CEFC looks to stronger cleaner grid after positive year of investing to reduce emissions

30 July, 2019

A message from CEFC CEO Ian Learmonth

On behalf of the CEFC, I am pleased to provide this update on our commitments in FY19, and to share information about our priorities for the year ahead.

FY19 HIGHLIGHTS

• CEFC commits almost $1.5 billion to new clean energy investments in year to 30 June 2019
• Record $320 million in CEFC finance repaid in one year, for re-investment in new projects
• FY19 performance to underpin increased focus on grid stability and large-scale storage

INVESTING IN A STRONG CLEANER GRID

The CEFC is looking to extend into new frontiers in low emissions energy generation after another strong year of investing in clean energy solutions Australia-wide. Key priorities for FY20 and beyond will include projects and technologies to deliver a stronger, more reliable grid, to take advantage of Australia’s robust renewable energy resources and to support the transition to a distributed energy model.

Following strong progress in the development of the large-scale solar and wind sectors, our investments will also increasingly target new technologies where there is less appetite from mainstream investors – including pumped storage and large-scale batteries, behind-the-meter generation and grid solutions.

INVESTING WITH COMMERCIAL RIGOUR

We made new investment commitments of almost $1.5 billion in the 12 months to 30 June 2019, across 30 transactions with a total value of $6.3 billion.

For the first time since we began investing in 2012, we deployed a record $1.3 billion into the clean energy sector in a single 12-month period. In addition, a record $320 million in CEFC finance was repaid in FY19, underscoring our ability to earn a positive return on our investments and reinvest our finance on behalf of the Australian community.

New commitments in FY19 included $940 million in renewable energy and $524 million across a broad range of energy efficiency and low emissions projects. Each dollar of CEFC finance committed in FY19 was matched by more than $3 from the private sector.

We are proud to have delivered a record $400 million in finance for some 5,800 smaller-scale projects in FY19, working with our co-finance partners to support projects valued from $10,000 to $5 million. 

Through the Clean Energy Innovation Fund, we also strengthened our position as Australia’s largest investor in the early stage cleantech sector, with total investment commitments of $69 million at 30 June 2019.

We broadened our equity portfolio in FY19, with equity investments now representing 20 per cent of commitments since inception, complementing our debt portfolio. We recognise that, as an equity investor, we increase our ability to influence longer-term emissions reduction across new and existing assets.

As expected, the scale of new investment commitments in FY19 was lower than the record $2.3 billion achieved in the previous year. This reflected broader market conditions, including the build out of the Renewable Energy Target. Grid and transmission constraints also contributed to a lower rate of new investments in large-scale renewables.

OUR PORTFOLIO SINCE INCEPTION

We are pleased to report that, with our co-investors, CEFC finance has played a role in driving $24 billion in commitments to new investments in clean energy projects since inception, supporting significant growth in large-scale renewables in particular.

Our portfolio of investment commitments was almost $6.6 billion at 30 June 2019, after allowing for repayments, amortisation and cancellations on almost $7.2 billion in total commitments made since inception.

Through these commitments, we have deployed more than $5 billion to projects Australia-wide since 2012, of which almost $560 million has been repaid and is available for new investments.

Since we began investing, each dollar of CEFC commitments has been matched by more than $2 in private investment, a clear demonstration of our progress in drawing additional finance into clean energy solutions.

At 30 June 2019, our portfolio of investment commitments was targeting lifetime cuts to greenhouse gas emissions of more than 260 million tonnes of CO2-e. We welcome the continued trust of private investors in working with us to reduce emissions.

EXTENDING INTO NEW FRONTIERS

This track record is not a signal that we can stand still. Australia is forecast to have one of the most decentralised electricity systems in the world by 2050. This evolution will require support for the development of new technologies and industries so they can benefit from CEFC finance as they gain commercial traction with private investors.

We see a critical need for coordinated investment in generation, storage and transmission infrastructure as part of a stable and reliable grid. In particular, pumped hydro and other forms of dispatchable renewable energy are under consideration and, from our perspective, can play a vital role in Australia’s sustainable transition to net zero emissions.

While the large-scale solar and wind sectors are showing increasing maturity – with the ability to tap a strong market for equity and debt – the investor appetite for merchant risk remains constrained, placing a potential brake on continued market growth in the face of an ageing, constrained transmission network.

Early progress in large-scale storage investments is welcome, but this market is also still evolving, with fully commercial models yet to develop. We also see an important role for CEFC finance in this exciting market. 

ACCELERATING SUSTAINABLE NET ZERO EMISSIONS

Looking beyond energy generation, we will continue to be at the forefront of new investment in a wide range of projects to drive down emissions, touching on all areas of our economy, including agriculture, infrastructure, property, transport and waste.

During FY19 we stepped up our efforts to assist market participants better understand the emissions and financing benefits of clean energy investments.

Our research reports and real-life investment insights continued to be well received and have covered a range of issues – from electric vehicles to agriculture, bioenergy, the built environment and manufacturing. We will continue this practical focus in FY20 and beyond, working together with other experienced investors and developers.

THE INVESTMENT HORIZON

We welcome the increasing focus on sustainability and net zero emissions from businesses, both large and small, as well as institutional investors and innovative entrepreneurs. Regulatory interest in emissions reduction is also having a positive impact on investment decisions.

The pathway to net zero emissions requires sustained investment and action across all areas of economic activity, founded on a stable and reliable grid.

We look forward to continuing to work alongside other investors, project developers, cleantech entrepreneurs and all levels of government in this important endeavour.

CEFC COMMITMENTS – THE STORY SO FAR CEFC IN FY19

Please see our FY19 Investment Update for further information.