E&OE….
Topics: Clean Energy Innovation Fund, Clean Energy Finance Corporation, Australian Renewable Energy Agency
ROSS GREENWOOD:
The Environment Minister Greg Hunt is on the line right now, many thanks for your time Greg.
GREG HUNT:
And it's a pleasure to speak with you Ross.
ROSS GREENWOOD:
So, would you take this as an about turn, a backflip if you like?
GREG HUNT:
Well, it is a change of policy, there's no question about that, the policy of abolishing has been changed and we've made some pretty significant changes in operation as well so the reason – what are we doing and why?
What we're doing is we're keeping the Clean Energy Finance Corporation and keeping the Australian Renewable Energy Agency, known as ARENA…
ROSS GREENWOOD:
Okay, can I stop there because this is Tony Abbott, he said on day one – on day one, the Finance Minister will notify the Clean Energy Finance Corporation that it should suspend its operations and instruct the Department of Finance to prepare legislation to permanently shut down the Corporation.
You couldn't be any more unequivocal or clear about that could you?
GREG HUNT:
Well, that's correct and two things have happened. Obviously there's been a Senate which said no, we will not allow either of those things to occur.
So we have adjusted their practice very significantly to make them far more commercial, particularly in the case of the Clean Energy Finance Corporation – it's now projected on the basis of what we're doing to make the Government about $250 million…
ROSS GREENWOOD:
Hang on, so for something that effectively was going to cost the best part of, I think it was, $1.3 billion or something of that nature, you're now saying it will make the Government $250 million, why is that?
GREG HUNT:
So, the package that we're putting together will make the Government about $250 million over 10 years, it's not a trivial sum but it's a reasonable sum that will therefore go to help the Budget bottom line.
And that's because we've lifted the rate of return expected for the Clean Energy Finance Corporation. So it has to produce a profit of about four per cent a year on its investment…
ROSS GREENWOOD:
Okay sorry, just one thing so that people understand this, how does it make a profit?
Does it make a profit because the things its invested in have been revalued at a higher level, so in other words, that's not cash, that's if you like, a potential capital gain, or is it that it's producing actual cash because of the returns on the investments it's receiving?
GREG HUNT:
It's the latter. So, what happens is, let's say it borrows at a five year government bond rate of two per cent and lends at six per cent, we have changed the mandate so it's expected to return a spread or a profit of four per cent.
But what's interesting here is the private sector wants the Clean Energy Finance Corporation to make long term loans, they will then match or partner with it.
And as you said at the outset, what – because of the changes we've made, so it's actually become more commercial, it's both more effective and it returns the yield to the taxpayer.
And then the second thing is that obviously with a change of Prime Minister does come a change of focus and what we're doing is moving away from grants to investment.
So a grant means that the taxpayer gives away 100 per cent of every dollar that they grant. These investments are about making sure we get the taxpayer the full 100 per cent back and then a small profit.
In the case of what's called the Clean Energy Innovation Fund that we're creating today, that will be a profit of about one per cent because it would be investing in more emerging technologies, solar, batteries, storage, smart grid, energy efficiency – things that are actually going to yield a dividend…
ROSS GREENWOOD:
Okay, I want to get to that in a moment. Let's now go to you, however, as the Opposition Environment Minister and spokesperson, as you were at the time. This is what you said at that time.
(Excerpt)
ROSS GREENWOOD:
Okay, so that's you in Opposition. But what you're saying is the game has changed because you've been able to change the commercial nature of the business – that's pretty much it?
GREG HUNT:
Absolutely, and the three big things that we've changed. One, the rate of return, so we actually get a profit.
Two, we've got it investing in particular in energy efficiency, which does yield real, additional benefit – they put out a fund, a 250 million fund for investing in energy efficiency upgrades for low income housing, but this will return the yield.
And three, I think we've got the management now operating in a way which is more commercial, more aligned with the broader priorities, and actually delivering abatement, real outcomes. So…
ROSS GREENWOOD:
Okay, so I've got all that, but what you're telling me is the Clean Energy Finance Corporation is now profitable?
GREG HUNT:
Yep. The expectation that the Department of Finance has ticked off on is a $250 million net profit to budget (indistinct)…
ROSS GREENWOOD:
Okay, now second thing I've got there is the Clean Energy Innovation Fund. The Clean Energy Innovation Fund that you're creating, it's a new $1 billion Clean Energy Innovation Fund. Where does that $1 billion come from?
GREG HUNT:
So that is a sub-fund which will be made available from the Clean Energy Finance Corporation.
ROSS GREENWOOD:
Sure, but where does the billion dollars come from?
GREG HUNT:
So that is part of their $10 billion line of credit. In other words, they'll borrow at two per cent, they'll lend out at a higher rate, and that's the fund which will be administered by ARENA.
What does it mean? It means it's going to be looking at the really emerging technologies, but instead of giving the money away, getting zero back to the taxpayer, the expectation of the Department of Finance, who is a pretty ruthless taskmaster under Mathias Cormann, as you would want them to be, is that we'll get 100 per cent of the money back and an additional profit of about eight per cent a year.
Not a huge amount, but instead of giving $100 out of every hundred and getting nothing back, the hundred will come back at and a small profit of a dollar on top of that (indistinct)…
ROSS GREENWOOD:
Okay, and we think this is all going to make Australia a better country? We think all of this is going to still make Australia a better country – is that bottom line of it all as well?
GREG HUNT:
Yes. Energy efficiency, smart grid, batteries, battery storage option – these are the things that are actually going to make the system far more efficient and effective.
It wasn't where they were going under the previous regime. We've tried to be commercial and we've tried to be innovative and we've tried to make sure the public get every dollar back, and that is a radical transformation.
ROSS GREENWOOD:
Environment Minister Greg Hunt, good to have you on the program.
(ENDS)