03Financial Statements

Note 7: Other Information

7.1: Reporting of Outcomes

The Corporation has one outcome – to facilitate increased flows of finance into Australia’s clean energy sector, applying commercial rigour to investing in renewable energy, low-emissions and energy efficiency technologies, building industry capacity, and disseminating information to industry stakeholders.

	Outcome 1 2016 $’000	Outcome 1 2015 $’000	Total 2016 $’000	Total 2015 $’000
Departmental
Expenses	29,750	23,622	29,750	23,622
Own-source income	50,887	54,777	50,887	54,777
Net return from outcome delivery	21,137	31,155	21,137	31,155

7.2: Budgetary Reports and Explanation of Major Variances

The following tables provide a comparison of the original budget as presented in the 2015-16 Treasury Portfolio Budget Statements (PBS) to the 2015-16 final outcome as presented in accordance with AAS for the Corporation. The Budget is not audited.

7.2A: Budgetary Reports

The budgeted financial statements for 2015-16 were prepared on the basis of the Australian Government’s intention to abolish the CEFC. Legislation to abolish the CEFC and transfer the CEFC’s existing assets and liabilities to the Commonwealth was before Parliament at that time. Given the uncertainty regarding the timing of the passage of legislation, the budgeted financial statements assumed the CEFC was to be abolished from 1 July 2015. Accordingly, the 2015-16 Budget assumed:

no new investments would be entered into by the CEFC post 30 June 2015;
revenue from those contracts planned to be executed prior to 30 June 2015 was forecast to continue through the life of the investments (including revenue associated with the unwind of previously recorded concessionality charges);
no additional concessionality charges were forecast to be incurred (consistent with the assumption of no new investments being entered into by the CEFC post 30 June 2015);
all operational expenses (employee benefits and supplier costs) were anticipated to cease effective 30 June 2015;
an allowance for possible loan impairment was provided in each period of the forward estimates in relation to the existing investment portfolio; and
all outstanding liabilities to suppliers and employees were assumed to be settled at 30 June 2015.

The Corporation was not abolished at 1 July 2015, and therefore has continued to fulfil its obligation to invest in accordance with the CEFC Act. There has been no material change in the approach of the Corporation or the operations of the Corporation during the 2015-16 financial year, and as a consequence there are a large number of material variances to a budget that was based on assumption of abolition on the first day of the financial period. In explaining variances to the budget, the Corporation has therefore focussed on those items which are considered of most significance to the operations of the CEFC.

Statement of Comprehensive Income

for the period ended 30 June 2016

	Actual $’000	Budget¹ $’000	Variance² $’000
NET COST OF SERVICES
EXPENSES
Employee benefits	17,570	9,435	8,135
Suppliers	4,865	3,764	1,101
Depreciation and amortisation	534	624	(90)
Concessional loan charges	6,876	-	6,876
Write-down and impairment of assets	83	4,761	(4,678)
Provision for irrevocable loan commitments	(178)	-	(178)
Total expenses	29,750	18,584	11,166
Own-Source Income
Own-source revenue
Interest and loan fee revenue	51,013	49,250	1,763
Other revenue	30	-	30
Total own-source revenue	51,043	49,250	1,793
Gains
Other (losses) / gains	(156)	-	(156)
Total (losses) / gains	(156)	-	(156)
Total own-source income	50,887	49,250	1,637
Net contribution by / (cost of) services	21,137	30,666	(9,529)
Revenue from Australian Government	-	-	-
Surplus from continuing operations	21,137	30,666	(9,529)

	Actual $’000	Budget¹ $’000	Variance² $’000
OTHER COMPREHENSIVE INCOME
Items subject to subsequent classification to net cost of services
Gains on available-for-sale financial assets	5,885	-	5,885
Total other comprehensive income	5,885	-	5,885
Total comprehensive income	27,022	30,666	(3,644)

The Corporation’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the Corporation’s appearance in the 2015-16 Treasury PBS).
Difference between the actual and original budgeted amounts for 2015-16. Explanations of major variances are provided further below.

Statement of Financial Position

as at 30 June 2016

	Actual $’000	Budget¹ $’000	Variance² $’000
ASSETS
Financial assets
Cash and cash equivalents	232,778	-	232,778
Trade and other receivables	3,853	2,991	862
Loans and receivables at amortised cost	402,225	530,115	(127,890)
Available for sale financial assets	277,694	118,045	159,649
Other financial assets	306,594	330,033	(23,439)
Total financial assets	1,223,144	981,184	241,960
Non-financial Assets
Property, plant and equipment	1,021	269	752
Computer software	509	177	332
Prepayments	539	-	539
Total non-financial assets	2,069	446	1,623
Total assets	1,225,213	981,630	243,583

	Actual $’000	Budget¹ $’000	Variance² $’000
LIABILITIES
Payables and unearned income
Suppliers	1,324	-	1,324
Unearned income	5,536	7,364	(1,828)
Other payables	4,588	-	4,588
Total payables and unearned income	11,448	7,364	4,084
Provisions
Employee provisions	1,199	-	1,199
Other provisions	13,435	-	13,435
Total provisions	14,634	-	14,634
Total liabilities	26,082	7,364	18,718
Net assets	1,199,131	974,266	224,865
EQUITY
Contributed equity	1,108,363	879,819	228,544
Reserves	7,023	2,793	4,230
Retained surplus	83,745	91,654	(7,909)
Total equity	1,199,131	974,266	224,865

The Corporation’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the Corporation’s appearance in the 2015-16 Treasury PBS).
Difference between the actual and original budgeted amounts for 2015-16. Explanations of major variances are provided further below.

Statement of Changes in Equity

for the period ended 30 June 2016

	Retained Surplus			Reserves			Contributed Equity			Total Equity
	Actual $’000	Budget¹ $’000	Variance² $’000	Actual $’000	Budget¹ $’000	Variance² $’000	Actual $’000	Budget¹ $’000	Variance² $’000	Actual $’000	Budget¹ $’000	Variance² $’000
Opening balance
Balance carried forward from previous period	62,608	60,988	1,620	1,138	2,793	(1,655)	1,168,363	1,168,362	1	1,232,109	1,232,143	(34)
Comprehensive income
Surplus for the period	21,137	30,666	(9,529)	-	-	-	-	-	-	21,137	30,666	(9,529)
Other comprehensive income	-	-	-	5,885	-	5,885	-	-	-	5,885	-	5,885
Total comprehensive income	21,137	30,666	(9,529)	5,885	-	5,885	-	-	-	27,022	30,666	(3,644)
Transactions with owners
Distributions to owners
Return of equity to Special Account	-	-	-	-	-	-	(60,000)	(288,543)	228,543	(60,000)	(288,543)	228,543
Contributions by owners
Equity injection from Special Account	-	-	-	-	-	-	-	-	-	-	-	-
Total transactions with owners	-	-	-	-	-	-	(60,000)	(228,543)	228,543	(60,000)	(288,543)	228,543
Closing balance as at 30 June	83,745	91,654	(7,909)	7,023	2,793	4,230	1,108,363	879,819	228,544	1,199,131	974,266	224,865

The Corporation’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the Corporation’s appearance in the 2015-16 Treasury PBS).
Difference between the actual and original budgeted amounts for 2015-16. Explanations of major variances are provided further below.

Cash Flow Statement

for the period ended 30 June 2016

	Actual $’000	Budget¹$’000	Variance²$’000
OPERATING ACTIVITIES
Cash received
Interest and fees	45,254	44,925	329
Distributions from equity investments	9	-	9
Total cash received	45,263	44,925	338
Cash used
Employees	16,186	9,434	6,752
Suppliers	4,133	7,611	(3,478)
Total cash used	20,319	17,045	(3,274)
Net cash from operating activities	24,944	27,880	(2,936)
INVESTING ACTIVITIES
Cash received
Principal loan repayments received	133,680	204,349	(70,669)
Redemption of short-term investments	200,000	100,000	100,000
Redemption of other financial assets	453,226	166,836	286,390
Redemption of AFS financial assets	434	-	434
Total cash received	787,340	471,185	316,155
Cash used
Purchase of property, plant and equipment	971	-	971
Purchase of computer software	452	-	452
Loans made to other parties	208,015	219,986	(11,971)
Purchase of AFS financial assets	197,645	20,000	177,645
Purchase of short-term investments	100,000	-	100,000
Acquisition of other financial assets	162,000	-	162,000
Total cash used	669,083	239,986	429,097
Net cash from investing activities	118,257	231,199	(112,942)
FINANCING ACTIVITIES
Cash used
Return of equity	60,000	288,543	(228,543)
Total cash used	60,000	288,543	(228,543)
Net cash used by financing activities	(60,000)	(288,543)	228,543

	Actual $’000	Budget¹ $’000	Variance² $’000
Net increase in cash held	83,201	(29,464)	112,665
Cash and cash equivalents at the beginning of the reporting period	149,577	29,464	120,113
Cash and cash equivalents at the end of the reporting period	232,778	-	232,778

Actual

$’000

Budget¹

$’000

Variance²

$’000

Net increase in cash held

83,201

(29,464)

112,665

Cash and cash equivalents at the beginning of the
reporting period

149,577

29,464

120,113

Cash and cash equivalents at the end of the
reporting period

232,778

The Corporation’s original budgeted financial statement that was first presented to Parliament in respect of the reporting period (i.e. from the Corporation’s appearance in the 2015-16 Treasury PBS).
Difference between the actual and original budgeted amounts for 2015-16. Explanations of major variances are provided further below.

7.2B: Major Budget Variance for 2015-16

Affected Line Items	Explanations of Major Variances
Statement of Comprehensive Income:
Employee Benefits	Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), employee benefit costs were incurred for the full 2015-16 financial year. In order to meet the obligations of the CEFC Act, it was necessary for the Corporation to continue to employ executives and staff across all key functions including investment, legal, risk management, finance, corporate affairs, human resources, etc.
Suppliers	Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), supplier costs were incurred in the normal course of operations of the Corporation for the full 2015-16 financial year.
Concessional loan charges	Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), additional concessional loan charges were incurred on a number of new investments made during the 2015-16 financial year. The budget had assumed that no new investments would be made after 1 July 2015.
Write-down and impairment of assets	During the 2015-16 financial year a number of long term loans in the CEFC portfolio were refinanced by the private sector. The loans that were refinanced tended to be the higher yielding facilities, but consequently also the higher risk facilities, including a significant portion of sub-debt. In addition, the Corporation has invested in a higher proportion of AFS financial assets in the 2015-16 financial year and these are accounted for at fair value rather than amortised cost. With the removal of certain higher risk facilities from the Corporation’s portfolio and a larger proportion of new investments being made in AFS financial assets, the provision for impairment of assets has not had to increase at the rate forecast in the Budget.
Interest and loan fee revenue	Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the budget), the Corporation continued to make new investments to generate income for the Corporation that more than offset the reduction from facilities being refinanced unexpectedly during the financial year.
Changes in gains/(losses) on AFS financial assets	As stated above, the Corporation has invested in a significant number of AFS financial assets in the 2015-16 financial year and these are accounted for at fair value through other comprehensive income. The fall in interest rates during the 2015-16 financial year has also benefited the fair value of the AFS financial assets held by the Corporation as most of the Corporation’s AFS financial assets are fixed interest rate facilities.
Statement of Financial Position:
Cash and cash equivalents; and short term investments	Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), funds held for new investments were not returned to the CEFC Special Account held by the Department of the Environment and Energy but instead were held to fund new investment commitments by the Corporation.
Loans and receivables at amortised cost	A number of significant investments made by the Corporation in prior years were able to be refinanced by third party commercial banks during the 2015-16 financial year.
Available for sale financial assets	Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), the Corporation continued to make new investments in 2015-16. As stated above, the Corporation has invested in a larger proportion of AFS financial assets in the 2015-16 financial year, so while loans and receivables were being refinanced by the private sector, new AFS financial assets were being brought onto the Corporation’s statement of financial position. The largest components of the variance to Budget in available for sale financial assets were investments made during 2015-16 in Climate Bonds issued by a major Australia bank and a corporate entity, together with longer tenor corporate bonds issued by the major banks which the Corporation acquired in conjunction with the targeted CEFC energy efficiency programs being deployed through these banks to their customers.
Other financial assets	The other financial assets are lower than Budget as new investments have been made a slower rate than the repayment of these facilities and a number have repaid more rapidly than forecast in 2015-16. This is because the Corporation has not been required to ‘cash back’ new loans to the same extent in 2015-16 given the greater certainty afforded through the decision by the Australian Government to retain the Corporation.
Non-financial assets	Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), new property, plant & equipment and computer software additions were purchased to enable the Corporation to continue operating effectively. Prepayments were also incurred in the normal course of operations.
Payables and unearned income	Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), payables and unearned income both continued to be generated in the normal course of operations of the Corporation and remained outstanding at 2015-16 financial year.
Other provisions	The variance to Budget in other provisions is due to the status of various investments in the Corporation’s portfolio at 30 June 2016. Once an investment draws-down, the provision for concessionality is classified as an offset to the loan and receivable. In preparing a budget it is not possible to anticipate exactly at what stage each investment will be at at any given point in time.
Contributed equity	Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), funds held for new investments were not returned to the CEFC Special Account held by the Department of the Environment and Energy but instead were held to fund new investments by the Corporation. This meant that returns of equity to the CEFC Special Account held by the Department of the Environment and Energy were lower than budgeted.
Retained surplus	Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), it continued to incur costs associated with operations. The assumption in the Budget was that the Corporation would continue to generate income for the full year but the associated costs of managing the portfolio were not included in the Budget.
Statement of Changes in Equity:
Reserves	Since the Corporation was not abolished on 30 June 2015 (as anticipated in the Budget), it has invested in a significant number of AFS financial assets in the 2015-16 financial year and these are accounted for at fair value through other comprehensive income and reserves in the Statement of Financial Position. The fall in interest rates during the 2015-16 financial year has also benefited the fair value of the AFS financial assets held by the Corporation as most of the Corporation’s AFS financial assets are fixed interest rate facilities.
Contributed equity	Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), funds held for new investments were not returned to the CEFC Special Account held by the Department of the Environment and Energy but instead were held to fund new investments by the Corporation. This meant that returns of equity to the CEFC Special Account held by the Department of the Environment and Energy were lower than budgeted. The only return of equity in 2015-16 was an amount of $60 million from investments that had been realised during the normal course of operations.
Cash Flow Statement:
Employees	Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), employees were retained in the Corporation and employment related payments were made throughout the 2015-16 financial year in the normal course of the Corporation fulfilling its investment obligations under the CEFC Act.
Suppliers	Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), supplier costs were paid throughout the 2015-16 financial year for costs associated with operating the Corporation in the normal course.
Redemption of other financial assets; and acquisition of other financial assets	Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), the Corporation continued to make new investments in 2015-16 and this is reflected in the redemption and acquisition of other financial assets in the Cash Flow Statement.
Principal loan repayments received	A number of significant investments made by the Corporation in prior years were able to be refinanced by third party commercial banks during the 2015-16 financial year.
Loans made to other parties	A number of significant investments made by the Corporation in prior years were able to be refinanced by third party commercial banks during the 2015-16 financial year. This resulted in lower than budgeted draw-downs against contracted facilities for the year.
Purchase of AFS financial assets	Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), the Corporation continued to make new investments in 2015-16. A greater proportion of these new investments in 2015-16 involved the purchase of AFS financial assets.
Redemption of short-term investments; and purchase of short-term investments	Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), funds held for new investments were not returned to the CEFC Special Account held by the Department of the Environment and Energy but instead were used to fund short-term investments and then subsequently redeemed by the Corporation to funds loans made to other parties, purchases of AFS financial assets and acquisitions of other financial assets.
Return of equity; and cash and cash equivalents at the beginning of the reporting period	Since the Corporation was not abolished effective 30 June 2015 (as anticipated in the Budget), funds held for new investments were not returned to the CEFC Special Account held by the Department of the Environment and Energy but instead were held to fund new investment commitments by the Corporation.

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