Green Financing Forum Oliver Yates, Chief Executive Officer September CEFC Mission

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1 Green Financing Forum Oliver Yates, Chief Executive Officer September 2015 CEFC Mission 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 Clean Energy Finance Corporation

2 Agenda Insights from Australia s Clean Energy Finance Corporation 1. About the Clean Energy Finance Corporation (CEFC) 2. Clean energy investment in Australia 3. The CEFC s investments and overcoming financing barriers 4. Case studies

3 About the CEFC Facilitating increased flows of finance into clean energy in Australia Australian Government-owned corporation that operates like a traditional financier Finance for renewable energy, energy efficiency, and lowemissions technologies Access to $2 billion a year over 5 years We take a commercial approach and expect a return on investment Finance terms for projects that are more complex or new to the Australian market Facilitate the participation of private sector banks by sharing our expertise, acting as a co-financier and pioneering new financing structures Clean Energy Finance Corporation 3

4 Since 2006, Clean Energy Investment in Australia has totalled an estimated $34 billion $5.6 b $6.9 b $6.0 b $5.7 b $1.7b $1.6b $1.7b $2.3 b $2.5 b Source: BNEF Clean Energy Finance Corporation 4

5 Small and large-scale renewables have made up 85% of clean energy investment in Australia since 2006 Small Distributed Capacity Large-scale asset finance (New Build) Government R&D Public Markets (New Equity) Venture Capital / Private Equity Corporate R&D $0.4 b $0.2 b $1.2 b $3.5 b $13.4 b $15.4 b Cumulative investment in clean energy by investment type, 2006 to 2014, $b Source: BNEF Clean Energy Finance Corporation 5

6 Large- and small-scale solar and storage opportunities in Australia may require investment of $28 billion by 2020 $6.9b $6.5b $5.2b $3.9b $2.8b $2.6b Source: BNEF Clean Energy Finance Corporation 6

7 Australia s electricity sector is geographically vast West Coast: South West Interconnect System (SWIS) 17 TWh 900,000 customers East Coast: National Electricity Market (NEM) 194 TWh 9.5 million customers Remote or other mini grids: 34 TWh Source: Australian Energy Regulator, Western Power, AECOM, ACIL Allen Clean Energy Finance Corporation 7

8 Australia s electricity sector is still reliant on fossil fuels Source: Clean Energy Council Clean Energy Finance Corporation 8

9 New build renewables attract a lower cost of capital than new build fossil fuels Source: BNEF Clean Energy Finance Corporation 9

10 CEFC highlights as at June Clean Energy Finance Corporation 10

11 The CEFC invests in renewable energy, energy efficiency and low-emissions technologies as at June Clean Energy Finance Corporation 11

12 We invest across Australia as at June Clean Energy Finance Corporation 12

13 The CEFC has a $3.6 billion pipeline of opportunities $3.6 bn as at June Clean Energy Finance Corporation 13

14 We invest in projects, funds and co-finance facilities We invest into individual projects as well as opportunity-focused funds to increased flows of finance into clean energy. BUILDING UPGRADES CLEAN ENERGY INFRASTRUCTURE BUILDING UPGRADES ENERGY EFFICIENCY EQUIPMENT, VEHICLES, SOLAR AND STORAGE SOLAR SOLAR & STORAGE GREEN BONDS ENERGY EFFICIENCY EQUIPMENT, VEHICLES, SOLAR AND STORAGE ENERGY EFFICIENCY EQUIPMENT, VEHICLES, SOLAR AND STORAGE Clean Energy Finance Corporation 14

15 RISK We invest across the capital structure Direct investments Indirect investments Seed Future opportunity Expansion capital Currently exploring opportunities Infrastructure equity e.g. CFS Australian Clean Energy Infrastructure Fund Mezzanine debt & corporate finance e.g. CBA Energy Efficient Loans, NAB Energy Efficient Bonus Senior debt e.g Moree Solar Farm, DeGrussa Copper Mine Solar and Storage Property equity e.g. High Income Sustainable Office Trust (HISOT) RETURN Clean Energy Finance Corporation 15

16 Renewable energy: overcoming financing challenges Challenges Variability of fuel source can mean variability of cash flow Location of good renewable resources is often far from existing grid Ability to attract power purchase agreements Solutions Large and diverse portfolios of investments. Sufficient equity. The market will prioritise projects close to existing infrastructure, green bonds to overcome longer term infrastructure gaps. Lend with some willingness to accept merchant risk. Management track record in renewable energy assets Strong project partners. Regulatory uncertainty Take a long-term view. Clean Energy Finance Corporation 16

17 Energy efficiency: overcoming financing challenges Challenges Solutions Business priorities may not be focused on energy efficiency Scale and transaction costs can be high Opportunity-specific funds to raise awareness (buildings, equipment, vehicles etc.) Where possible, aggregate projects and limit transaction costs (work with other parties such as banks) Lack of standards and incentives Finance at sufficient tenor and competitive rates to encourage investment in energy efficiency Availability of finance We have over $350 million in the market in Australia for energy efficiency Clean Energy Finance Corporation 17

18 Leveraging private sector capital: A solar example Cornerstone investor for new solar technologies Underwrote debt for innovative solar thermal greenhouse New financing models, setting a precedent for the financial market Finance for smaller scale projects Financing merchant solar, when needed Solar leasing and PPAs. Dedicated large-scale solar facility soon to be launched. $13m for Uterne PV plant in remote central Australia $15m for DeGrussa solar and storage in remote Western Australia Grid-connected Moree Solar PV Farm in New South Wales Clean Energy Finance Corporation 18

19 Sundrop Farms: Solar Thermal to grow produce World-leading application of solar thermal technology CEFC underwrote up to A$40 million in senior debt finance, project then successfully secured commercial bank debt package and private equity capital CEFC underwrote up to A$40 million in senior debt for 20-hectare greenhouse facility Innovative use of solar thermal for heat, electricity, and desalinated water to grow vegetables in greenhouses The CEFC underwrote a debt package for the project which helped Sundrop Farms secure a debt package with major Australian commercial lenders. Upon this foundation, we then entered into a partnership with global investment firm KKR, which allowed us to proceed with our state-of-the-art glasshouse in Port Augusta. Sundrop Farms CEO, Philipp Saumweber Clean Energy Finance Corporation 19

20 Sandfire Resources: DeGrussa Copper Mine Debt financing for large-scale solar and storage A$15 million for Australia s largest solar and battery storage project to date at Sandfire Resources DeGrussa Copper Mine A$15 million in CEFC finance towards $40 million project. Invested alongside a $21 million grant from ARENA 34,000 panel, 10.6MW solar PV array with 6MW of battery storage integrated with existing dieselfired power station. Designed to provide majority of DeGrussa s daytime electricity requirements Will offset around 5 million litres of diesel fuel per annum, abating over 12,000 tonnes of CO2-e annually Clean Energy Finance Corporation 20

21 Green Bonds A financing instrument for clean energy investment US $600 billion globally in climate or green bonds To 2015, A$1.8 billion in AUD green bonds targeted at Australian investors The CEFC invested $75 million in the first Australian-bank issued Green Bond. Source: CEFC, Climate Bonds Initiative Clean Energy Finance Corporation 21

22 Sector-specific equity funds Funds can target sector-specific opportunities and open up the potential for wholesale investor participation Energy infrastructure CEFC cornerstone investment of up to $80 million in a $300- $500 million wholesale infrastructure fund focused on renewable energy, energy efficiency and low emissions technology. Fund manager: Colonial First State Global Asset Management Buildings CEFC cornerstone investment of up to $125 million in a $400 million unlisted property trust focused upgrading building energy performance to at least 4.5 stars under the NABERS rating Fund manager: EG Group More to come Clean Energy Finance Corporation 22

23 A new $250 million large-scale solar financing program To date, our single largest debt financing commitment to largescale solar in Australia. Available for merchant and contracted projects Eligible across the NEM, SWIS and offgrid Senior debt that is fixed-rate and longdated OUTCOMES 1. Help develop the Australian supply-chain for large-scale solar 2. Bring large-scale solar down the cost curve 3. Substantially increase installed large-scale solar capacity in Australia Clean Energy Finance Corporation 23

24 Talk to us, we re keen to share our knowledge and experience Visit our website for more information: cleanenergyfinancecorp.com.au Follow us on Follow us on LinkedIn Follow us on Youtube