04 Appendices, Glossary & Abbreviations GLOSSARY

CEFC ANNUAL REPORT / 2014–15

GLOSSARY

Term

Description

Australian Industry Participation Plans (AIPP)

Under the CEFC Investment Mandate, these are plans required of certain finance recipients that enable Australian and New Zealand industry to be informed of procurement plans by project proponents receiving more than $20 million in CEFC funding. AusIndustry administers the AIPP.

Abatement

Refers to reductions in CO2e emissions.

 Aggregation finance

The means of using a co-finance partner as an intermediary to aggregate customer demand for finance that would otherwise be too expensive to be serviced directly by the CEFC.

 Appropriations

The means by which money from the Treasury is made available to the Australian Government by the Parliament.

 AusIndustry

A specialist business program delivery division within the Department of Industry, Innovation and Science.

Australian Government Bond Rate

 The five-year Australian Government bond rate.

Australian Renewable Energy Agency (ARENA)

An Australian Government statutory authority with similar objectives to the CEFC, providing grant funding for earlier stage technology development. The CEFC shares information and works with ARENA to advance projects in the renewable sector.

Base building

With respect to NABERS ratings, a base building rating covers the performance of the building’s central services and common areas, which are usually managed by the building owner (see further NABERS reference below).

Benchmark return

See Portfolio Benchmark Return below.

Black price

The wholesale electricity price received by an electricity generation facility, excluding the benefit of any renewable energy certificates.

Clean Energy Finance Corporation Act 2012 (CEFC Act)

The enabling legislation that creates and empowers the CEFC.

Clean energy and clean energy technology

The types of technology the CEFC is permitted to invest in, which includes ‘renewable energy technologies’, ‘energy efficiency technologies’ and ‘low emissions technologies’.

Climate Bonds

A specific type of green bond issued by the Climate Bond Standards and Certification initiative. See further information on green bonds below.

CO2-e

Carbon dioxide equivalent is a standard measure that takes account of the different global warming potential of greenhouse gases and expresses the cumulative effect in a common unit (definition from the National Carbon Offset Standard).

Co-finance partner; co-financed products ‘Sell through’ investment in clean energy technology projects indirectly via a financial product that is cofinanced with an intermediary third party (such as a bank, utility company or other financier).

The CEFC’s finance is ‘sold’ through the third party which may or may not use CEFC branding in its offer to the end user or project owner, as arranged with the CEFC). The CEFC develops these products with cofinanciers to leverage their capital and existing sales networks. These products can be distinguished from a direct loan where the finance moves directly from the CEFC to the project owner.

Cogen/cogeneration The combined generation of power and useful heat from the same process or source.
Committed investment Where the CEFC has made a commitment to invest funds if all necessary pre-conditions are fulfilled by the counterparties.

Commonwealth Authorities and Companies Act 1997 (CAC Act)

The legislation that governed Australian Government statutory authorities such as the CEFC during the 2013–14 financial year, now repealed and replaced with the Public Governance, Performance and Accountability Act 2013 (PGPA Act). See further information on the PGPA below.

Concession/concessionality

Concessionality is defined by the Investment Mandate and reflects the mark-to-market valuation of loans committed that financial year. It should be Concession/concessionality measured as the difference between the net present value of each loan’s future cash flows, discounted at market rates, and the net present value of each loan’s future cash flows discounted at the given concessional rate.

Cornerstone investor

Cornerstone investors are usually large institutional investors, or reputable individuals of substance, whose early stage involvement in an investment signals to the market that an opportunity may be worthwhile for other investors to also consider.

Corporate facility or corporate loan

Typically, a loan to a company (rather than a specific project) for its smallerscale projects, or a bundle of projects, often secured against the assets or operations of the corporate entity.

Decarbonisation

Action that reduces the emissions intensity of the economy.

Distributed generation

Distributed generation is essentially generation that occurs away from large power stations, and closer to where the power is consumed, typically on the lower voltage distribution network (that is, generation that is ‘distributed’ throughout the network rather than centralised at a power station). Examples are onsite cogeneration and rooftop solar panels. It can include cogeneration within a building or factory (embedded generation), or even a network of connected buildings (precinct generation).

Dollars ($)

All references to dollars are Australian dollars unless otherwise specified.

Drivetrain

The components of a vehicle that deliver power from the engine to the wheels.

Ecologically Sustainable Development (ESD)

A set of principles that corporations and government entities must report against under the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act). See further information below.

Embedded generation

Generation of energy on site (for example, solar panels on a roof or a biogas fired generator within the manufacturing process), as opposed to buying energy generated from afar and transmitted to the site (for example, electricity from a utility transmitted through the electricity network).

Emissions Reduction Fund (ERF)

An Australian Government initiative that purchases emissions abatement through a competitive process.

Energy productivity

Using less energy to produce the same per unit outcome.

Energy Efficiency Technology (EET)

Clean energy technologies that fit within the CEFC Act’s definition of ‘energy efficiency technologies’. Includes technologies that are enabling technologies and technologies that are related to energy conservation or demand management.

Environmental Upgrade Agreement

A type of finance created by statute, available in local government jurisdictions in NSW (City of Sydney, North Sydney, Parramatta, Lake Macquarie and Newcastle) and Victoria (City of Melbourne). Funding from a financier is repaid out of a council rate charge, increasing the security of the finance.

Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act)

The Australian Government’s central piece of environmental legislation, which provides a legal framework to protect and manage nationally and internationally important flora, fauna, ecological communities and heritage places.

Equity

In finance terms, owned capital (such as shares) in a business or enterprise.

Export Finance and Insurance Corporation (EFIC)

An Australian Government statutory authority that provides finance and support to Australian exporters.

Forecast lifetime yield

The annualised weighted average of forecast income on outstanding principal balance over the life of the investment.

Fringe-of-grid

Areas at the edges of an electricity grid. These are typically the farthest points away from large-scale generation and transmission. Transmission over long distances tends to increase loss of energy. If energy demand is also increasing, fringeofgrid areas may lend themselves to localised energy solutions.

Fugitive methane emissions

CO2-e emissions that leak from certain sites, such as mines and landfills.

Government Policy Order

An instrument to direct government entities made under the PGPA Act.

Green bonds

A generic term for bonds used to finance projects with an environmental outcome. See Climate Bonds above.

Green Investment Bank (GIB)

A public company owned by the UK Government and charged with accelerating the UK’s transition to a greener, stronger economy. Operates with a mission similar to the CEFC.

Green price

The price for renewable energy certificates (RECs) that are created and sold by electricity generation facilities registered as accredited renewable energy facilities under the Renewable Energy (Electricity) Act 2000. Renewable energy facilities typically benefit from both the “black price” and the “green price” for each megawatt hour of electricity generated.

Greenhouse gases

The six Kyoto Protocol classes of greenhouse gases are carbon dioxide (CO2-e), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6).

Grid

An electricity grid. The main grids in Australia are the National Electricity Market (NEM), the SouthWest Interconnected System (SWIS) and the NorthWest Interconnected System (NWIS). There may also be localised grids (such as Darwin and Alice Springs).

Hedge

Refers to a way of protecting against financial loss or other adverse circumstances, typically through taking an offsetting position in a related security, such as a futures contract.

Heliostat

A mirror or polished surface used in concentrating and directing sunlight to optimise generation capacity.

Hybrid technology

As defined by the CEFC Board, a combination of technologies that integrate a renewable energy generation technology with other technologies into a combined system. See ‘Renewable Energy Technologies’ below.

Hybrid vehicle

A motor vehicle that uses both fuel and electric batteries as dual power sources.

Investment Mandate

The Clean Energy Finance Corporation Investment Mandate Direction 2015 is a formal Ministerial Direction made under the CEFC Act which specifies conditions under which the CEFC may perform its investment function.

More commonly, the term ‘investment mandate’ refers to the particular spectrum of opportunities that any given entity is permitted to invest in (also known as the ‘investment universe’). In this report we use capitalisation to distinguish between the two. The CEFC Investment Mandate changed during the 2014-15 reporting year.

Large-scale

In reference to renewables, a power station large enough to earn certificates under the LRET (i.e. above 100kW for Solar PV).

Large-scale Generation certificates (LGCs)

Tradable certificates created under Section 17 of the Renewable Energy (Electricity) Act 2000. One LGC is equivalent to 1MWh (megawatt hour) of eligible renewable electricity generated above the power station’s baseline.

Large-scale Renewable Energy Target (LRET)

The LRET creates a financial incentive for the establishment or expansion of renewable energy power stations, such as wind, solar farms and hydro-electric power stations. It does this by legislating demand for Large-scale Generation Certificates (LGCs). One LGC can be created for each megawatt-hour of eligible renewable electricity produced by an accredited renewable power station.

Lifetime abatement

The estimated amount of abated emissions over a project’s useful life.

Light Emitting Diode (LED)

A form of light bulb that emits less heat than incandescent bulbs and are therefore an energyefficient technology.

Limited recourse

Means that the recourse of the financier is limited to the assets, that are the subject of the finance.

Low Carbon Australia Limited (LCAL)

An Australian Government company that served as a small-scale pilot for the CEFC’s work. The Australian Government determined that LCAL would be integrated into the CEFC, and this process was completed during the 2013-14 year. LCAL was deregistered as a company in the 2014-15 year and no longer exists.

Low Emissions Technology (LET)

Low Emissions Technologies may be applied to a number of activities including but not limited to:

a) energy production

b) electricity generation including the use of nonrenewable, fossil fuels

c) fuels for and modes of transportation; and

d) using, reducing, or eliminating existing fugitive greenhouse gas emissions.

In addition to meeting the above criteria, the Board requires that at the time of CEFC investment, the low emissions technology must result in emissions of CO2e being substantially lower than the current average of the most relevant baseline for the activity being undertaken. The CEFC Board has provided further definition on what constitutes ‘low emissions technologies’ for its purposes on the CEFC website.

Merchant basis

In respect of renewable energy generation, energy sold onto the spot market without the benefit of a fixed price power purchase agreement where the price received is the prevailing market price at the time of sale.

Mezzanine debt

A specific type of debt that stands between equity and senior debt and in subordination to the senior debt. May or may not be convertible to equity. See Figure 37 for an illustration of the capital structure.

National Australian Built Environment Rating System (NABERS)

A national ratings system that measures energy efficiency, water usage, waste management and indoor environment quality of a building or tenancy and its impact on the environment.

National Electricity Market (NEM)

A regulated electricity trading market that interconnects the electricity grids of the states and territories of New South Wales, Victoria, Queensland, South Australia, Tasmania and the ACT.

Off-grid

Not connected to the electricity grid, such as in remote areas.

Offtake agreement

An agreement between a producer (of energy or crops) and a purchaser to purchase production output for a defined period at a defined price.

pari passu debt

A Latin term used in the legal and finance industry that means ‘on an equal footing’ or ‘on an equal basis’, for example, a loan in which two lenders agree to share any losses that arise on an equal basis. As distinct from ‘subordinated debt’.

Partner

A services company that the CEFC partners with to identify, channel and further develop project opportunities.

Photovoltaic (PV)

A type of solar cell generation, as in ‘solar PV’.

Pipeline

The forward view of potential CEFC investment opportunities.

Portfolio Benchmark Return (PBR)

A longterm target rate of return established by the CEFC Investment Mandate, against which the performance of the portfolio invested by the Corporation is measured.

Portfolio return

Weighted average return forecast to be made by the CEFC on its portfolio of investments.

Positive externalities

Benefits which are not exclusive to parties to a contract, such as an investment contract. May include reduced carbon emissions which benefit society as a whole. It is a requirement of the CEFC Investment Mandate that positive externalities be considered when the CEFC makes investment decisions.

Power Purchase Agreement (PPA)

A type of offtake agreement where a purchaser agrees to purchase and a supplier agrees to supply future generated electricity, usually at a specified price for a defined period.

Project finance

Longterm financing of infrastructure and industrial projects (such as a utilityscale generator or an onsite generation facility) which will be repaid from the projected cash flows of the project without recourse to the balance sheets of the sponsors.

Project proponents

The ‘proposers’ or owners of a given project, as distinct from the project financiers.

Public Governance, Performance and Accountability Act 2013 (PGPA Act)

An Act about the governance, performance and accountability of, and the use and management of public resources by, the Commonwealth, Commonwealth entities and Commonwealth companies, and for related purposes.

Refinancing

Repayment of an existing loan with a new loan.

Renewable Energy Certificates (RECs)

A generic term for tradeable certificates under the Renewable Energy (Electricity) Act 2000.

Renewable Energy Target (RET)

A target for the production of electricity from renewable energy sources under the Renewable Energy (Electricity) Act 2000. Made up of the small-scale renewables scheme (SRES) and the large-scale target (LRET).

Renewable Energy technologies (RNET)

Clean energy technologies that fit within the definition of ‘renewable energy technologies’ under the CEFC Act, and can include hybrids that integrate renewable energy technologies, and technologies that are related to renewable technologies, including enabling technologies.

Requirements for annual reports

Short for the Requirements for Annual Reports for Departments, Executive Agencies and FMA Act Bodies, approved by the Joint Committee of Public Accounts and Audit, July 2012.

Roll off

Investment amounts that exit the portfolio (e.g. by sale, repayment, cancellation of all or part of the facility, reduction in quantum borrowed etc.).

Sell-through

Investments that are on-sold by the counterparty in order to finance small-scale projects or equipment upgrades (for example to a small business or a consumer).

Senior debt

Debt that takes priority in repayment over other unsecured or more junior debt. See Figure 37.

Single-axis tracking

A type of PV array that rotates a panel around a single axis to track the sun’s movement across the horizon, optimising generation capacity.

Small-scale Renewable Energy Scheme (SRES)

A scheme to increase uptake of small-scale renewables, implemented through the Renewable Energy (Electricity) Act 2000 and the accompanying Renewable Energy (Electricity) Regulations 2001, by issuing small-scale technology certificates (STC). One STC is equivalent to 1MWh (megawatt hour) of:

a) renewable electricity generated by the solar panel, small-scale wind or hydro system (unless the Solar Credits multiplier applies); or

b) electricity displaced by the installation of a solar water heater or heat pump.

Special Account

A type of Australian Government account in which funds are held for a specified purpose.

Split incentive

In energy efficiency this references a misalignment of interests between those who pay energy bills and those who control the amount used. A typical example is where a building owner may avoid capital expenditure on energy saving equipment since the benefit flows to the tenant rather than the building owner.

Subordinated debt

Where two or more financiers are involved in offering finance, one may take a ‘subordinated’ or ‘junior debt’ position relevant to the other (‘senior debt’) in the event of a loss (i.e. one financier may rank after the other financier in priority for recovery in the event the finance recipient becomes insolvent and cannot repay the loan). As distinct from ‘pari passu debt’ — see Figure37.

tCO2-e

Tonnes of carbon dioxide equivalent greenhouse gas.

Tenor

Length or term of the loan.

Total Annual Remuneration Packages (TARPs)

Total remunerative benefits for staff including salary, superannuation and any other benefits.

Tri-generation

A system of generating power, heating and cooling from the same process or source. A trigeneration system is identical to a cogeneration system with the addition of the cooling element.

Utility-scale

Large centralised generation e.g. a power plant.