CEFC gets final investment mandate from government

The Clean Energy Finance Corporation has received its investment mandate from the federal government, providing the controversial $10 billion green investment vehicle with its final guidelines on how to support emerging renewable and low-emission projects through loans, guarantees and equity investments.

The mandate, revealed today, provides the CEFC Board – which is chaired by former Reserve Bank board member Jillian Broadbent – with the government’s expectations of its investment approach and overall corporate performance.

Among the guidelines, the mandate stipulates that the CEFC should make its investment decisions independently of the government; invest responsibly and manage risk to achieve financial self-sufficiency; and be limited to providing $300 million of concessionality in any one financial year.

It also reveals details of the CEFC’s targeted rate of return, suggesting it should achieve a benchmark rate “based on a weighted average of the five-year Australian government bond rate across the portfolio of investments over time.”

The establishment of the CEFC by the Gillard government has sparked much political controversy, with the Coalition repeatedly vowing to dismantle it if elected in September, while shadow finance minister Andrew Robb has described it as a “honeypot to every white-shoe salesman imaginable.”

The fund is set to begin investing on July 2, despite calls from the Tony Abbott-led Opposition for it to cease and desist from any such activity leading up to the September federal election.

In February, CEFC CEO Oliver Yates said the fund had already been in talks with banks interested in projects and was legally obliged to start investing from July, election or no.

“I will be investing when I have available money and I will invest during the election, during the caretaker period, after the election and until such time as I am effectively able to not continue performing my obligations,” Yates told the AFR.

Yates also revealed there were already projects identified as suitable for investment from July 2. “There are a number of firm proposals that people have put on the table and they are predominantly coming from some of the banking groups,” he said.

If elected, however, Abbott has pledged to order the CEFC to suspend its operations while the department of finance prepared legislation to shut it down permanently – a task the Coalition expects will be completed within the first sitting fortnight of Parliament.

The Australian Greens, meanwhile, have argued that the CEFC should be additional to the RET.