Prime Minister Tony Abbott’s promise to shut down the Clean Energy Finance Corporation has cast doubt on $400 million worth of loans to businesses in Western Australia.
On the first day of the new federal government, Treasurer Joe Hockey wrote to the CEFC and instructed it to immediately cease approving new investments.
The CEFC was set up by the Gillard government with an investment portfolio of $554 million to provide loans to companies seeking to set up renewable energy and energy efficiency projects.
The organisation was created to contribute to the government’s 2020 renewable energy target – a 5 per cent reduction in national greenhouse gas emissions within seven years.
The CEFC is a for-profit organisation and its contracted investments are expected to earn an average return of 7 per cent per annum.
THE CEFC is now operating in caretaker mode and its chief executive officer Oliver Yates said he was seeking consultations with the government.
Mr Yates said the ordinary law of contracts loans protected those loans already approved.
“The CEFC will continue to operate within its legislative framework to meet its existing legal and contractual obligations in relation to payments,” he said.
The CEFC has finalised eight financing agreements, which amount to more than $272.5 million, since it began providing loans in August this year.
It has received more than 150 proposals for loan finance, 14 of which were for WA projects with a combined total value of more than $1 billion.
The loan amount sought totalled more than $400 million.
Of the 150 proposals received, the CEFC had been in active discussions with 50 project proponents seeking $2 billion in total for projects with a combined project cost of $4.5 billion.
Among the WA projects were proposals for solar power at remote mine sites, biofuels and waste-to-energy technology development, and the establishment of wind and solar farms.
Only one WA project has received approved loan financing to date, from Low Carbon Australia, which was rolled into CEFC earlier this year.
Garden products supplier Richgro received a loan to adopt waste-to-heat technology and install a $3.3 million anaerobic digester, which uses waste by-products to provide energy to its Jandalot business.
Mr Yates said CEFC’s 44 staff could work with the new government to make sure staff and assets of the CEFC were utilised as the government transitions to its Direct Action Plan.
Sustainable Energy Association of Australia chief executive Kirsten Rose said she hoped the government would listen to the CEFC’s proposals for how it would work with the government to further its Direct Action Plan for emissions reductions.
“The Sustainable Energy Association believes that closing the CEFC would be a huge missed opportunity for Australia, and for Western Australia, which has some of the best renewable resources in the country,” Ms Rose said.
“The scale of the CEFC and its commercial focus gives it the ability to effect transformational change in energy efficiency and renewable energy. Without its support, that change will be slower and more incremental, but it will still happen.
“Renewable energy and energy efficiency increasingly stand on their own economically, and costs continue to fall. Losing the CEFC would be unfortunate, but we will see projects get up on their own merits.
“CEFC has the potential to accelerate that change and move us more quickly toward low carbon sources of energy that aren’t beholden to fuel price uncertainty.”
