Today the Gillard Government is pleased to release the report of the independent Clean Energy Finance Corporation (CEFC) Expert Review, and announce that the Government supports all the recommendations of the report.
The Gillard Government is building a clean energy future which will strengthen our economy and protect our environment, and the CEFC is a vital part of that reform agenda.
In the future the most competitive and most productive economies will be substantially powered by cleaner energy. The CEFC will play a crucial role in driving the investment we need to develop and deploy those new technologies.
The Review Panel, led by Ms Jillian Broadbent AO, was appointed to advise on the design of the $10 billion CEFC, which will provide a new source of finance to renewable energy, low-emissions and energy efficiency technology.
We sincerely thank Ms Broadbent, Mr Ian Moore and Mr David Paradice for their hard work.
The Government announced the CEFC as part of the Clean Energy Future package to encourage private investment and help overcome capital market barriers to commercialising and deploying cleaner energy technologies. The Clean Energy Future package is a comprehensive plan to cut carbon pollution and drive investment in the clean energy technologies that will ensure our economy remains competitive in a low-carbon global economy.
The CEFC will be established through legislation in the coming Budget sittings to enable the CEFC to commence its investment operations from 1 July 2013. The CEFC will bring to bear the utmost rigour in assessing its investments, but will also give effect to its important public policy objectives by facilitating transactions where they may face barriers to private investment.
The CEFC Board, to be appointed by the Government, will be responsible for the management, operational and investment decisions of the CEFC. The Government will provide the CEFC Board with an investment mandate that will set the parameters for its investment management and enable the Board to develop its investment strategy. The Government will not be able to direct the CEFC to make, or refrain from making, an investment. The CEFC Board will operate and make its investment decisions independently of the Government.
The CEFC's operating framework will be based on three principles which will direct where and how the CEFC will invest.
Firstly, the CEFC will focus its investments on Australia's clean energy sector, namely renewable energy, low-emissions and energy efficiency technology, as well as manufacturing companies that produce the required inputs. This will assist the development of the Australian industry to transition our economy towards cleaner energy and expand real options for Australia's energy future.
Secondly, the CEFC will apply commercial rigor to its investment decisions. This requires that investments be developed beyond the research and development stage, have a positive rate of return and have the capacity to repay capital. The CEFC will invest responsibly and manage risk to achieve a target rate of return and ultimately be financially self-sufficient.
Thirdly, the CEFC will examine financial barriers and determine whether an investment can be structured to overcome those barriers. Investment proposals will be assessed on a case-by-case basis. The tools that the CEFC will have at its disposal in tailoring investment are: a capacity to provide funds; changing the allocation of risk amongst participants; lengthening the available duration of loans; and offering an appropriate concessional cost of fund. The terms that the CEFC offer will be the least generous required to enable a project to proceed.
As a part of Clean Energy Future package, the CEFC will complement other Australian Government policies and programs including the Australian Renewable Energy Agency (ARENA) and AusIndustry's Clean Technology Investment Program and the Clean Technology Innovation Program. It will be particularly important for the CEFC and ARENA to maintain an active ongoing dialogue as projects funded by ARENA provide a potential pipeline of projects for the CEFC.
This report is an important step towards establishing a robust and rigorous organisation that will help Australia achieve a clean energy future.
The CEFC Expert Review can be accessed on the CEFC website