Oliver Yates, the head of the newly created and controversial Clean Energy Finance Corporation, says the agency has already attracted interest from more than 150 projects with a total capital cost of more than $10.5 billion in its first two months of operation.
The CEFC was established as part of the Federal Government’s carbon pricing package and will have a total of $10 billion in funds to allocate over a five year period to renewable energy investments, as well as energy efficiency and low emissions projects.
It must, however, deliver a return on its investment, more than the equivalent of the government bond rate. More than that, it must also fight for survival if a Coalition government is elected in September.
CEO Oliver Yates said the CEFC – which officially “opened its doors” in early April after absorbing Low Carbon Australia and expanding its team – was involved in “active discussions” with more than 50 project proponents who were seeking CEFC funding of around $2 billion, and which had total project costs of more than $4.5 billion.
He said the CEFC had have received further proposals from more than 100 additional project proponents seeking CEFC finance of more than $3 billion and with total project costs of over $6 billion. He said the CEFC had “already committed” to concluding some transitions and that list was growing. “There are many aspects of any transaction that need to be concluded before a deal is ‘done’,” he said.
Yates said the CEFC represented a significant opportunity for the public and private sectors to overcome current market failures in clean energy investment at scale and :achieve the type of economic transformation which are required if we are to achieve Australia’s 2020 emissions targets on which both major parties are agreed.
“The CEFCs flexible mandate and commercial approach is a huge advantage and an opportunity to achieve genuine market based change,” Yates said in an interview with RenewEconomy.
However, the Coalition has promised to dissolve the CEFC should it win power in the September 14 federal poll, and is repeating threats that it would not honour contracts written by the CEFC ahead of the official “caretaker period” from August 12.
The Coalition has accused the CEFC on several occasions of wanting to invest in projects that other financial institutions “would not touch”. The approach has echoes of the political posturing in the US, where the Republicans have opposed clean energy support schemes, except where it assists the nuclear or coal industries.
The Coalition has also claimed that the CEFC could make commitments of its entire budget of $10 billion before the caretaker period. On Friday, Yates dismissed this and suggested no more than “a few hundred million” would likely be allocated in that time.
Later, in his response to emailed questions – the full interview can be found here – Yates said the Coalition’s position was based on a bunch of “preconceptions” and a misunderstanding of the CEFC’s aims and how it would operate.
He said there is no basis to claims that the CEFC is providing “low cost high risk loans” that “no other financial institution would provide” or that it was a “lender of last resort”.
He said the CEFC would be taking a “commercial approach” to investment and would be self-sufficient. Its mandate no longer assumed it would be making losses of 7.5 per cent on each investment, and it would not cost “anything like” the $350-450 million per year that the Coalition says it can save by dumping the institution.
“The whole concept of the CEFC was to provide stability and independent market-based decision making for financing development of the clean energy sector,” Yates said.
“The difference between the CEFC and a traditional financial institution is that we don’t seek maximum profits. The CEFC expects to earn a positive, risk-adjusted return for taxpayers from its portfolio of investments higher than the government’s costs of funds and the benchmark rate and is intended to operate as a self-sustaining operation within a few years.
“Our potential to make higher profits helps to secure public policy benefits and reduce the cost of moving to a lower carbon economy. The big difference is that the CEFC has the ability to offer concessional finance where we consider there are real public policy benefits for a transaction to occur.”
Yates also said that repeated Coalition threats to not honour the contracts entered into by the CEFC had raised the threat of sovereign risk, and were not something that any government should be contemplating.
“Imagine a world where every infrastructure project in the country will need to consider an environment that contracts could be ripped up by incoming governments that don’t like the project,” he said. “It is not a world we want in Australia.”
