Clean Energy Finance Corporation says shadow ministers asked it to break its legal obligations by not committing to any loans

The government’s new $10bn green investment bank claims the Coalition is asking it to act illegally by urging it not to carry out its statutory duties ahead of September's election.

The Clean Energy Finance Corporation (CEFC) says the Coalition is also suggesting it could act illegally itself, as it takes steps towards its planned abolition of the bank – which lends on commercial terms but which the Coalition has labelled a “giant slush fund”.

In his budget-in-reply speech, Tony Abbott revealed he was counting on the abolition to deliver $1.2bn in savings over the next three years.

The shadow finance minister, Andrew Robb, and shadow environment minister, Greg Hunt, wrote to the CEFC chief executive, former Macquarie bank executive Oliver Yates, in February, urging him to make no funding commitments prior to the election on the basis the Coalition would abolish it.

But CEFC chair and former Reserve Bank board member, Jillian Broadbent, told Guardian Australia the organisation had been “legally reassured” that it was obliged to begin its work lending the first year’s $2bn allocation from 1 July and to continue to do so until the law setting up the CEFC was changed.

“We did write back to the shadow ministers saying we were required to discharge our duties under the act and we are doing that and we cannot do otherwise. Effectively they are saying we should act in a way that is not consistent with the law of the day and that is an unusual request for them to make,” Broadbent said.

“We have been legally reassured, we talk to the department and to our own lawyers and we are entirely comfortable with what we are doing.”

Andrew Robb stressed the Coalition’s argument was not with the CEFC itself or those working for it, but the government.

He said: “We understand the CEFC has a legislative mandate to operate and that the government will make funds available for its use from 1 July, but there is no apparent legal requirement for loans to be written for instance between now and 14 September or the commencement of the caretaker period on 12 August.

“If there was such a requirement it would mean the CEFC would be obliged to write loans for projects regardless of their viability.

“Given the absence of bi-partisanship and our unwillingness to risk $10 billion of borrowed taxpayers’ money there is a clear logic to not pushing funds out before the election.”

The Coalition has also pledged to revoke any loans the CEFC enters into, where legally possible, but Broadbent says it will not be legally possible to revoke any of them.

“I don’t believe there is any way the Coalition would act illegally to unwind a contract we have entered into legally,” she said. “CEFC contracts will be bound by the laws of contract, like all other contracts are.”

And she said the CEFC was likely to have a number of transactions “ready” as soon as the first year’s funds became available on 1 July, and wanted to move quickly “to show what we can do”.

The Coalition’s plan to immediately abolish the CEFC could also be complicated by the attitude of independent senator Nick Xenophon, who might hold a balance-of-power vote in the Senate after the 14 September poll, where the Greens and Labor would certainly also oppose the abolition of the lender that they created as part of the carbon tax plan.

Xenophon told Guardian Australia that sources of baseload power other than coal needed finance and “if killing of the CEFC kills off the future of geothermal and solar thermal and the like then that is short-sighted policy and bad news”.

The CEFC – modelled on the UK’s Green Investment Bank – is supposed to operate at little cost to the taxpayer by achieving a return on its lending similar to the cost to the government of borrowing the funds. It is supposed to step in to finance projects close to commercial viability which cannot otherwise get finance either because commercial banks are unfamiliar with the technology involved or uncomfortable with the duration of the funding required.

The lending comes at a cost to the budget only to the extent that a small proportion of it is at concessional rates. This cost is what the Coalition is claiming as a saving of $350m in 2013/14, $450m in 2014/15 and $400m in 2015/16.

But Broadbent said that of the many “high-quality transactions” that had been brought to the CEFC even before it opens it doors for lending, very few were asking for concessional terms.

“Many of the transactions we have seen haven’t required concessionality … There is a ceiling on it in terms of our lending, but I don’t see we would be using the levels allocated as things stand.”

Broadbent said the CEFC, which now has 50 staff, would, if the Coalition won the election, be hoping to persuade the incoming government of the merits of its role.

“We don’t want to play up the political battle because we see a purpose in what we are doing and we want to get on with the job … We would really like to have a chance to persuade [the Coalition] of our merit because a lot of the comments they make indicate they don’t really understand our work, although so far they haven’t been very interested in being persuaded.

“We don’t want to be on a collision course with a future responsible minister. We want to persuade them of our merit.”