Never mind the sentiment, the maths is all wrong

In The Australian today:
“There is no passion, said Georges Clemenceau, like that of a functionary for his function. He must have had the Clean Energy Finance Corporation in mind, as it battles the Coalition’s election commitment to abolish it.”

About Henry Ergas

Henry Ergas AO is a columnist for The Australian. From 2009 to 2015 he was Senior Economic Adviser to Deloitte Australia and from 2009 to 2017 was Professor of Infrastructure Economics at the University of Wollongong’s SMART Infrastructure Facility. He joined SMART and Deloitte after working as a consultant economist at NECG, CRA International and Concept Economics. Prior to that, he was an economist at the OECD in Paris from the late 1970s until the early 1990s. At the OECD, he headed the Secretary-General’s Task Force on Structural Adjustment (1984-1987), which concentrated on improving the efficiency of government policies in a wide range of areas, and was subsequently Counsellor for Structural Policy in the Economics Department. He has taught at a range of universities, undertaken a number of government inquiries and served as a Lay Member of the New Zealand High Court. In 2016, he was made an Officer in the Order of Australia.
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12 Responses to Never mind the sentiment, the maths is all wrong

  1. Blogstrop

    Shameless shysters, charlatans, cash-burning carbonistas.

  2. Fred Furkenburger

    Blogstrop, you are being far too kind!

  3. Tom

    the cheaper the crook, the gaudier the patter.

    At the very least, the seven moochers on the CEFC board, having defied the wishes of their 100% owner, have not only identified themselves as small-time carpetbaggers, but have made themselves unusable on commercial boards in Australia.

  4. Samuel J

    See what the Board members other jobs are – they seem highly conflicted.

  5. manalive

    … no matter how well intentioned its board may be …

    What a luxury it must be to have the national interest, indeed the global interest as you see it, neatly coinciding with self-interest.

  6. Takes a lot of export coal – and heavily taxed domestic coal burnt in aging facilities – to keep Clean Energy in the manner to which it has become accustomed.

  7. Squirrel

    “In essence, the CEFC borrows at the government bond rate, say 3.5 to 4 per cent, and lends at slightly above 7 per cent to abatement-­related projects that, in ­theory, would otherwise struggle to find funding on reasonable terms.”

    Wow – a eucalyptus-scented version of the carry-trade, with a warm (solar powered, of course) green inner glow – what could possibly go wrong?

    As a nation, we need to think big, and apply this sure-fire model on a larger scale – borrow a few trillion at the bond rate, lend it out to “investors” operating in legislatively rigged and engineered markets, and pocket the difference to get the federal budget back in the black (forget about all those nasty cuts – yehaa!)

  8. johanna

    Yeah, Squirrell, they’ve found the economic equivalent of a perpetual motion machine.

    Must be a Nobel Prize in it for someone!

  9. Andrew of Randwick

    The CEFC submission to the Senate was a shocker – it is bear repeating some comments from last year:
    4 Dec 2013 Cat Comment
    I wish someone with the time and money (Sinc, Steve, Judith, Henry, IPA) could have a look at the Clean Energy Corporation (CEFC) submission to the Senate Enquiry.
    This submission has been quoted extensively by Labor and Green senators in the filibuster debate being undertaken at the moment…… and so on
    17 Dec 2013 Cat Comment
    #1114301, posted on December 17, 2013 at 4:18 pm
    I wrote about the CEFC submission to the Senate Inquiry at the start of the month (4 Dec) – the questions still apply. This submission was quoted extensively by Labor and Green senators in the filibuster debate.
    Perhaps some furphies could be exposed about these dodgy investments (Appendix C). Based on my intermittent listening of the radio on the 4th December, a starting list would be:
    1) The CEFC is making a profit. This is justified because the CEFC project returns are 7% and the 5 year bond rate is 3% – hence a 4% positive difference. Here I would say that the CEFC debt is almost certainly subordinated to private debt and thus a return of 15-20% should be required. And thus the CEFC is making a loss on a risk-adjusted return. (I am assuming here that the CEFC is not a seed equity provider)
    2) The CEFC has multiplied the private lenders to put in $3 for every $1. What are the different terms for the lenders?
    3) Do all CEFC projects rely upon the Renewable Energy target for existence?
    3) What is the EBITDA to Interest coverage of these projects?
    4) Oh and is I was devious I would look at equity. What is the capital structure of the projects? And is the equity true equity or faux equity where a subsidiary is capitalised with a loan from a parent that has covenants that put its debt on a par with other debt holders, i.e. in front of the CEFC.
    5) The CEFC is helping to create thousands of green energy jobs. Where?
    6) The CEFC is helping Australia build internationally competitive industries in green energy. How much green energy has Australia exported? Oh alright, I may be being a bit harsh. How much green energy equipment or knowhow has Australia exported?
    7) The CEFC will help Tasmania become a green energy powerhouse and power Australia. Oh yeah- how?
    8) The CEFC has helped Warrnambool City Council replace street lights. What is the total ownership cost benefit of that scheme when capital is taken into account?
    And so it goes on. The one piece of information missing from all of the speeches is what is the fully loaded c/kWhr of these projects.
    P.S. Why are the explanations of the financials for the case studies in Appendix C so obtuse? No mention of capex, opex – just words like “provided finance”.

  10. johanna

    It’s post-modern economics, Andrew. You need to get with the program and give up that hegemonistic, patriarchial view of the economy that is currently hampering your understanding of the CEFC.

  11. john constantine

    they abbott-proofed that ten billion-and hid it from their leftie deficits and debts. what a kick that it only took ten billion dollars to rub tories faces in that paticular joke. can’t change australia forever without breaking some eggs. the ten billion went towards helping out prop up prices in the sector that the union superannuation funds are long and overweight on,with no exit potential. come the day that unicorn power is priced at market levels,the union super funds will no longer be able to flood the airwaves with anti tory propaganda.

  12. john constantine

    what is a shifty ten billion between cronies?. maaaaaate.

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