Investing with commercial rigour
As the nature of CEFC investment commitments continues to evolve, an enduring characteristic of our investment approach is the commercial rigour of our activities. Along with the goal of attracting additional private sector capital into the sector, the CEFC works to deliver a positive return for taxpayers across our portfolio. This focus was particularly important during 2020–21 in the face of the widespread disruption caused by the pandemic.
Capital leverage
Each dollar of CEFC capital committed in 2020–21 attracted an additional $2.68 in private sector finance. This leverage saw the CEFC participate in new investment commitments with a total value of $5 billion, delivering a significant lift in clean energy investment despite the economic challenges of the year. The lifetime leverage of $2.40:$1.00 on CEFC capital took the transaction value of CEFC investment commitments to almost $33 billion to 30 June 2021.
Clean energy technologies
The CEFC Act requires the CEFC to invest in eligible clean energy technologies, including renewable energy, energy efficiency and low emissions technologies. The CEFC is required to ensure that, at any time on or after 1 July 2018, at least half of CEFC funds are invested in renewable energy technologies. At 30 June 2021, investments in renewable energy technologies represented 55.7 per cent of the CEFC on-risk portfolio.
There were no new investment commitments to low emissions technologies in 2019-20. Figures represent lifetime investment commitment.
Repayments and returns
The CEFC investment portfolio received $823 million in repayments and returns during the year, building on the strong performance of $942 million in the previous year. Total repayments since the CEFC began investing were almost $2.5 billion to 30 June 2021, with this capital available for CEFC reinvestment.
Capital deployment
The CEFC continued our strong focus on capital deployment during the pandemic, which is essential to accelerating the delivery of emissions reduction activities. Lifetime deployment reached $7.4 billion to 30 June 2021, including $1.3 billion during the year. As part of the 2020–21 deployment, we were pleased to deploy $175 million in discounted asset finance to some 5,800 smaller-scale projects Australia-wide, making a timely contribution to economic activity and emissions reduction. Our portfolio of on-risk investment commitments reached $6.5 billion at 30 June 2021, reflecting almost $2.5 billion in amortisation and repayments on $9.5 billion in lifetime commitments.
CEFC operations
We returned an operating surplus of $144.5 million (normalised $184.4 million) in 2020–21, reflecting higher revenues from equity investments and reduced operating costs, partially offset by lower interest rates.
Refinancing and restructuring
While the Australian economy avoided some of the worst fears of economic impact due to the pandemic, ABS data showed capital expenditure slowed across the economy, reflecting investor caution particularly in the early part of the financial year. In working closely with clients and co-investors to minimise disruption related to the pandemic and to address lower power prices, the CEFC made additional capital commitments of $410 million to refinancing and restructuring arrangements. These had a particular focus on renewable energy projects, which were adversely impacted by marginal loss factors and lower wholesale electricity prices.
Refinancing may be required as projects are constructed, or following adjustments in the underlying debt and equity mix, in response to heightened market uncertainty. Supporting clients via restructuring and refinancing demonstrates the important role of the CEFC in contributing to the increased flows of finance into the clean energy sector through a changing market cycle.
* Capital returned includes investment principal returned by way of sales, redemptions, repayments and debt amortisation.