Oct. 18 (Bloomberg) -- Clean Energy Finance Corp., the Australian green development bank earmarked for closing by newly-elected Prime Minister Tony Abbott, is making a profit and prodding commercial banks to lend, according to its chief executive officer.
“We’re operating profitably already, with our contracted investments expected to earn an average return of around 7 percent,” which is above the bank’s capital cost of about 3 percent, Oliver Yates, CEO of the bank founded less than four months ago by the previous government, told delegates at an Oct. 14 conference in London. He declined to comment on Abbott’s plan to close CEFC, citing public-service rules.
Abbott, elected Sept. 7, has vowed to close the bank and repeal a law creating a carbon market passed by former Prime Minister Julia Gillard in 2011. Canceling the legislation will save the average household A$521 in fiscal 2014-15 and cut costs for business and manufacturers, Environment Minister Greg Hunt said Oct. 16. A 30 percent tax on coal and iron ore profits, which Abbott is also seeking to remove, was forecast to raise A$4.4 billion in the four years to June 30, 2017, the Treasury said in August.
The development bank has built a loan portfolio of around A$536 million ($518 million) and helped projects get debt and equity of about A$2.2 billion, including from other institutions, Yates said at the Climate Markets & Investment Association event. The deals will cut emissions by about 3.9 million metric tons of carbon dioxide annually, he said. They include wind farms and a tomato farm that uses solar energy to desalinate seawater.
“We’ve been able to make a meaningful impact offering finance on a commercial basis,” Yates said. “Though we have the capacity to provide concessional loans, for the great majority of cases that hasn’t proved necessary. Our job is not to make it easy for the banks, but to stretch them and encourage them to join into transactions with us.”
The bank has demonstrated it can generate carbon reductions at a net benefit to the taxpayer of A$2.40 a ton of carbon dioxide, he said.
The first Green Bank Congress was held in the two days through yesterday in Edinburgh, where 18 financiers agreed to share best practice, Stephen Moir, spokesman for the U.K. Green Investment Bank, said today by phone.
The Intergovernmental Panel on Climate Change said Sept. 27 there’s enough space in the atmosphere for about 22 years of emissions at current levels before runaway climate change becomes probable.
--Editors: Matthew Brown, Andrew Reierson