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Analysis of performance criteria 2019–20

Performance Analysis of performance criteria 2019–20

Increasing the impact of our

investment activities

$89m

Operating result 2019–20

$1.1b

New investment commitments 2019–20

Operating result

The operating result for 2019–20 was $89 million, against the $110 million target established in the 2019–20 Corporate Plan and the $100 million to $110 million target established in the 2019–20 Portfolio Budget Statements (PBS). While revenue of $205 million was higher than the $191 million planned, the lower operating result was attributable to higher impairment provisioning, driven by higher levels of uncertainty in the external operating environment due to challenges in the electricity sector (including connection delays, lower merchant pricing and curtailment) and the broader impacts of the COVID-19 pandemic. 

Portfolio benchmark return

The core portfolio cumulative return through to 30 June 2020 was 4.75 per cent, against a benchmark of 5.28 per cent to 6.28 per cent. This represents a deficit of 0.53 per cent to 1.53 per cent against the benchmark. The Clean Energy Innovation Fund cumulative return through to 30 June 2020 was negative 6.02 per cent against a benchmark of 3.15 per cent. Returns from investments in early stage ventures in the Clean Energy Innovation Fund are highly volatile in nature and negative returns in the early years are not uncommon. Cumulative returns in the Innovation Fund improved by 21.03 per cent from negative 27.05 in the prior year, largely as a result of the successful exit during the year of the Innovation Fund investment in Carbon Revolution. 

Capital committed

New investment commitments were $1.1 billion during 2019–20, against the $0.8 billion target established in the 2019–20 Corporate Plan and the $1 billion target in the 2019–20 PBS. As expected, capital committed in 2019–20 was lower than the $1.5 billion in the previous year, with investment activity in the energy sector retreating from the record levels achieved in 2017–18 and 2018–19. In the second half of 2019–20, as the economy tightened due to the impacts of the COVID-19 pandemic, the CEFC committed more than $380 million to seven transactions, working closely with project proponents and co-investors to bring projects to financial close in a timely manner. 

Capital deployed

Total capital deployed in 2019–20 was $0.9 billion, against the Corporate Plan target of $0.7 billion and the PBS target of $1 billion. During 2019–20, $0.9 billion in capital was repaid or recouped through sale or redemption, markedly higher than the 2018–19 $0.3 billion record.

Financial leverage

In order to increase the flow of finance into the clean energy sector, it is important that others also invest in the sector. At the transaction level, the CEFC measures this through financial leverage. Actual leverage in CEFC transactions in 2019–20 saw more than $3 in additional capital invested for every $1 of CEFC finance committed, bettering the $2:$1 target.

Contribution to emissions reduction

CEFC investment activities seek to make a positive contribution to Australia’s emissions reduction efforts. New commitments in 2019–20 are forecast to reduce emissions by some 1.1 Mt CO2-e per year, against a target of 1.5 Mt CO2-e per year in the Corporate Plan and 2 Mt CO2-e per year in the PBS. This lower level of estimated emissions reduction is attributable to a lower proportion of new investments in renewable energy generation, which typically account for large emission reductions.