infrastructure and timberland (8.2 per cent), alternative assets (14.0 per cent), debt securities (9.3 per cent) and cash (13.2 per cent). The Future Fund had circa AUD$154 billion funds under management, invested in Australia and overseas, as at 31 March 2019.
For more information visit www.futurefund.gov.au.
Export Finance and Insurance Corporation (Efic) – structure
Like the CEFC, Efic is a corporate Commonwealth entity governed by an independent Board. Efic operates on a commercial basis and partners but does not compete with banks. From 1 July 2019, Efic’s trading name changed to Export Finance Australia. The organisation has four key functions under its enabling legislation:
- To facilitate and encourage Australian export trade by providing insurance and financial services and products to persons involved directly or indirectly in such trade.
- To encourage banks and other financial institutions in Australia to finance or assist in financing exports.
- To manage the Australian Government’s aid-supported mixed credit program (a facility which has now been discontinued, although loans are still outstanding under it).
- To provide information and advice regarding insurance and financial arrangements to support Australian exports.
Efic’s investment function is primarily related to the issuing of insurance and security guarantees, working capital guarantees and longer-term finance guarantees within these functions. Efic is headquartered in Sydney, provided facilities totalling $194 million during 2017–18 and had exposures of some $2.61 billion at 30 June 2018 (made up of circa $2.0 billion on the Commercial Account and $0.61 billion on the National Interest Account).
For more information visit www.efic.gov.au.
Northern Australia Infrastructure Facility (NAIF) – structure
The Northern Australia Infrastructure Facility (NAIF) was established on 1 July 2016 as a corporate Commonwealth entity under the Northern Australia Infrastructure Facility Act 2016 (NAIF Act). A commercially focused independent Board oversees the NAIF and is responsible for making investment recommendations to deploy finance.
The NAIF offers up to $5 billion in debt or alternative financing mechanisms, which may be on concessional terms, to benefit northern Australia. It is designed to be a key catalyst for the longer-term transformation of the northern Australian economy and population through the construction of infrastructure. This may include developments in airports, communications, energy, pipelines, ports, roads, rail and water. NAIF investments may support growth in sectors across the north, such as food and agribusiness, international education, medical research, tourism, energy and resources.
For more information visit www.naif.gov.au.
Figure 32: Operating costs and expenses benchmark – Comparison with Annual Reports
CEFC 2018–19 |
Future Fund 2017–18 (c) |
EFIC 2017–18 (c), (d) |
NAIF 2017–18 (c) |
|||||
$’000 |
% |
$’000 |
% |
$’000 |
% |
$’000 |
% |
|
Employee Benefit Expenses |
||||||||
Wages and salaries |
24,864 |
46,987 |
17,200 |
3,905 |
||||
Superannuation |
1,479 |
2,673 |
1,700 |
311 |
||||
Leave and other entitlements |
375 |
1,062 |
200 |
|||||
Other expenses |
633 |
– |
900 |
441 |
||||
Total Employee Benefit Expenses |
27,351 |
41 |
50,722 |
21 |
20,000 |
11 |
4,657 |
53 |
Board remuneration |
||||||||
Wages and salaries |
435 |
784 |
||||||
Superannuation |
41 |
81 |
||||||
Total Board Remuneration |
476 |
1 |
865 |
0 |
– |
0 |
0 |
0 |
Total Employee and Board Remuneration and Benefits |
27,827 |
42 |
51,587 |
21 |
20,000 |
11 |
4,657 |
53 |
Other costs |
||||||||
Interest expense |
– |
0 |
144,800 |
82 |
||||
Provision for impairment and irrevocable loan commitments (h) |
23,099 |
35 |
(200) |
0 |
||||
Concessional loan discount (b) |
3,922 |
6 |
||||||
Professional fees and expenses |
3,142 |
5 |
141,499 |
57 |
1,160 |
1 |
1,191 |
13 |
Other investment portfolio expenses |
1,141 |
2 |
20,469 |
8 |
800 |
0 |
4 |
0 |
Travel and incidentals |
1,240 |
2 |
600 |
0 |
597 |
7 |
||
Office facility costs |
2,104 |
3 |
1,500 |
1 |
292 |
3 |
||
Insurance |
291 |
0 |
20 |
0 |
||||
Marketing and Communications |
710 |
1 |
1,200 |
1 |
57 |
1 |
||
Depreciation and amortisation |
1,031 |
2 |
2,668 |
1 |
5,000 |
3 |
||
Auditors’ remuneration |
252 |
0 |
205 |
0 |
240 |
0 |
||
Administrative, IT and other expenses |
1,335 |
2 |
30,721 |
13 |
1,100 |
1 |
2,029 |
23 |
Total Expenses |
66,094 |
100 |
247,149 |
100 |
176,200 |
100 |
8,847 |
100 |
a) Like for like comparisons are not strictly possible since different entities group and report costs differently.
b) Non-cash charge that reverses over the life of the underlying loans.
c) From 2017–18 Annual Report since 2018–19 Information is not available at the time of preparing this report.
d) Costs are shown gross before National Interest Account allocation.
e) From Portfolio Budget Statements 2019–20 for the Finance Portfolio.
f) From Portfolio Budget Statements 2019–20 for the Industry, Innovation and Science Portfolio.
g) Efic does not appear separately in the 2019–20 Portfolio Budget Statements and its 2018–19 Corporate Plan does not provide this level of detail.
h) The new accounting standard AASB 9 changed the methodology for calculating impairment provisions with effect from 1 July 2018 for entities with a 30 June financial year end.
Figure 33: Operating costs and expenses benchmark – Comparison with Portfolio Budget Statements
CEFC 2018–19 (actual) |
Future Fund 2018–19 (estimate)(e) |
NAIF 2018–19 (estimate) (f) |
||||
$’000 |
% |
$’000 |
% |
$’000 |
% |
|
Employee benefits |
27,827 |
42 |
49,691 |
10 |
7,608 |
65 |
Supplier costs |
10,215 |
15 |
453,269 |
89 |
4,046 |
35 |
Depreciation and amortisation |
1,031 |
2 |
4,772 |
1 |
||
Concessional loan discount(b) |
3,922 |
6 |
||||
Allowance for impairment of assets and irrevocable loan commitments |
23,099 |
35 |
||||
Total Expenses |
66,094 |
100 |
507,732 |
100 |
11,654 |
100 |
a) Like for like comparisons are not strictly possible since different entities group and report costs differently.
b) Non-cash charge that reverses over the life of the underlying loans.
c) From 2017–18 Annual Report since 2018–19 Information is not available at the time of preparing this report.
d) Costs are shown gross before National Interest Account allocation.
e) From Portfolio Budget Statements 2019–20 for the Finance Portfolio.
f) From Portfolio Budget Statements 2019–20 for the Industry, Innovation and Science Portfolio.
g) Efic does not appear separately in the 2019–20 Portfolio Budget Statements and its 2018–19 Corporate Plan does not provide this level of detail.
h) The new accounting standard AASB 9 changed the methodology for calculating impairment provisions with effect from 1 July 2018 for entities with a 30 June financial year end.
Visit
https://www.transparency.gov.au/annual-reports/clean-energy-finance-corporation/reporting-year/2018-2019-63