About 7.5 per cent of the loans and investments made by the new $10 billion Clean Energy Finance Corporation will not be recovered, the government is predicting.
Treasury officials have told a parliamentary committee scrutinising the bills that will set up the corporation that even if defaults are in line with this ”high-side” estimate - which amounts to losses of about $150 million a year - the corporation would still deliver its projected return of about the government bond rate, or about 4 per cent.
The Clean Energy Finance Corporation is designed to overcome capital market barriers that hinder the financing, commercialisation and deployment of renewable energy and low-emissions technologies.
The government is pushing the bills to set up the corporation through Parliament in the next three weeks so it can prepare to start its investment operations from July 1, 2013, and was yesterday forced to rely on embattled backbencher Craig Thomson to vote against a Coalition move to prolong the scheduled two-hour committee ”roundtable”.
Mr Thomson resigned as chairman of the House of Representatives’ economics committee last August as the allegations against him mounted but yesterday briefly returned as an ordinary committee member, while the committee was sitting in camera, to vote against the Coalition’s push to hold hearings around the country for several weeks.
Coalition backbencher and committee member Kelly O’Dwyer said it was ”disgusting” the government was avoiding scrutiny of how it was using $10 billion in taxpayers’ money.
The head of Treasury’s Clean Energy Finance Corporation secretariat, Mike Waslin, told the committee the estimated ”writeoff rate” would be reviewed when the detailed investment mandate for the corporation was finalised.
The Coalition has promised to scrap the fund, which it describes as a ”slush fund” and a ”giant waste of money” but the legislation seeks to ”Abbott-proof” the corporation by ”appropriating” the full $10 billion five-year budget upfront.
The move means the corporation could continue lending to clean energy projects at the promised rate of $2 billion a year, until a future Abbott government was able to pass a repeal through both houses of Parliament.
The corporation, a key demand of the Greens in the negotiations over a carbon tax, will provide one third of its funding as investments, one third as commercial loans and one third as concessional loans.
The corporation has said it will apply a ”commercial filter” to its lending, with careful procedures to minimise risk, but its return is less than a private-sector investor would seek.
Mr Waslin said the corporation aimed to overcome the market barriers to big, renewable energy investments posed by actual investment risk, the perceived risk of a new type of investment and the ”pulling back” of European bank lending to home markets due to the financial crisis.
To the extent the corporation’s lending is concessional, either by offering a lower rate, or a longer term than would be commercially available, its operations hit the federal budget’s bottom line. But most of its lending, with an expected commercial return, is off budget. The Coalition has said this is a tricky mechanism to achieve a false budget surplus.
The budget estimates the cost of the lending concessions as being $944 million over the first four years.
