INVESTMENT IN RENEWABLE ENERGY, LOW EMISSIONS AND ENERGY EFFICIENCY TECHNOLOGY
New investment commitments of $2.3 billion were made during 2017-18, marginally higher than the $2.1 billion committed in the previous year and well above our target of $900 million to $1.1 billion.
CEFC commitments were made across 39 transactions, reflecting another strong year of investment in renewable energy in the Australian market and the breadth of the CEFC’s activities. The 39 new transactions included six under the Clean Energy Innovation Fund, accounting for $26 million of the total capital committed.
PLACEMENT OF FUNDS INTO AUSTRALIA’S CLEAN ENERGY SECTOR
Total funds deployed were more than $2 billion, a strong improvement on the prior year and above our target of $650 million for 2017-18. Increased deployment is correlated with the strong level of new investment commitments during this year and the prior year. Our investments in 2017-18 made a significant contribution in facilitating Australia’s emissions reduction efforts, with the total CEFC investment portfolio of $6.6 billion (commitments since inception) expected to reduce emissions by more than 10 million tonnes per annum. As an investor, we achieved positive returns for each tonne of CO2-e abated by investee projects and businesses.
In order to increase the flows of finance into the clean energy sector, it is important that others also invest in the sector, in line with the CEFC mission. At the transaction level, we measure this through financial leverage. Actual leverage in CEFC transactions in 2017-18 was $1.00:$1.80, above the target of $1.00:$1.00, representing more than $1.80 in private sector investment for every $1.00 of CEFC commitment.
Financial sustainability is important as we pursue our public policy purpose. Own source revenue was $133 million for 2017-18 against a budget of $85 million. We reported a net surplus of $74 million, against a budget of $9 million, driven by higher revenues and lower levels of concessional expense.
At 30 June 2018, the CEFC core portfolio return since inception was 4.44 per cent, against a Portfolio Benchmark Return (PBR) target of 5.51-6.51 per cent, over the medium to longer term. The net difference of 1.07 per cent against the bottom end of the target range is an improvement against the equivalent 1.24 per cent differential at 30 June 2017.
At 30 June 2018, the Clean Energy Innovation Fund return since inception was –14.71 per cent against a Portfolio Benchmark Return (PBR) target of 3.21 per cent. As an early stage, venture capital style investor, negative returns during early years of investment are expected, with returns anticipated to strengthen as investee companies grow.
STAKEHOLDER ENGAGEMENT AND INDUSTRY LEADERSHIP
The 2017-18 year again 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, while also meeting Australia’s Paris Commitments in emissions reduction. As an active investor seeking to catalyse additional finance into the clean energy sector, we retained a strong focus on sharing our experience and insights across the market.
We maintained a strong focus on and support for projects of national significance that have a long lead time, including the Tasmania-Victoria Second Interconnector (Battery of the Nation) project, and the proposed Snowy 2.0 expansion. We also contributed to considerations around the South Australian large-scale battery tender and the Whyalla Steelworks (Arrium) sale.
We continue to inform stakeholders about potential clean energy opportunities through the Reef Funding Program, including extensive consultation and briefings to relevant government agencies, with industry groups in the Reef Catchment Area and smaller-scale investors, including in agribusiness.
As a specialist investor, we seek to extend our reach across the economy through research, insights and information sharing. In 2017-18 we published a major market analysis on the potential electric vehicle market in Australia, with a view to lowering transport-related emissions. We were pleased to make a number of submissions to Government and/or parliamentary enquiries, including the AEMO Integrated System Plan Consultation project; the Energy Security Board draft design consultation paper into the National Energy Guarantee, and the RIT-T Application Guidelines review by the Australian Energy Regulator.
CEFC staff appeared before the House of Representatives Standing Committee on Environment and Energy in respect of the Future of the Grid inquiry, and the Senate Environment and Communications inquiry into the provisions of the Clean Energy Finance Corporation Amendment (Carbon Capture and Storage) Bill 2017.
The CEFC works extensively with state, territory and local governments, both as a conduit to business and in their own capacity as service providers with a large carbon footprint. We provided Infrastructure Victoria with advice regarding automated and zero emissions vehicles. We also provide a weekly Markets Update to key stakeholders, including policy makers, investors and clients, with timely information about emerging developments in the clean energy sector.
The CEFC remained a frequent contributor to targeted industry and sector-specific conferences and events. These provide an opportunity to lift understanding about clean energy finance and the role of clean energy technologies in decarbonising the Australian economy. The CEFC Chair, CEO, Executives and staff spoke at 107 conferences, across the breadth of our portfolio and in multiple locations, also reflecting our national focus. We also issued 44 media releases about CEFC transactions. We see this as an important additional means of delivering transparent information about our investments on behalf of taxpayers, and also to help inform and educate the market about the scale and diversity of clean energy investment opportunities.
The CEFC remains an active member of the Green Bank Network (GBN), an international membership organisation which fosters collaboration and knowledge sharing across ‘green banks’ in the US, UK, Malaysia and Japan. As noted by the International Energy Agency (IEA) in its 2018 Investment Outlook, the CEFC is a significant player in ‘green bank’ investment, representing 50 per cent of total investment by ‘green banks’ around the world to date. In addition, the IEA noted that the CEFC is responsible for almost all the investment by ‘green banks’ in low carbon transport, as well as the increased share of solar and energy efficiency investment since 2016.
In addition to our external engagement with mainstream media channels, we continue to grow our digital reach to provide increased and timely access to information about our activities, across the CEFC website, Twitter and LinkedIn. The CEFC website recorded 7.65 per cent growth in user numbers, with case studies about specific CEFC investments consistently attracting the highest level of engagement. We saw 25 per cent growth in our Twitter audience, to over 6,400 followers, with the CEFC’s own tweets about our transactions being re-tweeted at an average rate of 2:1. The increase in LinkedIn audience numbers, up almost 70 per cent to more than 4,300, reflected a sustained push to leverage this channel to reach decision makers in the clean energy sector and broader economy. A series of video case studies about CEFC investments attracted strong attention via LinkedIn.
We maintained our role as a leading investor in Australia’s renewable energy sector and further extended our reach into emissions reduction activities in infrastructure, agriculture, property, transport and waste. In addition, our venture capital finance for innovative clean energy companies saw continued growth.