The Clean Energy Finance Corporation (CEFC),
Australia's equivalent of the UK Green Investment Bank or the
US CEDA or PREF Programs, is set to be established as an
independent corporation, with secure funding and a flexible mandate
to invest in debt, equity and funds participations. It goes far
beyond its offshore equivalents and is likely to be more of a Green
Future Fund than a Green Bank.
Norton Rose will be holding briefing sessions on the proposed
structure and mandate of the CEFC in Sydney on 11
May and Melbourne on 9 May. If you are
interested in attending one of these sessions please contact
Natalie Hancock (
CEFC in a nutshell
The establishment of the CEFC is a key element of the Australian
Government's implementation of its Clean Energy Future Plan.
Its core focus is to overcome barriers to private sector support
for renewable and clean energy projects and technologies.
The report of the CEFC Expert Review Panel
(Report) was released by the Government on 17
April 2012, with complete acceptance of all 26 of the
recommendations set out in the Report.
The Report recommends that the CEFC operate as an independent
statutory authority, with A$10 bn of pre-authorised Government
funding. It will be an entity that will use a range of debt, equity
and funds-based participations to:
achieve its objective of "facilitating flows of finance
into the clean energy sector";
invest in Australian-based renewable energy, low-emissions and
energy efficiency projects as well as incidental
allocate funding at least equally between renewable energy and
low-emissions/energy efficiency streams;
direct investment in energy efficiency to focus on larger
energy efficiency-focused projects;
apply a "commercial filter" to its investment
consider positive externalities (policy goals) as well as
purely commercial factors;
offer concessional finance through flexibility in availability,
tenor, cost or risk absorption;
favour later-stage projects with renewable energy projects
still being eligible for large-scale generation certificates under
existing Renewable Energy Target (RET) scheme;
seek a positive rate of return at approximately the
Government's bond rate;
favour loans initially rather than equity investments whilst it
builds its capacity;
be efficient, accountable and transparent in its
act through an independent board operating within the
parameters of its investment mandate;
develop and apply a robust risk management and compliance
commence investment operations on 1 July 2013.
The Report also recommends the later consideration of either
absorbing Low Carbon Australia into the CEFC or directing some
aspects of CEFC funding through Low Carbon Australia.
CEFC in context
The Report and Government have confirmed that legislation, which
will include the CEFC's enabling legislation, will provide the
necessary appropriation to secure its A$10 bn of funding. That
legislation is proposed to be tabled in Parliament within the next
3-4 months. There is also an assumption that key existing
Government policies on carbon price and the RET will remain in
In some respects the CEFC will resemble its export finance
cousin, the Export Finance and Insurance Corporation
(EFIC), Australia's export credit agency. EFIC
is a provider of loans, guarantees and other financial support (but
not equity or subsidies) where the commercial market is unable to
assist Australian exporters. It is a statutory authority with an
independent board (albeit with one Government-appointed member) and
provides a commercial return to the Government.
However, quite importantly, EFIC's obligations are expressly
guaranteed by the Commonwealth and it funds itself by issuing debt
securities in local and offshore capital markets. It is not reliant
on appropriations but does operate within debt issuance limits
agreed with the Government. There are some other important
differences that relate to restrictions on the type and amount of
financial support that EFIC can provide, arising in part due to
OECD and WTO requirements. A final, ironic difference is that at
the same time as we see a bold and expansive CEFC initiative being
launched, the Government-appointed Productivity Commission is
likely to recommend a significant reduction in EFIC's mandate.
If implemented, those changes would leave exporters in the
renewable and clean energy sector with no gap funder to assist, as
the CEFC mandate is to be limited to Australian projects and
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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