CEFC Annual Report 2017–18 CEFC

Investing for Impact and Innovation. ANNUAL REPORT 2017–18 CEFC ANNUAL REPORT 2018 [ G ] CEFC CEFC ANNUAL ANNUAL REPORT REPORT 2018 2018 FINANCIALCONTENTS [ 1 ] STATEMENTS [ 1 ]

XX XX

InIn thisthis reportreport

Our capital works across the economy, in a diverse range More than 5,500 projects of projects. for farmers, businesses and manufacturers. Our missionmission 33 Economy Letter ofof transmittaltransmittal 66 Business From ourour ChairChair 88 From ourour CEOCEO 1010

SECTION 11 1414 PERFORMANCE

SECTION 22 6060 GOVERNANCE SECTION 3 82 FINANCIALSECTION 3 82 STATEMENTSFINANCIAL STATEMENTS SECTION 4 142 APPENDICESSECTION 4 142 APPENDICES

Environment Tackling some of Australia’s toughest emissions challenges. Future Backing innovation and new technologies.

Follow us @CEFCAus Follow us @CEFCAus cefc.com.au cefc.com.au

18121_CEFC_AR_eds_Sec1_PPV1.indd 7-1 15/10/2018 5:14 PM FINANCIALCONTENTS [ 1 ] STATEMENTS [ 1 ] [ G ] CEFC CEFC[ G ] CEFC ANNUAL ANNUAL CEFC REPORT REPORTANNUAL ANNUAL 2018 2018 REPORT REPORT 2018 2018 FINANCIALCONTENTS [ 1 ]FINANCIAL STATEMENTSCONTENTS [ 1 ] STATEMENTS [ 1 ] [ 1 ]

XXXX XXXXXX

In thisIn this reportreport

Our capitalOur works capital across works the across the economy, economy,in a diverse in rangea diverse range More than More5,500 than projects 5,500 projects of projects.of projects. for farmers,for businesses farmers, businesses and manufacturers.and manufacturers. Our missionOur mission 3 3 EconomyEconomy Letter ofLetter transmittal of transmittal 6 6 BusinessBusiness From ourFrom Chair our Chair 8 8 From ourFrom CEO our CEO 10 10

SECTIONSECTION 1 1 14 14 PERFORMANCEPERFORMANCE

SECTIONSECTION 2 2 60 60 GOVERNANCEGOVERNANCE

SECTIONSECTION 3 3 82 82 FINANCIALFINANCIAL STATEMENTSSTATEMENTS

SECTIONSECTION 4 4 142 142 APPENDICESAPPENDICES

EnvironmentEnvironment Tackling someTackling of Australia’s some of Australia’s toughest emissionstoughest emissionschallenges. challenges. FutureFuture Backing innovationBacking innovation and and new technologies.new technologies.

Follow us @CEFCAusFollow us @CEFCAus cefc.com.aucefc.com.au

18121_CEFC_AR_eds_Sec1_PPV1.indd18121_CEFC_AR_eds_Sec1_PPV1.indd 7-1 7-1 15/10/2018 15/10/20185:14 PM 5:14 PM [ 2 ] CEFC[ 2 ] CEFC ANNUAL ANNUAL REPORT REPORT 2018 2018

XX

Clean Energy Finance Corporation ABN: 43 669 904 352 For further information please visit cefc.com.au Suite 1702, 1 Bligh Street, Sydney NSW 2000 Level 25, Riparian Plaza, 71 Eagle Street, Brisbane QLD 4000 Level 13, 222 Exhibition Street, Melbourne VIC 3000 PHONE 1300 00 2332 Follow us on Twitter @CEFCAus Contact officer: Mr S G Every Head of Corporate & Government Affairs Clean Energy Finance Corporation [email protected] The Clean Energy Finance Corporation’s Annual and EEO reports are available on our website. © Copyright Clean Energy Finance Corporation 2018 FINANCIALOUR MISSION [ 3 ] STATEMENTS [ 3 ]

XX

To accelerate Australia’s transformation towards a more competitive economy in a carbon constrained world, by acting as a catalyst to increase investment in emissions reduction.

Our mission [ 4 ] CEFC ANNUAL REPORT 2018

CEFC is tackling some of Australia’s toughest emissions challenges by supporting innovative projects, technologies and investment partnerships.

2017-18 year in Our review commitments *since inception

TOTAL CEFC PROJECT 39 $6.6B VALUE TRANSACTIONS OTHER $ FINANCE 19B $2.3B $12.3B NEW COMMITMENTS

Transforming clean energy $6.7B investment TOTAL PROJECT VALUE 2017-18 $2.3B

2016-17 Every $1 of CEFC finance $2.1B matched by an additional 2015-16 $1.80 from the $837M private sector. A YEAR IN REVIEW [ 5 ]

Special investment Clean energy programs technologies: 2017-18 *since inception Renewables SUSTAINABLE CEFC FINANCE CITIES $1.1B $ TOTAL PROJECT VALUE 1.8B $3.1B REEF FUNDING PROGRAM Energy efficiency

CEFC FINANCE $ $944M 326M TOTAL PROJECT VALUE CLEAN ENERGY $3.3B INNOVATION FUND $ Transport CEFC FINANCE 56.2M $100M

TOTAL PROJECT VALUE $100M PORTFOLIO LIFETIME ABATEMENT* Waste-related ~ CEFC FINANCE 190M tCO2-e $127M TOTAL PROJECT VALUE * Once funds are deployed and projects are fully operational $148M [ 6 ] CEFC ANNUAL REPORT 2018

26 September 2018

The Hon Angus Taylor MP Minister for Energy

Senator the Hon Mathias Cormann Minister for Finance and the Public Service

Parliament House Canberra ACT 2600

Dear Ministers

CLEAN ENERGY FINANCE CORPORATION (CEFC) ANNUAL REPORT 2017-18

On behalf of the Board and Management of the CEFC, I am pleased to present the Clean Energy Finance Corporation Annual Report 2017-18.

This Annual Report has been prepared for presentation to the Australian Parliament in accordance with the requirements of the following Acts and their accompanying subordinate legislation:

• Clean Energy Finance Corporation Act 2012 • Public Governance, Performance and Accountability Act 2013.

This Report is comprised of:

• a Report of Operations, including the additional information required by section 74 of the Clean Energy Finance Corporation Act 2012 • the audited Financial Statements and Notes and the Auditor’s Report • mandatory reports under: o section 516A of the Environment Protection and Biodiversity Conservation Act 1999 o Schedule 2, Part 4, section 4 of the Work Health and Safety Act 2011 o section 9 of the Equal Employment Opportunity (Commonwealth Authorities) Act 1987.

This Report was approved by resolution at the 81st meeting of the Board of the CEFC held at the Adelaide Oval, War Memorial Drive, North Adelaide, via delegation of authority to the Chair.

There were no exemptions from reporting requirements sought or granted.

Yours sincerely

Steven Skala AO Chair

cc: The Hon Melissa Price MP Minister for the Environment

Clean Energy Finance Corporation Suite 1702, 1 Bligh Street e [email protected] Sydney NSW 2000 t 1300 002 332 ABN: 43 669 904 352

All rights reserved. No part of this publication may be reproduced, copied, stored in a retrieval system or transmitted in any form or by any means, electronic, photocopying, recording or otherwise, without the prior written permission of the Clean Energy Finance Corporation. ABOUT US [ 7 ]

The CEFC is responsible for investing About us $10 billion in clean energy projects on behalf of the Australian Government.

Our goal is to help lower Australia’s carbon emissions by investing in renewable energy, energy efficiency and low emissions technologies.

We also support innovative start-up companies through the Clean Energy Innovation Fund. Across our portfolio, we invest to deliver a positive return for taxpayers.

Our purpose 1 4

REDUCING SUPPORTING EMISSIONS PRODUCTIVITY GAINS THROUGH ENERGY EFFICIENCY 2 5

REDUCING ENCOURAGING THE COST OF INNOVATION CLEAN ENERGY AND BUILDING TECHNOLOGIES INDUSTRY CAPABILITY

CEFC investment decisions are 3 6 influenced by the public policy BRINGING ENCOURAGING TECHNOLOGICAL PRIVATE SECTOR benefits they bring DIVERSITY INTO FINANCE INTO to the Australian THE ENERGY MIX THE CLEAN economy: ENERGY SECTOR [ 8 ] CEFC ANNUAL REPORT 2018

The year has seen industry seize the challenges and opportunities offered by decarbonisation.

From our Chair I am pleased to commend This means the CEFC will continue the 2017-18 Annual Report to have a significant number of the Clean Energy Finance of opportunities available in its Corporation. investment pipeline.

This, our fifth full year of The CEFC will also continue to investing, has been amongst examine market gaps in clean our most successful to date. energy investment. In all cases this will be done prudently, seeking to The CEFC has a clear charter to meet the challenging objectives be a catalyst for investment in of increasing the flow of finance and financing of clean energy into the clean energy sector, while to achieve the long-term goal achieving a reasonable rate of of decarbonising the Australian return on the CEFC’s capital. economy. We are a global leader amongst institutions of our type. AN ENGAGED BOARD Our methodology is to seek to During the reporting period, crowd in private sector investment the then Responsible Ministers and engage capital markets to the Hon Josh Frydenberg MP, operate effectively in the private and Senator the Hon Mathias energy sector. Cormann substantively refreshed the Board. Leeanne Bond, A record $2.3 billion in new Philip Coffey, Laura Reed, Andrea investment commitments were Slattery, Samantha Tough and made during the year. These Nicola Wakefield Evans all joined investments include marquee the Board and I was appointed projects and highlight that Chair. These Board changes decarbonisation can be achieved were phased in over a period of profitably and effectively six months between August 2017 right across the clean energy and February 2018. Steven Skala AO sector – in renewable energy, Chair energy efficiency, transport and I thank and again acknowledge waste-related projects. The types the service of both the current of underlying assets that attract Board and former Board members CEFC investment commitments Jillian Broadbent AO, Ian Moore, are broad and touch all aspects Anna Skarbek, Andrew Stock of our national economy. and Martijn Wilder AM. I note in particular Paul Binsted, who This year has seen industry seizing continued to serve after the expiry the challenges and opportunities of his term as an adviser to the offered by decarbonisation, and Board’s Audit and Risk Committee accelerating its consideration of and to the Australian Government emerging duties associated with in relation to the Statutory Review. carbon disclosure. The financial markets have also moved in this regard. The question now is not one of direction, but of pace. CHAIRMAN’S LETTER [ 9 ]

After the reporting period, changes Given the finite amount of the to the Ministry meant that the Hon CEFC’s capital ($10 billion plus Josh Frydenberg ceased to be a retained earnings), the run rate at Responsible Minister for the CEFC which the capital is being deployed with the Hon Angus Taylor MP and and the timing when loans are due the Hon Melissa Price assuming his for repayment to the Corporation, portfolio responsibilities. the CEFC is reviewing carefully how it might seek to ‘recycle’ Minister Frydenberg proved a some of its assets to ensure there strong advocate for the work of is no significant constraint on its the CEFC throughout his tenure investment capacity. and I thank him on behalf of the Corporation for his support, In doing so, we are examining how advice and interest in the CEFC potential clean energy investors and its operations. may gain exposure to some of our loan and equity assets, to step in I would also like to thank Minister to some of the CEFC’s partially Cormann for his continued de-risked positions, and thereby support, and ongoing interest in free up capital to enable the CEFC the work of the CEFC; and warmly to make new investments. welcome Ministers Taylor and Price to the portfolio. The scale of Australia’s transition to a decarbonised economy means LOOKING TO THE FUTURE that the power of markets and The CEFC has now made private capital must be employed, cumulative investment and it is our role to catalyse that commitments into the clean private sector investment. energy economy of more than $6.6 billion, to projects with a I thank our staff, our clients total value of $19 billion. and our stakeholders for their continued support, passion and Importantly, these investments are commitment to our work. made up of loans and equity – not grants – and seek to achieve the Australian Government’s cost of funds plus a reasonable margin. Repaid investment principal and retained earnings are available to finance the next cycle of investments. Some $4.7 billion of the CEFC’s original $10 billion in statutory appropriations remains to be invested. [ 10 ] CEFC ANNUAL REPORT 2018

We see a common thread in this activity: a focus on embracing technological innovation to cut energy costs, lower emissions and plan for the long term.

From our CEO Much has changed since the IMPACT AND INNOVATION CEFC began investing in 2013. Our strategy is focused around the From our early days largely key themes of impact, innovation focusing on renewable energy and organisational effectiveness. opportunities, we now see our In addressing financing gaps in the capital working right across clean energy sector, we constantly the economy, in an increasingly adapt our offering to meet the diverse range of projects. needs of this dynamic market. Within a robust governance We see clean energy technologies framework we invest across a wide embraced by home owners range of clean energy subsectors and small businesses; essential and asset classes: infrastructure projects and landmark property developments; –– 2017-18 was a record year for innovative start-ups and renewable energy investment institutional investors with an in Australia as the cost of eye to a sustainable future. renewables continued to decline and proponents raced to In 2017-18, our most active year build out the 2020 Renewable of investment, we see a common Energy Target. We financed thread in this activity: a focus 10 large-scale solar projects on embracing technological and four wind farms in 2017-18, innovation to cut energy costs including projects underpinned and lower emissions. by power purchase agreements as large-scale energy consumers As an investor on behalf of reduced their exposure to high Australian taxpayers, we are power prices. proud to be part of this exciting –– Australia now has a firmly economic transition. CEFC established ecosystem of capital has played a key role in a local and international project

Ian Learmonth $19 billion uplift in clean energy developers, engineers, equipment Chief Executive Officer investments in Australia in just suppliers, advisers, consultants five years, with every dollar of and financial institutions, CEFC investment matched by generating income and jobs $1.80 from other investors. This for the Australian community. is made possible with the vital contribution of our co-investors, –– Integrating variable renewables project developers and others requires significant investment as the CEFC works to deliver in balancing technologies such on our mission to catalyse as pumped hydro, storage, additional finance into the transmission and demand clean energy sector. response. We have financed four large-scale renewables-plus- storage projects, as well as the world’s first fully-integrated wind, solar and battery project. CEO’S REPORT [ 11 ]

–– Energy efficiency performance A RECORD OF STRONG On behalf of the CEFC, is mixed across the economy: GOVERNANCE I acknowledge the exceptional while office and commercial None of the CEFC’s achievements leadership of Ivor Frischknecht, buildings increasingly target would be possible without our ARENA’s founding chief ambitious standards, residential highly skilled and experienced team. executive, and welcome his energy efficiency is improving We ask our people to bring their successor Darren Miller. We are very slowly, and there is a long commercial expertise and market excited by the continued role way to go in industrial energy knowledge to the transformation of our two organisations at the use. We invest in market leading of clean energy markets and heart of Australia’s innovative projects and investment funds I recognise their tremendous clean energy ecosystem. to demonstrate how energy contributions. I also recognise the efficiency can reduce emissions efforts of our departing Chief SHARPENED FOCUS ON and deliver high quality buildings, Governance and Strategy Officer EMISSIONS processes, infrastructure, Kevin Holmes and Chief Investment In the year ahead, we will products and services. Risk Officer Stephen Panizza. sharpen our focus on the –– Electrifying transport is an emissions impact of our important way to tackle growing We bid farewell to our founding investments – from the direct transport emissions and Australia Board members and chair, Jillian carbon reductions of projects is still to embrace the market Broadbent AO during 2017-18 we finance, to the indirect in a meaningful manner. The and welcomed our new chair demonstration benefits of the CEFC particularly focuses Steven Skala AO, and new Board projects and companies we on accelerating the uptake members. The fresh perspectives invest in, and our increasing of electric vehicles and new of our Board continue the CEFC’s focus on biocarbon. charging infrastructure. record of strong governance. While the pace of the clean –– Agriculture emissions are We appreciate the effective energy transition varies from projected to grow as Australia’s working relationships with Minister year to year, our investment population grows and we export for the Environment and Energy pipeline is robust. We look food and fibre to our region and the Hon Josh Frydenberg MP forward to expanding our beyond. We invest in energy and the Minister for Finance work alongside market leading efficient agriculture to cut Senator the Hon Mathias Cormann. businesses, entrepreneurs and methane emissions. We thank Minister Frydenberg developers for the benefit of –– The waste sector also presents an for his support and look forward the Australian community. opportunity. By recovering energy to working with Energy Minister from urban and industrial waste Angus Taylor and Environment and cutting the amount of waste Minister Melissa Price in their that goes into landfill, we can new roles. reduce emissions and provide firm generation capacity. We also appreciate the continued –– Clean energy is an emerging interest in our activities from focus for Australian innovators, many members of the Australian and our venture capital-focused parliament, as well as state and Innovation Fund is helping territory parliaments and agencies. accelerate the commercialisation of exciting low carbon technologies. [ 12 ] CEFC ANNUAL REPORT 2018

Australia’s first Investing across fully integrated Australia wind, solar and battery project $350m for clean DARWINDARWIN energy benefits to the Reef

Helping power Melbourne trams REEF CATCHMENT Sustainability adds up to PILGANGOORAPILGANGOORA Sun-poweredSun-powered shopping Alice SpringsAlice Springs KENNEDY Pumping centre savings ENERGY PARK solar into the grid

LithiumLithium for for UTERNEUTERNE cleanclean energy energy SOLAR PLANTSOLAR PLANT supplysupply chain chain Clean energy DEGRUSSADEGRUSSA AYERSAYERS ROCK ROCK innovators RedRed centre centre RESORTRESORT SolarSolar and and storage storage growsgrows as as solar solar QIC providesprovides remote remote area area centrecentre energyenergy solution solution ENERGY LAB BRISBANE Rail freight Latest turbine replaces SAPPHIRE technology trucks MIRAMIRA WIND FARM Energy SmartSmart LINCOLN GAP from farmingfarming WIND FARM waste technologiestechnologies PERTHPERTH PARKES SOLAR Energy efficiency FARM property makeovers SYDNEY RESOURCECO CARNEGIECARNEGIE Grid-scaleGrid-scale BANNERTON MOOREBANK batterybattery ADELAIDE AA new new wave wave toto boost boost Backing CSIRO ofof ocean ocean EG GROUP, HISOT grid reliabilitygrid reliability ACT innovation technologytechnology DEXUS HWPF WINDLAB ADELAIDE OVAL Second life for lithium-ion batteries MELBOURNE RELECTRIFY CARBON REVOLUTION Lowering transport emissions SustainabilitySustainability 1 MALOP ST getsgets a agood good Howzat! Makeover for historic Geelong healthhealth report report Energy landmark efficient lights GRANVILLE Tasmania wind generation takes off HOBART

*This is a selection only

18121_CEFC_AR_eds_Sec1_PPV1.indd 12-13 16/10/2018 10:33 AM INVESTING ACROSS AUSTRALIA [ 13 ]

Australia’sAustralia’sAustralia’s first first first fullyfullyfully integrated integrated integrated wind,wind,wind, solar solar solar and and and batterybatterybattery project project project $350m$350m$350m for for forclean clean clean DARWINDARWIN energyenergyenergy benefits benefits benefits toto theto the the Reef Reef Reef

HelpingHelpingHelping power power power MelbourneMelbourneMelbourne tramstramstrams REEFREEFREEF CATCHMENTCATCHMENTCATCHMENT SustainabilitySustainabilitySustainability addsaddsadds up up upto to to PILGANGOORAPILGANGOORA Sun-poweredSun-powered shoppingshoppingshopping Alice SpringsAlice Springs KENNEDYKENNEDYKENNEDY PumpingPumpingPumping centrecentrecentre savings savings savings ENERGYENERGYENERGY PARK PARK PARK solarsolarsolar into into into thethethe grid grid grid

LithiumLithium for for UTERNEUTERNE cleanclean energy energy SOLAR PLANTSOLAR PLANT supplysupply chain chain CleanCleanClean energy energy energy DEGRUSSADEGRUSSA AYERSAYERS ROCK ROCK innovatorsinnovatorsinnovators RedRed centre centre RESORTRESORT SolarSolar and and storage storage growsgrows as solaras solar QICQIC QIC providesprovides remote remote area area centrecentre energyenergy solution solution ENERGYENERGYENERGY LAB LAB LAB BRISBANEBRISBANEBRISBANE RailRailRail freight freight freight LatestLatestLatest turbine turbine turbine replacesreplacesreplaces SAPPHIRESAPPHIRESAPPHIRE technologytechnologytechnology truckstruckstrucks MIRAMIRA WINDWINDWIND FARM FARM FARM EnergyEnergyEnergy SmartSmart LINCOLNLINCOLNLINCOLN GAP GAP GAP fromfromfrom farmingfarming WINDWINDWIND FARM FARM FARM wastewastewaste technologiestechnologies PERTHPERTH PARKESPARKESPARKES SOLAR SOLAR SOLAR EnergyEnergyEnergy efficiency efficiency efficiency FARMFARMFARM propertypropertyproperty makeovers makeovers makeovers SYDNEYSYDNEYSYDNEY RESOURCECORESOURCECORESOURCECO CARNEGIECARNEGIE Grid-scaleGrid-scale BANNERTONBANNERTONBANNERTON MOOREBANKMOOREBANKMOOREBANK batterybattery ADELAIDEADELAIDEADELAIDE A newA new wave wave to boostto boost BackingBackingBacking CSIRO CSIRO CSIRO of oceanof ocean EGEG GROUP,EG GROUP, GROUP, HISOT HISOT HISOT grid reliabilitygrid reliability ACTACTACT innovationinnovationinnovation technologytechnology DEXUSDEXUSDEXUS HWPF HWPF HWPF WINDLABWINDLABWINDLAB ADELAIDE ADELAIDE ADELAIDE OVAL OVAL OVAL SecondSecondSecond life life lifefor for forlithium-ion lithium-ion lithium-ion batteries batteries batteries MELBOURNEMELBOURNEMELBOURNE RELECTRIFYRELECTRIFYRELECTRIFY CARBONCARBONCARBON REVOLUTIONREVOLUTIONREVOLUTION LoweringLoweringLowering transport transport transport emissions emissions emissions SustainabilitySustainability 1 MALOP1 MALOP1 MALOP ST ST ST getsgets a good a good Howzat!Howzat!Howzat! MakeoverMakeoverMakeover for for forhistoric historic historic Geelong Geelong Geelong healthhealth report report EnergyEnergyEnergy landmarklandmarklandmark efficientefficientefficient lightslightslights GRANVILLEGRANVILLEGRANVILLE TasmaniaTasmaniaTasmania wind wind wind generationgenerationgeneration takes takes takes off off off HOBARTHOBARTHOBART

*This*This *Thisis ais selection ais selection a selection only only only

18121_CEFC_AR_eds_Sec1_PPV1.indd18121_CEFC_AR_eds_Sec1_PPV1.indd 12-13 12-13 16/10/201816/10/2018 10:33 AM10:33 AM [ 14 ] CEFC ANNUAL REPORT 2018

Section 1 Performance SECTION 1 • PERFORMANCE [ 15 ]

Performance

Investing for impact CEFC FINANCE IN ACTION and innovation 16 Australian first hybrid project 26 Australia’s emissions task 17 Australia’s largest solar investor 28 Clean energy trends 18 Wind powers onto next generation 30 CEFC Strategy 20 Innovative solutions for waste 32 Our investment approach 21 Farmers harvest clean energy benefits 34 Eligible technologies 22 Transforming infrastructure National footprint 23 Australia wide 36

Deep economic impact 24 Built-in clean energy 38

Investment pipeline 25 Asset finance for business, farmers 40

Clean Energy Creating investor options Innovation Fund 44 with green bonds 42

Sustainable Cities Investment Program 46

Reef Funding Program 48

Accelerating the electric vehicle transition 50

Energy relief for manufacturers 51

CEFC commitments 2017-18 52

Annual performance statement 54

Analysis of performance criteria 56 [ 16 ] CEFC ANNUAL REPORT 2018

Investing for impact and innovation.

The CEFC set new records in the number and value of investment commitments in 2017-18, delivering a heightened focus on some of the nation’s toughest emissions challenges through our support for innovative projects, technologies and investment partnerships across Australia.

2017-18 CEFC COMMITMENTS $2.3B

In 2017-18, we maintained our role At 30 June 2018, total CEFC as a leading investor in Australia’s investment commitments since renewable energy sector and inception exceeded $6.6 billion. further extended the impact of our After allowing for fully amortised, investment in emissions reduction repaid or exited, and expired or initiatives in infrastructure, cancelled undrawn commitments, agriculture, property, transport the CEFC investment portfolio and waste. In addition, our venture commitments stood at $5.3 billion, capital finance for innovative a 55 per cent increase on the clean energy companies saw $3.4 billion portfolio a year earlier. continued growth. In five years of investing, CEFC In the 12 months to 30 June 2018, commitments have contributed the CEFC directly committed to clean energy projects to 39 transactions, up from 36 Australia-wide, with a total direct investments in 2016-17. project value of around $19 billion. Total new CEFC commitments in We have directly invested in more 2017-18 were $2.3 billion, up from than 110 individual transactions $2.1 billion in the previous year. and financed more than 5,500 smaller-scale clean energy projects Our commitments in 2017-18 through our partners. included $1.1 billion in renewable energy, $944 million in energy Each dollar of CEFC investment efficiency, $100 million in transport commitments made in 2017-18 and $127 million in waste-related has been matched by more than projects, demonstrating the $1.80 of private sector finance. diversity of our approach to Our portfolio of investment finance and investment. commitments made in 2017-18 is expected to deliver annual cuts to greenhouse gas emissions of more

than 3 million tonnes of CO2-e. SECTION 1 • PERFORMANCE [ 17 ]

Taking into account our full portfolio of investment commitments since 2013, Australia’s lifetime cuts to greenhouse emissions task gas emissions of more than

190 million tonnes of CO2-e are forecast (once funds are deployed and projects are fully operational). The Australian Government has The most recent projections We do not claim that committed to reduce Australia’s from the Department of the abatement associated with emissions by 26 to 28 per cent Environment and Energy show our investment commitments below 2005 levels by 2030 under that the electricity sector occurs independently of the Paris Agreement, as part of currently accounts for 34 per cent complementary government initial international efforts to cap of Australia’s emissions, with policies such as the Renewable any rise in global temperatures to direct combustion (18 per cent), Energy Target. well below 2°C above pre-industrial transport (17 per cent) and levels. In order to achieve this agriculture (13 per cent) the objective, all parties are aiming other major emitting sectors. to pursue net zero global emissions in the second half of this century.

SINCE INCEPTION Figure 1: Australia’s historical emissions and illustrative Annual cuts to trajectories to 2030 – by sector greenhouse gas emissions Mt CO2-e 700

~10.8M tCO2-e 600 2018

500

400 LULUCF SINCE INCEPTION Waste 300 Industrial Lifetime Processes cuts to greenhouse 200 Agriculture gas emissions Fugitives Transport 100 Direct Combustion Electricty 0 ~190M tCO2-e 1990 1995 2000 2005 2010 2015 2020 2025 2030

Source: Australian Government, CEFC. Note: From 2018–2030, illustrative emissions trajectories are in line with an emissions reduction of 28 per cent in each sector. [ 18 ] CEFC ANNUAL REPORT 2018

Clean energy trends.

Australia will require declining emissions in every Corporate PPA sector of economic activity in order to achieve its transactions Paris commitments at least cost. reached

1,700 MW NEW INVESTMENT RENEWABLE INTO LARGE-SCALE ENERGY OUTPUT RENEWABLE WIND $ AND SOLAR ENERGY 8.6B

Electric vehicle sales The electricity system, which purchase agreements (PPA), as represents about a third of national large-scale energy users seek to 2,300 greenhouse gas emissions, is lock in lower long-term electricity NEW VEHICLES undergoing a multi-decade prices, and preference renewable transition – from one dominated energy. Energetics estimates by coal-fired generation to a that corporate PPA transactions portfolio of utility-scale renewable reached as much as 1,700 MW generation, energy storage, of renewable energy output in distributed energy resources 2017-18, up from 1,200 MW a year and flexible thermal capacity earlier, and less than 200 MW linked by a strengthened in 2016-17. transmission network. Small-scale renewables growth The pace of this transition is is at record levels, with capacity accelerating. In 2017-18, Bloomberg being added at an average rate of New Energy Finance reported more than 100 MW each month new investment into large-scale over 2017-18. Small-scale batteries renewable wind and solar energy are allowing households and reached more than $8.6 billion, businesses to integrate on-site compared with $5.4 billion in the renewables and storage to manage previous year. their electricity consumption and reduce costs. Bloomberg New revenue models are also New Energy Finance forecasts emerging. While many new that by 2024, a majority of new renewable energy projects residential solar systems will have offtake arrangements with incorporate storage. electricity retailers, some new capacity is initially operating on a partial or fully merchant basis. Increasingly, projects are underpinned by corporate power SECTION 1 • PERFORMANCE [ 19 ]

Mirvac Indigo Looking beyond the electricity Along with decarbonising the Pavilions Sydney sector, there is evidence of electricity sector, electrifying Olympic Park an accelerating clean energy Australia’s light duty vehicle fleet transition in the property sector. will be central to the achievement The number of new projects of Australia’s emissions reduction certified under the Green Building target. Electric vehicle sales Council of Australia’s Green Star grew strongly in 2017 from an rating scheme, which assesses the exceptionally low base, with nearly sustainable design, construction 2,300 new vehicles sold. While this and operation of buildings, fit- is a welcome trend, electrification outs and communities, continues of the vehicle fleet remains a very to grow. Alongside this growth, substantial challenge, given the the Green Star certified rating of extremely low penetration rates buildings continues to rise, from in Australia today. an average of 4.6 to 5.1 stars over the past decade. An increase in global electric vehicle sales offers promising However, energy efficiency in opportunities for Australia, which residential dwellings is showing has strong potential to play only small signs of improvement. an important role as a global Residential final energy supplier of materials for the clean consumption per person has energy transition such as lithium, declined by an average annual cobalt, nickel and aluminium. rate of 0.8 per cent over the past Lithium production has increased decade, and by 1.1 per cent on a dramatically in response to higher per-dwelling basis. With property prices driven by global demand for representing a substantial part of vehicle batteries. In 2017 alone, the Australia’s emissions reduction production of Western Australian challenge, this is an obvious area spodumene (hard rock lithium for further action. concentrate) soared to almost 1,700 tonnes, up from 400 tonnes As demand management and in 2016. This fourfold increase in behind-the-meter technologies tonnage represented more than improve and become cheaper, we $800 million in value according anticipate increased investment to the Western Australian in such measures to improve Department of Mines, Industry household energy efficiency, both Regulation and Safety. to reduce overall consumption and emissions, and better manage rising energy costs. [ 20 ] CEFC ANNUAL REPORT 2018

Since we began investing, the CEFC CEFC has financed a broad range of Strategy businesses and projects that will help reduce emissions across the Australian economy.

Our track record is sound, and we adopt a flexible approach to our activities to meet the evolving needs of clients and stakeholders. Our strategy is built around the key themes of impact, innovation and organisational effectiveness.

Organisational Impact Innovation effectiveness

INCREASING THE DEVELOP ATTRACTING AND IMPACT OF OUR INNOVATIVE RETAINING THE INVESTMENT INVESTMENT RIGHT PEOPLE ACTIVITIES SOLUTIONS

We focus on increasing the We develop innovative Attracting and retaining the impact of our investment investment solutions within right people is essential to activities, to accelerate our core portfolio to meet increasing the impact of the transition to lower business and industry needs our investment activities, emissions. across diverse economic as well as ensuring we sectors and geographies. have effective systems This includes catalysing and an outstanding risk additional private sector We also support innovative management framework. capital into clean energy clean energy businesses solutions, supporting and venture capital markets In addition to investing in nationally-significant through the Clean Energy our people, we continue infrastructure projects Innovation Fund. We to invest in improved that underpin our energy continue to develop our business systems and transition and using capacity to actively manage organisational processes our experience and assets and recycle capital to to support our investment economic reach to deepen ensure we are able to meet activities in an efficient and understanding of clean the needs of the market effective manner. energy alternatives. and facilitate continued investment in technologically and geographically-diverse projects and businesses. SECTION 1 • PERFORMANCE [ 21 ]

As an experienced and specialist investor, Our the CEFC recognises that the transition to investment a low emissions economy will be achieved approach through a mix of technologies, alongside centralised and decentralised lower-carbon electricity generation.

We have a particular focus on low carbon electricity, with the CEFC Act requiring that at least half of the CEFC funds invested for the purposes of our investment function are invested in renewable energy technologies from 1 July 2018. 1 3 Our strategic investment approach focuses LOW CARBON TRANSPORT on addressing the ELECTRICITY main sources of carbon emissions in the Australian economy, across four Low carbon electricity: Transport: moving from ‘decarbonisation through the increased fossil fuels to lower pathways’* deployment of clean emissions fuel sources such energy technologies, as bio-fuels, particularly in including storage the transport sector 2 4

ENERGY BIO-SEQUESTRATION EFFICIENCY AND OTHER EMISSIONS REDUCTIONS ACTIVITIES

Energy efficiency: Bio-sequestration and other delivered across all emissions reductions activities: economic sectors to including reducing waste to substantially lower landfill and adopting lower * As discussed in ClimateWorks energy intensity emissions practices within Australia research the supply chain. [ 22 ] CEFC ANNUAL REPORT 2018

Eligible technologies.

TOTAL COMMITMENTS The CEFC Act requires the CEFC to invest in SINCE INCEPTION eligible clean energy technologies, including renewable energy, energy efficiency and low $ emissions technologies. The CEFC Act also requires the CEFC commitments in 2017-18 3.6B CEFC to ensure that, at any time included $1.1 billion in renewable on or after 1 July 2018, at least energy, $944 million in energy RENEWABLE half of the CEFC funds invested efficiency, $100 million in ENERGY at that time for the purposes of its transport and $127 million investment function are invested in waste-related projects. in renewable energy technologies. At 30 June 2018, 53 per cent Renewable energy related of CEFC’s funds invested investments during 2017-18 were invested in renewable included 10 large-scale solar $ energy technologies. projects and four wind farms, to deliver an additional 1,100MW 3.0B Since inception to 30 June 2018, in clean energy capacity the CEFC had committed a Australia-wide. Substantial ENERGY EFFICIENCY total of $3.6 billion to renewable commitments to energy efficiency AND LOW EMISSIONS energy, and $3.0 billion to featured projects in property, TECHNOLOGIES energy efficiency and low infrastructure and agriculture. emissions technologies. We also delivered an increased focus on non-energy related emissions, particularly those produced by waste and landfill. SECTION 1 • PERFORMANCE [ 23 ]

National footprint.

The CEFC has a strong commitment to extend the geographic reach of our finance.

We have a national focus and For the same period, national The CEFC remains committed to seek to identify and respond commitments (where CEFC extending the geographic reach of to clean energy opportunities finance has potential to be our finance. Our largest investment Australia-wide. deployed nation-wide) reached in Tasmania, $59 million for the $2.9 billion, across more than Granville Harbour Wind Farm, Since inception, the total value 40 transactions. This brings reached financial close just after of CEFC commitments specific together smaller-scale clean year end, and is therefore not to each state and territory, energy investments via our asset fully reflected in 2017-18 figures. reached $3.7 billion, excluding financing programs, as well as We are also considering a number national-level investments. CEFC commitments in climate of opportunities in Western bonds and equity funds with a Australia and South Australia, specialist clean energy focus. complementing the recent strong levels of renewable energy-related investments in Queensland and Victoria.

Total value of CEFC commitments since inception

$1.4B $892M $775.2M $412.6M

NEW SOUTH VICTORIA QUEENSLAND SOUTH WALES AUSTRALIA

$153.5M $53.9M $20M $10.3M

WESTERN TASMANIA NORTHERN AUSTRALIAN AUSTRALIA TERRITORY CAPITAL TERRITORY [ 24 ] CEFC ANNUAL REPORT 2018

Deep economic impact

The CEFC has a broad role in These commitments are catalysing additional private sector characterised by accelerated investment to reduce the carbon emissions reduction targets, higher intensity of the economy. technology and construction standards, and the creation of new This can occur through changes mechanisms to share insights and in production processes within performance with other asset industries, using proven owners and operators. Collectively, technologies to transition to lower they seek to encourage best-in- emissions and renewable energy. class approaches to accelerating the achievement of lower emissions. While it is not possible for the These fund managers have a CEFC to directly influence the strong commitment to emissions emissions and energy profile reduction and, alongside the of every asset in the economy, CEFC, are investing for the long in 2017-18 we stepped up our term to embed clean energy engagement with industry technologies across large and leaders, providing finance for complex portfolios. market-leading exemplar projects The CEFC which have the added benefit of This investment approach is an has made providing practical insights for innovative way for the CEFC to others to adopt. maximise the impact of our capital. substantial It is also an important way to investment The CEFC has made substantial support the development of new commitments investment commitments in and innovative investment vehicles agribusiness, infrastructure, to meet the growing appetite for in agribusiness, transport and property funds sustainable investment. infrastructure, including partnerships with leading transport and sustainability-focused companies, including Dexus, IFM Australia, property funds Lendlease, Macquarie Group and projects. and Mirvac. SECTION 1 • PERFORMANCE [ 25 ]

Investment pipeline.

The CEFC is active in the market, with our specialist Investment team working with a range of project proponents and potential investors to accelerate investment in clean energy projects.

An important part of this We recognise that not all these market engagement is to projects will ultimately be financed increase understanding about by the CEFC, either because they the technologies and solutions secure private sector finance, available to reduce emissions and are deferred, or do not meet the lower energy consumption. investment requirements of the CEFC. Nevertheless, this pipeline This has contributed to a robust is a strong signal of broad investor pipeline of opportunities. and business confidence in the At 30 June 2018, the CEFC positive potential of clean energy was considering more than 120 technologies and projects. potential investment opportunities. Together, these projects are seeking more than $8.5 billion in CEFC finance, representing total investment value in excess of $52 billion. 120 $8.5B $50B POTENTIAL POTENTIAL POTENTIAL TOTAL INVESTMENT CEFC FINANCE INVESTMENT OPPORTUNITIES COMMITMENT VALUE [ 26 ] CEFC ANNUAL REPORT 2018

Australian Demonstrating the first hybrid project bankability of large-scale hybrid projects. SECTION 1 • PERFORMANCE [ 27 ] $94M INVESTING IN AUSTRALIA’S FIRST FULLY-INTEGRATED WIND, SOLAR AND BATTERY PROJECT

The CEFC is investing $94 million in Australia’s first fully integrated wind, solar and battery project, at the central north Queensland Kennedy Energy Park. The project is being developed by Windlab and Eurus Energy.

The 60MW hybrid renewable energy project will connect to the local grid, providing electricity to communities from Julia Creek to Charters Towers, more than 500 kilometres away.

The landmark project creates a new model for renewable energy that brings together the benefits of wind, solar and battery storage to overcome grid intermittency and improve reliability. Financing three separate technologies on one site was a complex undertaking that had not previously been achieved in Australia.

As the sole debt financier for the project, the CEFC goal was to demonstrate the bankability of large-scale, integrated hybrid renewable energy projects for the future. We expect such projects to become an increasingly important part of Australia’s electricity system, with complementary battery storage addressing the intermittency of wind and solar generation in order to support grid stability.

Canberra-based Windlab is an innovative Australian company that uses world leading atmospheric modelling and wind energy assessment technology originally developed by the CSIRO. The CEFC had previously provided Windlab with a corporate facility of up to $8 million in corporate finance to assist the company with its continued expansion from a project developer to an integrated developer, owner and manager of renewable energy assets. [ 28 ] CEFC ANNUAL REPORT 2018

Australia’s Our finance continues largest solar investor to fill a private sector financing gap.

Since inception, CEFC finance has helped accelerate the delivery of more than 1GW in additional solar energy – equating to enough electricity to power about 375,000 average homes – with projects in Queensland, New South Wales, Victoria and the Northern Territory.

While total CEFC solar investments represent just one per cent of Australia’s total electricity generation, they represent a substantial reduction in carbon emissions, of around 1.8 million tonnes annually, making an important contribution to Australia’s overall emissions reduction goals.

Despite the welcome increase in private sector investment in large-scale solar projects, CEFC finance remains necessary to fill a gap in investor appetite for projects that are in the process of finalising power purchase agreements, or which have entered power purchase agreements with corporates or other offtakers outside the large investment grade energy companies.

Australia’s large-scale solar market continues to mature, with growing interest from private sector financiers in refinancing projects once they are contracted and/or operational, because of the perceived lower investment risk.

For a project sponsor, refinancing may offer the opportunity to borrow at a reduced cost once the project has achieved commissioning and a contracted revenue stream. The CEFC’s role as an ‘interim’ financier is helping to ultimately crowd in additional private sector investment to support the sector’s continued development. SECTION 1 • PERFORMANCE [ 29 ] 1GW CEFC FINANCED SOLAR CUTTING 1.8M tCO2-e EACH YEAR

Victoria’s largest solar farm, the 88MW SOLAR-POWERED Bannerton Solar Park, is located in the state’s Sunraysia district, on an almond orchard no TRAMS longer suitable for planting. The development is drawing on $98 million in CEFC finance, with equity investment from the Foresight Solar Fund and Korean investors. A significant proportion CEFC of its projected output is already contracted COMMITMENT to Alinta Energy, as well as the Victorian $ Government, which plans to use solar power 98M for Melbourne’s iconic tram network.

The 150MW Daydream and 50MW Hayman solar farms in Queensland reflect the CEFC’s focus on SOLAR SOLUTIONS delivering clean energy solutions in the Great Barrier FOR THE REEF Reef catchment area. The projects, located in a former coal mining hub, take advantage of the area’s high insolation rates to accelerate the low emissions transformation of the electricity grid. The CEFC CEFC finance of $90 million is part of a syndicated debt COMMITMENT facility, alongside the Commonwealth Bank and $ French investment bank Natixis. BlackRock Real 90M Assets is an equity investor.

The 150MW Coleambally Solar Farm is part of the emerging solar generation belt in regional NSW. NSW SOLAR While NSW has the largest electricity demand GENERATION BELT in Australia, it has a relatively low penetration of large-scale solar generation. The project is expected to abate about 300,000 tonnes of carbon emissions annually. Developer Neoen Australia secured CEFC $30 million in CEFC finance, and has contracted COMMITMENT 70 per cent of the project output to EnergyAustralia. $30M [ 30 ] CEFC ANNUAL REPORT 2018

Wind Our finance has delivered a powers onto next substantial increase in new generation wind generating capacity.

CEFC has contributed to a substantial increase in new wind generating capacity in Australia since 2013, contributing to the establishment of a robust ecosystem of local and international project developers, engineers, contractors, advisors and financial institutions.

Three wind investments in 2017-18 took total CEFC finance for wind since 2013 to more than $700 million, catalysing an additional $3.1 billion in private sector capital investment, and accelerating the development of more than 1,650MW of additional renewable energy capacity. Just after year end, the CEFC committed a further $59 million to the 112MW Granville Harbour Wind Farm, to deliver a one third increase in Tasmania’s wind capacity.

During the year, the levelised cost of wind generation continued to decrease, the result of lower up-front installation costs and longer turbine design lives. We also saw increased turbine size, reflecting advancements in rotor design, blade lengths and hub heights.

The CEFC continues to play an important counter-cyclical role in investment in the sector, helping maintain industry momentum and capacity through periods of weaker or changing market sentiment. While this peaked in 2014-15, with the CEFC delivering 90 per cent of new investment in wind generating assets, new investment in 2017-18 demonstrated the continuing need for CEFC finance for project delivery.

Despite the increasing maturity of the wind sector in Australia, the financing appetite for materially uncontracted projects remains a challenge, requiring a continuing role for the CEFC in contributing to developer and investor confidence in financing these projects to support continued investment.

CEFC finance is also supporting increasing interest in frequency control and battery storage technologies to improve grid stability. SECTION 1 • PERFORMANCE [ 31 ] $700M CEFC COMMITMENTS IN WIND

The $250 million Crudine Ridge Wind Farm is being developed by CWP Renewables and Partners Group, BENEFITING LOCAL with the CEFC participating in a $113 million senior debt COMMUNITIES facility. The central west New South Wales wind farm has a partial energy offtake agreement with Meridian Energy Australia, owner of retailer Powershop. The project will contribute more than $168,000 per year to Community CEFC Enhancement Funds. In addition, 19 host landowners COMMITMENT will benefit from rental income throughout the life of the $ project, with neighbour agreements helping distribute 37M funds to others in the local community.

Stage One of the 212MW Lincoln Gap wind farm, in South Australia’s Port Augusta region, includes a 10MW WIND-POWERED battery energy storage system, capable of producing up BATTERY STORAGE to 10MWh of fast response storage capacity. The project, being developed by Nexif Energy Australia, draws on $150 million in CEFC debt finance. It complements other large-scale battery projects in South Australia, including CEFC the Tesla/NEOEN 100MW battery and ElectraNet 30MW COMMITMENT battery on the York Peninsula. The project has a long- $ term offtake agreement with Snowy Hydro. It is the 150M first Australia project to have secured debt finance for a grid-connected large-scale battery component on a non-subsidised basis.

The 112MW Granville Harbour Wind Farm, on Tasmania’s west coast, will deliver a one third increase in Tasmania’s LARGEST TASMANIA wind generating capacity. The $280 million development INVESTMENT has a long-term power purchase agreement with Hydro Tasmania, which is exploring opportunities to become a net exporter of clean energy to the Australian mainland through its ‘battery of the nation’ project. The CEFC CEFC investment commitment of $59 million was announced COMMITMENT just after year end. $59M [ 32 ] CEFC ANNUAL REPORT 2018

Innovative We strongly endorse the solutions for waste waste hierarchy and the principle of avoiding and reducing waste at the source.

Australia generates around 64 million tonnes of waste a year, with as much as 40 per cent of this ending up as landfill where it produces methane emissions which have a global warming potential more than 25 times stronger than that of carbon dioxide.

Australia’s waste sector is undergoing an important transition, requiring significant investment in infrastructure and equipment, including upgrades to existing assets, as well as the installation of new assets.

By focusing on clean energy technologies, these investments can reduce emissions by diverting waste from landfill, as well as help ensure that waste processing and resource recovery operations are as energy efficient as possible.

The CEFC strongly endorses the waste hierarchy and the principle of avoiding and reducing waste at the source. Our finance is about effectively managing the remaining waste and investing in proven technologies to repurpose it, including as compost and alternative fuels.

We also see a growing commercial opportunity for resource recovery, reinforced by tightening state government landfill regulations. With investment in proven technologies, companies can turn urban and industrial waste into new energy sources, creating an important revenue stream while also reducing landfill gas emissions.

In this way Australia can develop a circular economy, with strong domestic markets for recyclable materials, and products made from recycled material. SECTION 1 • PERFORMANCE [ 33 ] 64M TONNES OF WASTE GENERATED IN AUSTRALIA EACH YEAR

The CEFC has committed up to $38 million to Melbourne’s South Eastern Organics Processing Facility, to process household garden COMPOST and food waste from kerbside green waste collections. Sacyr Group’s FROM FOOD, state-of-the-art facility, which is under construction, will produce 50,000 GARDEN WASTE tonnes of high grade compost each year. With an annual processing capacity of 120,000 tonnes of waste, it is expected to abate more than 65,000 tonnes of CO₂-e emissions a year – cutting 85 per cent of the CEFC emissions the waste would have generated in landfill. COMMITMENT $38M

Leading Australian waste management company Cleanaway is accelerating its best practice sustainable waste management activities FAST TRACKING with an array of projects drawing on a $90 million corporate loan LANDFILL from the CEFC. Cleanaway operates a national network of waste SOLUTIONS collection, processing, treatment and landfill assets from more than 260 locations. The company is fast tracking a range of eligible projects, including facilities for organics processing and resource recovery, as CEFC well as landfill gas projects, to achieve better environmental, social COMMITMENT and economic outcomes. $90M

During the year we were pleased to see the opening of a new resource recovery facility in western Sydney, which is transforming commercial PROCESSED and industrial waste into an alternative renewable fuel source. The ENGINEERED FUEL plant, co-owned by Cleanaway and ResourceCo, produces Processed Engineered Fuel (PEF), drawing on $30 million in CEFC finance. The plant is licensed to process 250,000 tonnes of waste a year. Over the lifetime of the equipment, the plant is expected to abate over 4 million CEFC tonnes of carbon emissions. The PEF is used by the Berrima Cement COMMITMENT Works in NSW, with ResourceCo also targeting markets in Asia. $30M [ 34 ] CEFC ANNUAL REPORT 2018

Farmers We have a long track record harvest clean energy of extending the benefits benefits of clean energy to farmers and agribusinesses.

Agribusiness plays a critical role across the Australian economy, with a well-earned reputation for quality produce, innovative production methods and local employment opportunities – whether producing for the domestic market or extending into the highly competitive global market. This track record makes agribusinesses ideally-suited to capitalise on the growing wave of energy efficient and clean energy technology. In 2017-18 the CEFC committed $100 million to an agricultural portfolio managed by Macquarie Infrastructure and Real Assets (MIRA) to contribute to on-farm energy efficiency and sustainability in large-scale row cropping assets, such as wheat and other grains, and permanent crops including avocados. A key feature of the CEFC investment is the establishment of a specialist Energy, Emissions and Efficiency Advisory Committee, 3EAC to bring together the skills of the CSIRO, MIRA and the CEFC. 3EAC will support new on-farm standards in energy efficiency and emissions reduction. Central to this will be the development of a benchmarking tool to enable the establishment of emissions and energy baselines which will allow annual improvement targets to be established. It will also develop clean energy models targeted for broader use in the farming sector. The CEFC investment will contribute to sustainable on-farm asset management practices, with MIRA investing in farms across multiple climatic zones, production regions and end markets. The technology-driven whole-of-farm approach will incorporate the full range of precision agriculture and other sustainable farm management practices. The goal is to achieve reduced energy intensity on a per unit of production basis and to deliver improved financial and environmental efficiency. MIRA has begun implementing energy efficiency measures across seven property aggregations, situated in New South Wales and Western Australia, including a 14,553 hectare row cropping property, The Grange. SECTION 1 • PERFORMANCE [ 35 ] +870 AGRICULTURE PROJECTS FINANCED AUSTRALIA-WIDE

GPS GUIDED ZERO TILLAGE CLEAN ENERGY MACHINERY AND STUBBLE SOLUTIONS IN RETENTION AGRICULTURE GPS guided machinery: Zero tillage and which results in fewer stubble retention: to passes of a field to maintain soil health, minimise inputs increase water retention

SWATH CONTROLLED VARIABLE RATE CONTROL TRAFFIC APPLICATION

Swath control: Controlled traffic: Variable rate featuring on board eg uniform machinery application: for precise computing for widths, to reduce seed, chemical and improved overlapping crop, soil damage, fertiliser use fertilizer application fuel usage and planting

REDUCED USE LOWER ENERGY IMPROVED OF FERTILISERS CONSUMPTION ON-FARM PRACTICES

Reduced use Lower energy Improved on-farm of fertilisers: through consumption: with practices: including land mapping more efficient processes reduced energy, and GPS-enabled for key inputs water and diesel machinery consumption

The CEFC has a long track record in extending the benefits of clean energy to individual farmers and agribusinesses through our co-financing programs. Since we began investing in 2013, $260 million in CEFC finance has supported investment in more than 870 agriculture projects to facilitate the uptake of solar PV, lower emissions farm equipment, energy efficient machinery upgrades and biomass energy-from-waste. [ 36 ] CEFC ANNUAL REPORT 2018

Transforming We support best practice infrastructure Australia wide and market leading design, construction and operations.

The infrastructure sector accounts for almost half of Australia’s total greenhouse gas emissions, driven largely by fossil fuel consumption in energy generation and passenger and freight transport. As institutional investors increasingly consider environmental, social and governance factors in their investment decisions, infrastructure owners face new challenges in the way they manage the energy profile of their assets.

As a specialist financier, we have committed $450 million to infrastructure projects to help drive investment decisions that lower emissions while meeting the evolving needs of investors.

We support best practice and market leading design, construction and operations, financing measures to enable an increased focus on renewable energy and energy efficiency technologies at the individual asset level. This includes the development of investment policies which support net zero emissions outcomes.

We also encourage increased transparency around emissions performance, via asset-level energy and emissions performance reporting and benchmarking against internationally-accepted Science Based Targets.

The CEFC invests in infrastructure projects as part of the Sustainable Cities Investment Program. SECTION 1 • PERFORMANCE [ 37 ] $450M BETTER INFRASTRUCTURE FOR BETTER CITIES

The IFM Australian Infrastructure Fund has Australia’s largest portfolio of high-quality infrastructure assets ECONOMIC including Ausgrid, Brisbane Airport, Melbourne Airport, INFRASTRUCTURE Sydney’s Port Botany and the Port of Brisbane. The fund is targeting comprehensive and sustained improvements to the carbon footprint of the assets, while enhancing benchmarks and transparency around infrastructure emissions to deliver a step change in the emissions profile of infrastructure. CEFC COMMITMENT $150M

Leading alternative asset growth manager Morrison & Co launched a $1 billion infrastructure fund to spearhead SOCIAL AND clean energy standards across social and economic ECONOMIC infrastructure assets. The fund will acquire and develop a INFRASTRUCTURE diverse range of essential assets where there is potential for significant improvements in their energy efficiency profile. Assets may include hospitals, data centres, retirement and aged care accommodation, student housing and renewable energy.

CEFC COMMITMENT $150M [ 38 ] CEFC ANNUAL REPORT 2018

Built-in Our new commitments clean energy covered hospitals and healthcare, shopping centres, hotels, masterplanned residential communities, student accommodation and commercial-scale precincts.

There are compelling reasons to improve the energy profile of Australia’s built environment. Energy efficient buildings using proven clean energy technologies reduce stress on the electricity network, lower electricity consumption, and support a least-cost pathway to net zero emissions, improving health and resilience outcomes for households and businesses.

With the property sector contributing nearly 25 per cent of greenhouse gas emissions in Australia, it is an important area of focus for the CEFC. Since we began investing we have committed more than $1 billion to property projects valued at $3.7 billion.

In 2017-18 our property-related investment commitments targeted ‘demonstration’ projects with the ability to deliver best-in-class performance around energy efficiency and the integration of renewable energy into new and existing buildings.

Our new commitments covered hospitals and healthcare, shopping centres, hotels, masterplanned residential communities and commercial-scale precincts. These subsectors all have significant potential to unlock emissions reductions and cost savings through an increased focus on sustainability.

During the year we were pleased to see progress on earlier commitments in the sector. In Geelong, Quintessential Equity completed the landmark 1 Malop Street development, which used CEFC finance to achieve a 5.5 NABERS energy rating (excluding green power). Community and affordable housing provider SGCH completed the construction of 80 energy efficient homes in Sydney, drawing on CEFC finance to deliver a range of benefits, including glazed windows, high performance insulation, ceiling fans to reduce the need for artificial cooling and heating.

The CEFC invests in property-related projects as part of the Sustainable Cities Investment Program. SECTION 1 • PERFORMANCE [ 39 ] $1B CEFC COMMITMENTS TO PROPERTY

The Healthcare Wholesale Property Fund will own Australia’s first portfolio of hospital and healthcare assets A CLEAN BILL to have environmentally sustainable development and OF HEALTH operations. A focus on medical facilities in Adelaide and Sydney are among those to set new standards in energy efficiency. The fund is targeting emissions reductions of CEFC 45 per cent, drawing on $100 million in CEFC investment. COMMITMENT $100M

First and new home buyers in Sydney and Brisbane will CLEAN TECH HOMES have access to state-of-the-art clean energy homes of the future. Three Mirvac master-planned communities will have OF THE FUTURE built-in solar PV plus battery storage, high-grade insulation, LED lighting and energy efficient appliances. CEFC finance of $90 million aims to deliver a lifetime of lower energy CEFC costs and carbon emissions for residents. COMMITMENT $90M

Lendlease is targeting a new standard of sustainability in MELBOURNE large-scale commercial precincts, aiming to deliver net zero emissions in a $4.5 billion commercial property portfolio QUARTER LEADS as early as 2025. The portfolio includes commercial developments in the new Melbourne Quarter precinct, in the heart of the city’s CBD, which will include best practice CEFC energy efficiency measures. COMMITMENT $100M [ 40 ] CEFC ANNUAL REPORT 2018

Asset finance We continue to deliver the for business, farmers benefits of clean energy to energy users, whether on the farm, in households, on the road or in a factory.

Since we began investing, the CEFC has made more than $1 billion in finance available for smaller-scale projects. SECTION 1 • PERFORMANCE [ 41 ] 5,500 SMALLER SCALE CLEAN ENERGY INVESTMENTS

The CEFC has a strong focus Reflecting the significant Since we began investing, the on extending the reach of our challenge posed by CEFC has made more than finance to support investment transport-related emissions, $1 billion in finance available to in smaller-scale clean energy these asset finance programs smaller-scale projects through projects. Through our asset have helped to catalyse a these asset finance programs. co-finance programs with marked increase in the transition This approach to co-financing the major banks, specialised to electric and hybrid passenger has proved very successful. lenders and funds, we continue and light commercial vehicles, While we expect the finance to deliver the benefits of clean with more than 540 vehicles for some programs to be energy to energy users, whether financed to date. fully deployed during 2018-19, on the farm, in households, on Eligible projects range from others will continue. We see an the road or in a factory. small-scale rooftop solar and important ongoing role for CEFC We are proud to have helped battery storage, to energy finance to support smaller-scale finance more than 5,500 efficient manufacturing and farm investments in clean energy individual projects, involving equipment, as well as improved assets and are exploring farmers, small businesses, building insulation, heating and additional opportunities with manufacturers, building owners cooling, demand management co-financiers to establish and community facilities. These systems and low emissions or the next iteration of these investments are made via the electric light vehicles. innovative partnerships. wholesale debt facilities we provide to our co-financiers, The co-finance programs remain who use that capital to provide an efficient, effective and timely low cost finance to borrowers mechanism to enable a large investing in smaller-scale number of Australian households clean energy assets around and businesses to draw on the country. CEFC finance. Throughout 2017-18, we saw At the same time, they a substantial increase in the encourage increased investment number of projects financed in clean energy technologies, through these programs. by incentivising borrowers to Projects range from $10,000 preference best in class clean to $5 million, with an average energy assets when considering investment of $125,000. new equipment purchases, property fit outs and vehicles. [ 42 ] CEFC ANNUAL REPORT 2018

Creating We expect to see investor options with increasingly diverse green bonds “green” investment options.

As fund managers become more familiar with green bonds, we can expect to see increasingly diverse investment options. SECTION 1 • PERFORMANCE [ 43 ] 11 GREEN BOND INVESTMENTS

The CEFC sees the green bond market With international superannuation and as a central mechanism to capitalise on pension funds recognising the long-term growing interest from superannuation and consistent returns available from funds and managers seeking to deepen investing in large-scale renewable energy their exposure to sustainable assets. projects, this investment encourages We have been a material investor in the a similar approach from Australian market since we began investing in 2013, superannuation funds. Given their size, having invested across a range of issuers superannuation funds can help underpin in 11 transactions. future clean energy investment, as well as capture the value of Australia’s growing In 2017-18, we made a $25 million renewable energy infrastructure to cornerstone investment in the first ever benefit their members. green tranche of an Australian residential mortgage backed bond. The NAB Class The emergence of the securitisation of A1-G Notes were certified by the Climate green consumer loans in Australia has Bonds Initiative (CBI) as meeting its Low resulted in increased availability of green Carbon Buildings criteria. consumer lending products. In the long run, we anticipate further innovation in In a separate innovative financing consumer lending products that will drive offering, the CEFC made a $90 million better energy efficiency outcomes for cornerstone investment in the Australian households. $200 million NAB Low Carbon Shared Portfolio, backed by senior loans to seven As fund managers become more familiar wind and large-scale solar assets. with green bonds, we can expect to see increasingly diverse investment options, The portfolio creates an opportunity further broadening the investor appeal for institutional investors to participate and catalysing additional finance into in the renewable energy sector even clean energy transaction. though they may not be able to enter into individual project financing transactions. [ 44 ] CEFC ANNUAL REPORT 2018

Clean Energy Innovation Fund.

The CEFC is now well established The Innovation Fund targets as Australia’s largest dedicated technologies and businesses that investor in clean energy innovation. have passed the research and Early stage Through the $200 million development stage, and which can innovation Innovation Fund, we support benefit from early stage or growth the growth of an exciting range capital to help them progress of innovative clean energy their development. Through our cornerstone technologies and businesses investment in the Australian-first which are critical to Australia’s We invest in companies with Clean Energy Seed Fund clean energy transformation. experienced and capable managed by Artesian, the management teams, a competitive Innovation Fund is supporting The Innovation Fund targets edge in technology and innovation very early stage innovators venture capital-like longer-term and the potential for both through business incubators capital returns. domestic and global market such as EnergyLab, Australia’s application of their technologies. first dedicated clean energy Having reviewed many hundreds These companies illustrate the accelerator program. of high quality clean energy strength of Australian innovation innovation opportunities, we have in the clean energy space, and are In 2017-18, EnergyLab tripled its committed venture capital of more pursuing diverse opportunities – intake of start-ups, including its than $56 million to nine companies including behind-the-meter and first Brisbane base, offering office in the 18 months since the storage technologies, and low space, financial and mentoring Innovation Fund began investing. emissions transport solutions. support to start-up companies Together, these companies have in the Brisbane area. The new raised more than $140 million The Fund invests using CEFC EnergyLab Brisbane office is of new capital for clean energy capital and draws on the co-located with the CEFC, as projects, a welcome injection of technical expertise of ARENA. part of our goal to accelerate capital to this emerging sector. We thank ARENA for its investment in Australian clean valuable contribution. energy innovators.

Start-ups joining EnergyLab’s 2018 program include Sydney’s Figure 2: Clean Energy Innovation Fund commitments PowerPal which is tapping into INNOVATION INNOVATION the Internet of Things using big FUND FUND data and artificial intelligence with (CUMULATIVE) 2017-18 the aim to build Australia’s largest energy engagement platform. Transactions financed 10 6 Its goal is to eliminate energy CEFC direct finance $56.2m $26.2m waste for all Australians, reducing Projects via channel partner N/A N/A grid demand by five per cent. Investment via channel partner N/A N/A Ohm Power, based in Melbourne, Leverage* $1.5 $0.9 has launched an online platform that helps homeowners find their Lifetime MtCO2-e abatement estimated* 6.6 6.5 best performing solar and/or * re CEFC direct finance only battery storage system from a range of trusted Australian solar retailers. SECTION 1 • PERFORMANCE [ 45 ]

INNOVATION FUND Smarter approach COMMITMENT to watts Wattwatchers is expanding production of its real-time electricity monitoring and control devices to help consumers better manage $ their energy use and costs. The Wattwatchers devices and data 2M streams, combined with software tools and analytics, allow rooftop solar generation, grid power and overall household and business consumption to be managed remotely through the cloud.

Second life INNOVATION FUND batteries COMMITMENT Electric vehicle battery packs that are no longer useful in vehicles can retain as much as 80 per cent of their capacity. Relectrify’s $ ground-breaking technology gives used batteries a second life, 750K optimising energy from stronger cells to unlock unused capacity. The recycled batteries can be used in the home as well as for utility-scale grid backup.

INNOVATION FUND Intelligent COMMITMENT Zen tech The Zen Ecosystems intelligent energy management solutions could save Australian businesses up to 25 per cent on their $ energy use. Zen’s cloud-based Zen HQ and Zen Thermostat 5M products allow smaller footprint operations – such as retailers, hotels and motels, schools, universities, car dealerships and fast food outlets – to manage energy-intensive assets across single and multiple locations. [ 46 ] CEFC ANNUAL REPORT 2018

Sustainable Cities Investment Program.

Through the $1 billion Sustainable Cities Investment Program, the CEFC invests to accelerate the development and deployment of a broad range of clean energy projects in Australia’s 50 largest cities, from Alice Springs with 25,000 people to Sydney, Australia’s largest city, at some 5.1 million people.

SUSTAINABLE CITIES PROJECTS 3,300

Reflecting the diverse and vibrant The CEFC also works across nature of our cities, finance Government to support the can be used across the urban national Cities agenda, including environment to deliver clean through the City Deal areas energy benefits to commercial, of Townsville, Launceston, industrial and residential property; Western Sydney, Geelong, Hobart, low emissions transport and Darwin and Perth. energy efficient large-scale economic infrastructure; as well as To 30 June 2018, the CEFC had educational and community assets. committed more than $1.8 billion to more than 3,300 Sustainable Eligible projects range from Cities projects, representing total precinct-scale renewable energy investment of over $5.0 billion developments, to next-generation alongside the private sector. transport management systems, These projects include direct green buildings and energy commitments to 33 larger-scale efficient new and retrofitted projects and $437 million to more affordable housing. than 3,250 smaller-scale asset finance projects, including small- $ The investments are intended to scale renewables, energy efficiency drive new enterprise and economic equipment and electric and 1.8B+ growth, reduce greenhouse gas hybrid vehicles. emissions and contribute to more CEFC COMMITMENT resilient and livable cities, where Projects financed through the the majority of Australians live. Sustainable Cities Investment Program are targeting lifetime emissions of more than

26M tCO2-e. SECTION 1 • PERFORMANCE [ 47 ]

Sustainable Cities Investment Program.

While the CEFC has exceeded Figure 3: Sustainable Cities Investment Program commitments the $1 billion investment target for the Sustainable Cities Investment SUSTAINABLE SUSTAINABLE CITIES CITIES Program, we continue to work with (CUMULATIVE) 2017-18 others to accelerate sustainable investment in a diverse range of Projects financed 36 11 projects in Australia’s cities. CEFC direct finance $1,456.4m $382.5m This has two benefits: Projects via channel partner 3,292 2,360 Investment via channel partner $436.9m $354.0m 1. There are very substantial opportunities for Australia to Leverage* $2.2 $3.2 reduce overall emissions by Lifetime MtCO2-e abatement estimated* 26.4 6.4 introducing more renewable energy, energy efficiency and * re CEFC direct finance only low emissions technologies into the way we operate our cities.

2. These technologies can benefit industry, asset owners and residents, via enhanced productivity, lower energy consumption, enhanced living conditions and improved environmental outcomes.

Projects financed through the Sustainable Cities Investment Program are targeting lifetime emissions of more than

26M tCO2-e [ 48 ] CEFC ANNUAL REPORT 2018

Reef Funding Program.

The Reef Funding Program is a $1 billion investment program financing clean energy projects in the Great Barrier Reef Catchment Area, supporting delivery of the Reef 2050 plan and the long-term health of the Great Barrier Reef.

CEFC $ COMMITMENT 350M+ 346 projects

CEFC finance is directed to eligible Water quality impacts include projects in the Great Barrier Reef clean energy projects that reduce Catchment Area across renewable the runoff of pollutants, fertiliser energy, energy efficiency and low and sediment, such as the emissions technologies. installation of more energy and water efficient irrigation systems, CEFC finance through the Reef pesticide sprayers, fertiliser Funding Program focuses on application systems and best five priority areas of economic practice wastewater management. activity: agribusiness, property, infrastructure, grid and storage As the CEFC’s primary role and solutions and bioproducts. statutory objective is to facilitate increased financial flows to These priorities reflect broad the clean energy sector, CEFC and ongoing consultation with investment within the Reef businesses, government agencies Catchment Area primarily delivers and financiers in the Reef indirect benefit to the Reef in Catchment Area. Within these lowering emissions to address sectors we particularly encourage climate change, the single greatest projects with the potential to threat to the Reef. improve water quality outcomes, which have the greatest potential These also support the Reef 2050 to directly impact Reef health. plan objectives in contributing to local economic growth by providing a local source of clean renewable energy supply and efficient local use of energy, and in demonstrating the positive benefits of clean energy to Reef communities. SECTION 1 • PERFORMANCE [ 49 ]

Figure 4: Reef Funding Program commitments

REEF REEF FUNDING FUNDING PROGRAM PROGRAM (CUMULATIVE) 2017-18

CEFC FINANCE THROUGH Projects financed 5 2 THE REEF FUNDING PROGRAM FOCUSES ON CEFC direct finance $320.3m $183.1m FIVE PRIORITY AREAS Projects via channel partner 341 107 OF ECONOMIC ACTIVITY: Investment via channel partner $41.8m $29.6m 1. AGRIBUSINESS Leverage* $2.6 $2.1 2. PROPERTY 3. INFRASTRUCTURE Lifetime MtCO2-e abatement estimated* 23.3 11.8 4. GRID AND STORAGE * re CEFC direct finance only SOLUTIONS 5. BIOPRODUCTS

Our investments CEFC finance has also supported This focus on water quality the delivery of almost 350 improvements has seen the CEFC To 30 June 2018, the CEFC had smaller-scale asset finance finance 10 water quality projects committed more than $350 million projects, including on-farm to date, with a total value of more in finance to 346 individual energy efficiency and irrigation than $2 million. This on-farm projects through the Reef Funding equipment to improve water irrigation equipment contributes Program, for new investments with quality and reduce water towards the Reef 2050 plan by a total project value exceeding consumption and run-off. reducing water use, improving $1.2 billion. water infiltration and quality and reducing sediment run-off. This has included more than Industry consultation $320 million to seven large-scale Throughout 2017-18, we have solar farm investments in the continued to work directly with Reef Catchment Area, including agribusinesses and farming bodies Ross River, Whitsunday, Hamilton, to help raise awareness about Collinsville, Hayman, Daydream and how producers can invest in clean Clermont. Together, these large- energy technologies to improve scale solar projects will deliver Reef health. This includes working total investment of more than with farm agronomists in sugar $1.1 billion in the Reef Catchment cane, banana growing and cattle Area, with more than 550MW grazing to identify equipment of renewable energy capacity that can improve water quality available to local communities, outcomes while meeting the addressing end-of-grid issues and CEFC’s eligibility criteria. signaling a rapid and substantial transition to lower-cost clean energy supply. [ 50 ] CEFC ANNUAL REPORT 2018

Accelerating the electric vehicle transition.

Electric vehicles could represent more than 90 per cent of all cars and light commercial vehicles on Australian roads by 2050, supported by $1.7 billion in investment in new charging infrastructure, according to modelling produced for the CEFC and ARENA.

The modelling forecasts a surge Australians have traditionally been in electric vehicle (EV) sales from early adopters of new technology as early as 2021, based on a but are lagging when it comes combination of incentives, models to EVs. The research shows we and infrastructure. It also finds can accelerate the uptake of EVs that, on current trends, EVs could in a way that benefits drivers have the same driving range as well as the environment, by capabilities as diesel or petrol- lowering prices, supporting fuelled cars by 2024, addressing more models and developing one of the biggest consumer a charging network. $ concerns about EVs. Vehicle makers are forecasting an end to the production of pure 43M internal combustion engines FINANCE FOR over the coming years. At the same time, vehicle charging CLEANER VEHICLES networks are expanding, creating the essential infrastructure to support electric vehicles.

Lowering transport-related emissions is critical to the broader decarbonisation of the Australian economy. Since inception, the CEFC has deployed almost $43 million to support the purchase of electric and plug-in hybrid electric vehicles, for individual, small business and fleet buyers. In addition, through the Clean Energy Innovation Fund, we are financing start-up companies targeting the EV market. SECTION 1 • PERFORMANCE [ 51 ]

Accelerating the electric Energy relief for vehicle transition. manufacturers.

Manufacturing is vital to the Australian economy, contributing around $100 billion (6.2 per cent) to Gross Domestic Product annually and supporting nearly 900,000 jobs, or around 7.4 per cent of total employment. Australian manufacturers are also the most energy intensive in the OECD, and account for around 40 per cent of Australia’s total natural gas consumption.

IF THE INITIATIVES WERE IMPLEMENTED AT ONCE REDUCTION OF GREENHOUSE GAS EMISSIONS PER YEAR 10Mt

In a joint initiative, the CEFC, The guide identifies a range of the Energy Efficiency Council proven technologies with the and the Australian Industry potential to cut gas consumption Group developed Australian by 25 per cent. In the majority Manufacturing: Gas Efficiency of cases, up-front investment Guide – a comprehensive costs were $50,000 or less, resource identifying practical with the costs recovered within and proven strategies to deliver just five years. If the initiatives energy and cost savings across were all implemented at once, manufacturing operations. they would reduce greenhouse gas emissions by as much as The guide examines the energy 10 million tonnes a year, equivalent needs of a wide range of to taking more than two million manufacturers, from food and passenger vehicles off the road, beverage production to metals or meeting the electricity needs fabrication, printing and furniture of 1.5 million homes. manufacturing. It finds significant opportunities to cut energy use, The CEFC finances clean energy such as a meat processing plant equipment upgrades and which saved $45,000 per month renewable energy installations in by cutting gas use by 21 per cent, the manufacturing sector through after upgrades to its boiler tailored asset finance programs. and steam facilities. A building products manufacturer saved $42,000 per year by installing a new control system on its boiler. [ 52 ] CEFC ANNUAL REPORT 2018

CEFC commitments 2017-18.

Figure 5: CEFC finance in action – Low carbon electricity

LOW CARBON ELECTRICITY 2017-18 Renewables generators, electricity retailers 39 and network service providers Commitment Genex Power Kidston Solar Project $4.1m INDIVIDUAL Wattwatchers Limited $2.0m TRANSACTIONS Daydream and Hayman Solar Farms $89.9m COMPLETED IN Cleanaway Waste Management Limited $8.1m 2017‑18 Ottoway Fabrication $4.2m Relectrify Pty Ltd $0.8m Some transactions are allocated Bannerton Solar Farm $97.8m across multiple ‘decarbonisation Redback Technologies Pty Ltd $6.5m pathways’ or categories, Kennedy Energy Park $93.6m reflecting the deployment of CEFC finance across different Lincoln Gap Wind Farm $150.0m industry sectors. Dubbo Solar Farm $2.2m ANZ Energy Efficient Asset Finance Program $52.5m CBA Energy Efficient Equipment Finance Program $4.0m Granville Harbour Wind Farm $4.8m Clermont Solar Farm and Wemen Solar Farm $207.2m Mirvac Group Finance Limited $30.0m Ross River Solar Farm $3.8m Coleambally Solar Farm $29.6m Oakey Solar Farm Stage 2 $54.3m Newcastle City Council $6.5m Australian Prime Property Fund Commercial $31.0m Australian Hospitality Fund II $4.3m IFM Australian Infrastructure Fund $31.5m CBA Energy Efficient Equipment Finance Program $15.0m Crudine Ridge Wind Farm $37.7m Greensync Holdings Pty Ltd $2.0m NAB Low Carbon Shared Portfolio $90.0m Morrison Growth Infrastructure Fund $45.0m New Energy Solar Limited $50.0m Total $1,158.3m SECTION 1 • PERFORMANCE [ 53 ]

Figure 6: CEFC finance in action – Energy efficiency

ENERGY EFFICIENCY 2017-18 Property, infrastructure, manufacturing, agriculture, community housing and universities Commitment Thinxtra Pty Ltd $10.0m ANZ Energy Efficient Asset Finance Program $97.5m CBA Energy Efficient Equipment Finance Program $96.0m Fleet Partners/Eclipx – FP Turbo Trust 2017-1 $14.1m Macquarie Agricultural Funds Management Limited $100.0m Healthcare Wholesale Property Fund $100.0m National RMBS 2018-1 – Green Tranche $25.0m Metro Finance Pty Ltd $50.0m Australian Prime Property Fund Commercial $69.0m Australian Hospitality Fund II $34.7m IFM Australian Infrastructure Fund $118.5m CBA Energy Efficient Equipment Finance Program $85.0m ZEN Ecosystems $5.0m Intellihub Operations Pty Limited $35.0m Morrison Growth Infrastructure Fund $105.0m Total $944.8m

Figure 7: CEFC finance in action – Transport TRANSPORT 2017-18

Vehicles Commitment Macquarie Leasing $100.0m Total $100.0m

Figure 8: CEFC finance in action – Biosequestration and other emissions reduction

BIOSEQUESTRATION AND OTHER EMISSIONS REDUCTION 2017-18

Waste and bioenergy Commitment Sacyr Environment Australia Pty Ltd $45.0m Cleanaway Waste Management Limited $81.9m Total $126.9m [ 54 ] CEFC ANNUAL REPORT 2018

Annual performance statement.

INTRODUCTORY STATEMENT The CEFC Board, as the accountable authority of the Clean Energy Finance Corporation, presents the 2017-18 Annual Performance Statements, as required under paragraph 39(1) (a) of the Public Governance, Performance and Accountability Act 2013 (PGPA Act).

In our opinion, these Annual Performance Statements are based on properly maintained records, accurately reflect the performance of the Corporation, and comply with subsection 39(2) of the PGPA Act.

ENTITY PURPOSE The CEFC was established by the Clean Energy Finance Corporation Act 2012 (CEFC Act)

“… to facilitate increased flows of finance into Australia’s clean energy sector”.

Ultimately, this objective is achieved through investing directly and indirectly with co-investors and, in doing so, encouraging and facilitating others to also invest in renewable energy, energy efficiency and low emissions technologies and projects.

RESULTS The CEFC had a strong year in 2017-18. A summary of the CEFC’s performance outcomes is included in Figure 9. Performance has been assessed against the performance criteria set out in the 2017-18 Corporate Plan, as well as the performance criteria set out in the 2017-18 Portfolio Budget Statements. SECTION 1 • PERFORMANCE [ 55 ]

Figure 9: CEFC performance summary 2017-18

CEFC FINANCE IN ACTION – ENERGY EFFICIENCY 2017-18 PERFORMANCE CRITERION MEASURE OUTCOME

Investment in renewable energy, $2.3 billion against a target Dollar value of new investment 1 low emissions and energy of between $900 million and commitments efficiency technology $1.1 billion

More than $2 billion against Dollar value of capital deployed a target of $650 million

Expected carbon abatement A positive return to the CEFC from committed projects at for each tonne of CO2-e Placement of funds into negative cost (i.e. positive 2 emissions abatement Australia’s clean energy sector return) Actual leverage was more than $1.80 for every $1.00 committed Financial leverage in projects by the CEFC, which is above financed the target of $1.00 per $1.00 committed by the CEFC

Total own-sourced, excluding $126 million against a target the unwinding of concessional of $81 million interest rate discount

63% against a target Operating profit margin1 of 50 per cent

2 3 Financial sustainability Net profit margin 56% against a target of 11% Core Portfolio return of 4.44% Performance against portfolio against a benchmark of benchmark return set by 5.51-6.51 %. the Government in the 2016 Innovation Fund return Investment Mandate No.2 of –14.71% against a benchmark of 3.21%. The CEFC fostered increased investment in the sector, sharing Stakeholder engagement Insights, relationships, impact insights and working with 4 and industry leadership and amplification industry, other public sector bodies/agencies and private sector financiers

1 Calculated as: (surplus from continuing operations, excluding concessional loan charges and unwind of concessional interest rate discount) divided by (total own-source revenue excluding the unwinding of concessional interest rate discount) 2 Calculated as: Surplus from continuing operations divided by total own-source revenue [ 56 ] CEFC ANNUAL REPORT 2018

Analysis of $ performance criteria 2.3B NEW INVESTMENT COMMITMENTS DURING 2017-18 INVESTMENT IN RENEWABLE PLACEMENT OF FUNDS INTO ENERGY, LOW EMISSIONS AUSTRALIA’S CLEAN ENERGY WELL ABOVE OUR AND ENERGY EFFICIENCY SECTOR TARGET OF $900M TECHNOLOGY Total funds deployed were New investment commitments more than $2 billion, a strong of $2.3 billion were made during improvement on the prior year and 2017-18, marginally higher than above our target of $650 million the $2.1 billion committed in the for 2017-18. Increased deployment previous year and well above our is correlated with the strong level $ target of $900 million to $1.1 billion. of new investment commitments during this year and the prior 2B+ CEFC commitments were made year. Our investments in 2017-18 TOTAL FUNDS across 39 transactions, reflecting made a significant contribution another strong year of investment in facilitating Australia’s emissions DEPLOYED in renewable energy in the Australian reduction efforts, with the total market and the breadth of the CEFC investment portfolio of CEFC’s activities. The 39 new $6.6 billion (commitments since transactions included six under inception) expected to reduce the Clean Energy Innovation Fund, emissions by more than 10 million accounting for $26 million of the tonnes per annum. As an investor, total capital committed. we achieved positive returns for each tonne of CO2-e abated by investee projects and businesses.

In order to increase the flows of finance into the clean energy sector, it is important that others also invest in the sector, in line with the CEFC mission. At the transaction level, we measure this through financial leverage. Actual leverage in CEFC transactions in 2017-18 was $1.00:$1.80, above the target of $1.00:$1.00, representing more than $1.80 in private sector investment for every $1.00 of CEFC commitment. SECTION 1 • PERFORMANCE [ 57 ]

FINANCIAL SUSTAINABILITY STAKEHOLDER ENGAGEMENT As a specialist investor, we seek Financial sustainability is important AND INDUSTRY LEADERSHIP to extend our reach across the as we pursue our public policy The 2017-18 year again saw economy through research, purpose. Own source revenue was significant external debate about insights and information sharing. $133 million for 2017-18 against a the future of Australia’s energy In 2017-18 we published a major budget of $85 million. We reported sector and the potential role of market analysis on the potential a net surplus of $74 million, against clean energy solutions in the electric vehicle market in a budget of $9 million, driven by context of energy affordability, Australia, with a view to lowering higher revenues and lower levels security and reliability, while transport-related emissions. We of concessional expense. also meeting Australia’s Paris were pleased to make a number Commitments in emissions of submissions to Government At 30 June 2018, the CEFC core reduction. As an active investor and/or parliamentary enquiries, portfolio return since inception was seeking to catalyse additional including the AEMO Integrated 4.44 per cent, against a Portfolio finance into the clean energy System Plan Consultation project; Benchmark Return (PBR) target sector, we retained a strong focus the Energy Security Board draft of 5.51-6.51 per cent, over the on sharing our experience and design consultation paper into medium to longer term. The net insights across the market. the National Energy Guarantee, difference of 1.07 per cent against and the RIT-T Application the bottom end of the target range We maintained a strong focus Guidelines review by the Australian is an improvement against the on and support for projects Energy Regulator. of national significance that equivalent 1.24 per cent differential CEFC staff appeared before the at 30 June 2017. have a long lead time, including the Tasmania-Victoria Second House of Representatives Standing Committee on Environment and At 30 June 2018, the Clean Energy Interconnector (Battery of the Energy in respect of the Future Innovation Fund return since Nation) project, and the proposed of the Grid inquiry, and the Senate inception was –14.71 per cent Snowy 2.0 expansion. We also Environment and Communications against a Portfolio Benchmark contributed to considerations inquiry into the provisions of the Return (PBR) target of around the South Australian Clean Energy Finance Corporation 3.21 per cent. As an early stage, large-scale battery tender and the Amendment (Carbon Capture and venture capital style investor, Whyalla Steelworks (Arrium) sale. Storage) Bill 2017. negative returns during early years We continue to inform stakeholders of investment are expected, with about potential clean energy The CEFC works extensively returns anticipated to strengthen opportunities through the Reef with state, territory and local as investee companies grow. Funding Program, including governments, both as a conduit to extensive consultation and business and in their own capacity briefings to relevant government as service providers with a large agencies, with industry groups carbon footprint. We provided in the Reef Catchment Area and Infrastructure Victoria with advice smaller-scale investors, including regarding automated and zero in agribusiness. emissions vehicles. We also provide a weekly Markets Update to key stakeholders, including policy makers, investors and clients, with timely information about emerging developments in the clean energy sector. [ 58 ] CEFC ANNUAL REPORT 2018

The CEFC remained a frequent In addition to our external contributor to targeted industry engagement with mainstream and sector-specific conferences media channels, we continue to and events. These provide an grow our digital reach to provide opportunity to lift understanding increased and timely access to 50% about clean energy finance information about our activities, and the role of clean energy across the CEFC website, Twitter CEFC technologies in decarbonising the and LinkedIn. The CEFC website REPRESENTATION Australian economy. The CEFC recorded 7.65 per cent growth in Chair, CEO, Executives and staff user numbers, with case studies OF TOTAL spoke at 107 conferences, across about specific CEFC investments INVESTMENT BY the breadth of our portfolio and in consistently attracting the highest multiple locations, also reflecting level of engagement. We saw ‘GREEN BANKS’ our national focus. We also issued 25 per cent growth in our Twitter AROUND THE 44 media releases about CEFC audience, to over 6,400 followers, WORLD transactions. We see this as an with the CEFC’s own tweets about important additional means of our transactions being re-tweeted delivering transparent information at an average rate of 2:1. The about our investments on behalf of increase in LinkedIn audience taxpayers, and also to help inform numbers, up almost 70 per cent and educate the market about the to more than 4,300, reflected a scale and diversity of clean energy sustained push to leverage this investment opportunities. channel to reach decision makers in the clean energy sector and The CEFC remains an active broader economy. A series of member of the Green Bank video case studies about CEFC Network (GBN), an international investments attracted strong membership organisation attention via LinkedIn. which fosters collaboration and knowledge sharing across ‘green banks’ in the US, UK, Malaysia and Japan. As noted by the International Energy Agency (IEA) in its 2018 Investment Outlook, the CEFC is a significant player in ‘green bank’ investment, representing 50 per cent of total investment by ‘green banks’ around the world to date. In addition, the IEA noted that the CEFC is responsible for almost all the investment by ‘green banks’ in low carbon transport, as well as the increased share of solar and energy efficiency investment since 2016. SECTION 1 • PERFORMANCE [ 59 ]

We maintained our role as a leading investor in Australia’s renewable energy sector and further extended our reach into emissions reduction activities in infrastructure, agriculture, property, transport and waste. In addition, our venture capital finance for innovative clean energy companies saw continued growth.