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Tony Abbott can't stop green loans, top lawyer says

Innovative solar projects were among those hoping to tap CEFC funding.

Innovative solar projects were among those hoping to tap CEFC funding. Photo: Max Mason-Hubers

The Clean Energy Finance Corporation, the $10 billion bank dubbed a “giant green hedge fund” by the incoming Abbott government, is obligated by law to ignore Coalition demands that it cease making loans, according to legal advice obtained by conservation groups.

The Australian Conservation Foundation and the Environment Defenders Office Victoria said they had received legal advice from Stephen Keim, SC, on whether a minister could stop the CEFC's operations without changing legislation.

“The CEFC's activities cannot be terminated by executive action,” Mr Keim said in the advice. “If given some unlawful direction by the responsible ministers (or anyone else) to cease operations or some aspect of its operations, the board would be obliged to ignore that direction.”

Jillian Broadbent, chair of the CEFC.

Jillian Broadbent, chair of the CEFC. Photo: NIc Walker

New Environment Minister Greg Hunt and other Coalition ministers have vowed to scrap the CEFC, saying it provides funding that the private sector already offers and was exposing the taxpayer to potential losses if projects failed.

Advocates of renewable energy, however, note the CEFC has been crucial in prompting ventures that bring on board commercial lenders but would not have been funded with partial backing from a government-backed agency.

Tony Mohr, the Australian Conservation Foundation climate change campaign manager, said the CEFC had deliberately been modelled on the Export Finance and Insurance Corporation – which has operated independently for more than half a century – to shield it from interference.

Renewable energy is intended to reduce the need for burning fossil fuels.

Renewable energy is intended to reduce the need for burning fossil fuels. Photo: Jonathan Carroll

The CEFC “cannot just be shut down holus-bolus like this”, Mr Mohr said.

“The Treasurer can’t actually write to the CEFC and direct them in any way,” Mr Mohr said. “The directors and the board of the CEFC are legally obliged to keep on...investing in projects because that’s their purpose as written in their act.”

It is understood the CEFC has obtained advice similar to that made public by the Australian Conservation Foundation and the Environment Defenders Office Victoria.

The bank, which began making loans on July 1, sought legal advice after the Coalition said in February it would scrap the organisation if it won government.

Investments

The CEFC stopped making new investments when the federal election was called and caretaker provisions began. It received a letter from Treasurer Joe Hockey's office on Wednesday the bank cease new investments stop.

The bank says it has committed about $500 million in projects with private capital providing about $1.6 billion more. Last week, Pacific Hydro announced that it had received $70 million from the CEFC for its wind farms in western Victoria, with commerical banks tipping in $158 million.

The CEFC is likely to make further announcements of investments - once counterparties sign off. All of the new projects were completed before the caretaker provisions came into force and are within the $500 million total already made public.

Mr Mohr said the CEFC had been established to assist clean energy firms who “really needed to avoid their funding source being some sort of political roundabout.” The CEFC is required to lend $2 billion annually for five years.

The legal advice from Mr Keim has also been sent to Mr Hunt's office, Mr Mohr said.

"Our position hasn't changed on this," a spokeswoman for Mr Hunt said.

The CEFC is hoping to convince the new ministers that the bank can also serve the Coalition's Direct Action plan to address climate change and is therefore worth retaining.

54 comments

  • The govt can pretty much sack the entire board and appoint new members who can render the CEFC useless.

    The govt has plenty of tactics to fall back upn and it would be foolish for the labor green mob to obstruct.

    Commenter
    Regh
    Date and time
    September 19, 2013, 2:50PM
    • Yes they could replace the board, but it would still be required by law to ignore an unlawful direction from the government. CEFC is a corporation and bound by Corporations Law. If the board obeys an unlawful direction, the Directors could be personally held liable, fined, disqualified from being directors and potentially even jailed.

      Commenter
      Mike
      Date and time
      September 19, 2013, 3:39PM
    • That's right regh, cut opportunities to create jobs to pay off your mining paymasters.

      Go easy on the sherry, old fella.

      Commenter
      realist
      Date and time
      September 19, 2013, 3:43PM
    • Yes, god forbid democracy should get in the way of the Abbott.

      Commenter
      Jace
      Date and time
      September 19, 2013, 3:49PM
    • It would be foolish for the "labor green mob" to continue advocating for what happens to be the best part of the carbon pricing package? The fact that the CEFC's initial investments are being matched 3:1 with private capital suggests that this scheme is working well on a financial level, not to mention the environmental benefits which is the primary aim. And the LNP want to shut it down and replace it with Direct Action, which is not an investment but a giant slush fund paying polluters to pollute. On what planet is that fiscally responsible?

      Commenter
      Dags
      Date and time
      September 19, 2013, 4:06PM
    • @Mike

      The CFEC is not a Corporation (under the Act) and the Corporations Act is not directly relevant. It is a Commonwealth Authority and hence principal regulation is under the Commonwealth Authority and Companies Act (1997).

      If it was a company bound by the Corporations Act, the shareholders (ie the Australian Government, represented by the Minister) could call an AGM and change the company rules such that the Corporation cannot lend money. Easy.

      As it is, its still quite feasible. Changes to regulations do not have to be approved by the Senate; the government can change regulations to make its commercial lending activities impossible.

      In practice, for all the bleating by Green groups, the Directors know that they cannot operate without government support, and indeed they haven't been. No loans were made during the caretaker period for exactly this reason - there was no legal compulsion for them to do this, but they are blessed with a modicum of common sense.

      The CEFC costs taxpayers $2b every five years. If these schemes were economically viable, they could use commercial sources of funding as do other companies. If the schemes are not economically viable, we shouldn't be lending money to their supporters. Either way, the CEFC fulfils no commercially worthwhile function, and if its all the same by you, I would rather have the $2,000,000,000 back again thanks.

      Commenter
      weterpebb
      Location
      Hornsby
      Date and time
      September 19, 2013, 4:20PM
    • @peterwebb. Actually these projects are commercially viable otherwise banks wouldn't touch them with a barge pole. If you read the article, commercial banks have invested a lot of money in a number of projects, and I'm sure you are aware of how conscious they would be of risky lending due to poor past form elsewhere that came to another head around 2008. The CEFC enables the banks to defray some of the risks of investing in a relatively new sector and so lower borrowing costs, particularly in an area so exposed to the fickleness of government.

      Commenter
      Pad
      Date and time
      September 19, 2013, 5:44PM
    • I'm hope Regh isn’t involved in any corporate business. You cannot override commercial law for a political agenda. There are some seriously dangerous people supporting this “Abattoir” already and by the sound of things Regh isn't all that worried about breaking the law. Great way to run a country.

      Commenter
      RTP.
      Location
      Sawtell
      Date and time
      September 19, 2013, 7:08PM
    • Green mob??
      Why is stopping polluting and investing in new energy efficient and renewable technology so stupid and worthy of derision? Why are you so frightened of innovation and change?
      If we are smart enough to figure out how to use the sun,the waves etc for power sources,why so much anger?
      That's what the human race is good at,coming up with new ideas to solve old problems.

      Commenter
      Wal
      Date and time
      September 19, 2013, 7:10PM
    • @Peterwebb

      Costing the taxpayers $2b per year?

      Sorry, that is completely, false, incorrect and misleading.

      They are required to LOAN $2b per year.

      So according to you, banks should stop lending money, because when they do the cost their shareholders the value of every loan they make?

      Either you have no idea about finance, and shouldn't comment, or you do, and you are trying to mislead on purpose.

      Which is it?

      Commenter
      Fotografa
      Date and time
      September 19, 2013, 10:20PM

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