The 2022-23 year marked the start of the second decade for the CEFC with important new investment commitments, the further development of its substantial investment portfolio and Australian Parliamentary approval for a significant expansion in its investment capacity.
With access to more than $30 billion to finance the clean energy transition, the CEFC is at the forefront of our efforts to reach net zero emissions by 2050, and to capture the benefits of a low emissions economy for all Australians. This includes through the new $19 billion Rewiring the Nation Fund, the $1 billion Household Energy Upgrades Fund and the $500 million Powering Australia Technology Fund.
The CEFC 2022-23 Annual Report, tabled in the Australian Parliament, reports on this important work, showcasing the impact CEFC investments are having in the market and the leadership its expertise is providing at a crucial time in Australia's race to net zero.
Leadership comments
In his opening letter to the Annual Report, CEFC Chair Steven Skala AO noted:
"Clear-eyed realism tells us that much more needs to be done, by us and by so many others. As a nation we require action at an even more accelerated pace and considerably larger scale, if we are to meet the Australian Government's 2030 targets and deliver on the 2050 net zero ambitions.
"In that context, during the reporting year the CEFC received Australian Parliamentary approval of the first material change to the CEFC Act since we were established, a change to our objective that makes clear the strong expectations of the CEFC in contributing to the achievement of national decarbonisation targets. Parliament subsequently provided the CEFC with additional investment firepower of $20.5 billion to work at the forefront of this nation-building transformation, the organisation's first additional capital allocation since inception. In accepting the related Investment Mandate Direction 2023, the CEFC Board has set the organisation on a much-expanded pathway to delivery and performance."
In his CEO report, Ian Learmonth noted:
"As CEO of an organisation almost entirely focused on decarbonisation, the intersection of these factors was cause for optimism and action in 2022-23, reflected in the scale and pace of new investments, the diligent management of our $7.7 billion portfolio and our considerable efforts in building market capacity. In challenging market conditions, our teams completed 50 new and follow-on transactions, with CEFC commitments of $1.9 billion contributing to transactions with a total value of $11.7 billion, delivering substantial and targeted investment in our net zero future.
"The magnitude of Australia's net zero emissions goals has necessarily placed emphasis on our ability to deliver in a compressed time frame. While there are obvious challenges in an economy-wide transformation of this scale, these pale in comparison to the benefits of a net zero economy. We are encouraged by the shared strength of purpose around decarbonisation, and the commitment to accelerated action. As a specialist investor, we know only too well that action requires a clear and ambitious policy framework, matched by the available capital. The 2030 target of 82 per cent renewables is an important market signal, as is the broader net zero commitment."
New capital, new ambition
Mr Learmonth added: "Achieving net zero emissions by 2050 has put accelerated decarbonisation front and centre in our national debate - for investors, developers, market participants, Governments and consumers. As a specialist investor, we are all too aware of the obvious challenges of an economy-wide transformation of this scale and pace. Equally, these challenges pale against the untapped benefits of a net zero future, where strong investor interest is buoyed by the steady drumbeat of technological advance, both large and small.
"The intersection of these factors is reflected across CEFC activities, as discussed in our Annual Report. The commercial rigour of our first decade will underpin the approach of our second, where we have bigger and more challenging responsibilities and scope, underscored by our expanded $30.5 billion capital allocation. We are excited by the potential of the nation building Rewiring the Nation Fund, and welcome the early support we have received from market, regulatory and government participants in shaping transaction delivery. We are also confident of extending decarbonisation benefits via the new $1 billion Household Energy Upgrades Fund and the new $500 million Powering Australia Technology Fund."
Annual Report highlights
Investment commitments: 2022-23
- CEFC investment commitments in the 2022-23 year reached $1.9 billion, including 30 new and 20 follow‑on transactions across a range of renewable energy, energy efficiency and low emissions technologies.
- Reflecting Australia's ambitious renewable energy goals, the CEFC made a record $1.2 billion in new commitments in renewables in the reporting year. This included working with investors and project developers to help bring forward 14 large‑scale solar, wind and storage projects with a total transaction value of $5.7 billion.
- Large-scale investment commitments featured across property, natural capital, electric vehicles, hydrogen and climate tech opportunities, including a record $54.5 million in new and follow-on commitments via the Clean Energy Innovation Fund.
- Continued growth in the well‑established CEFC co-finance programs in 2022-23, saw CEFC lifetime commitments for these programs exceed $2 billion, providing discounted finance for more than 53,000 eligible smaller-scale emissions reduction projects Australia‑wide, up from 39,500 a year earlier.
Financial outcomes: 2022-23
- Lifetime investment commitments of $12.7 billion from the original $10 billion CEFC capital allocation, delivered almost $50 billion in total transaction value.
- The first year in which capital returned to the CEFC from the private sector, at $1.2 billion, exceeded new deployment, at $929 million, with repayments and capital returns averaging close to $1 billion for each of the past four years.
- To 30 June 2023, the CEFC had drawn a net $4.93 billion from its original $10 billion allocation, including $6.46 billion drawn from, and $1.53 billion returned to, the CEFC Special Account. Investments drawing on the additional $20.5 billion capital allocation are expected to occur during the 2023-24 year.
- Record own-source revenues of $248 million reflected strong portfolio performance and the higher interest rate environment.
Portfolio outcomes: 2022-23
- At 30 June 2023, the portfolio of on‑risk investments reached $7.7 billion, split between debt at 66 per cent and equity at 34 per cent.
- Forecast abatement from 2022-23 commitments was 1.5 Mt CO2-e annually, taking estimated lifetime emissions abatement to more than 240 Mt CO2-e at 30 June 2023.
- Of the 30 new investment commitments in the 2022-23 year, all were assessed as contributing to decarbonisation, with 66 instances where transactions could address material ESG factors, notably climate risk disclosure (16 transactions), industry engagement and collaboration (15) and local job creation and social economic impacts (13).
