UK Windfarm Funding News – iFix Reinforcements

09 Jul 2015

Windfarm Green Investment Bank privatisation

The Green Investment Bank has today sought to downplay fears privatisation of the government-backed bank will dilute its ability to raise private capital and undermine its UK Windfarm Funding credentials, insisting the move will free it up to mobilise higher levels of investment in a wider range of low carbon project.

Speaking to Business Green ahead of today’s announcement that the government is to sell off a stake in the bank, Green Investment Bank (GIB) chief executive Shaun Kingsbury said the controversial move meant “good news for the green impact we can have”.

He added that moving the bank into the private sector would free it from EU State Aid rules and allow it to invest in clean tech areas that it was previously barred from supporting, such as electric vehicles infrastructure or smart grid technologies.

“Investing in low carbon transportation has always been challenging and at the edge of State Aid rules,” Kingsbury said. “One thing we talked about was could we finance electric taxis in London – that was at the edge of what we can do currently, but now we can look at it. We can also look at rail electrification, we can look at energy storage. Bringing in private capital is not just about getting us more capital, it is also about broadening what we can invest in.”

The Department for Business, Innovation and Skills will announce today it plans to offload a stake in the bank in order to give the bank greater freedom to borrow and access private capital.

The precise detail of how big a stake the government is looking to offload was not disclosed, but industry sources said they expected to the government to retain a “significant minority stake” in a manner similar to the recent privatisation of Royal Mail which saw the state hold around a 30 per cent stake in the business.

Business Secretary Sajid Javid said the sale would allow the bank to build on its recent success. “The Green Investment Bank has shown that investment in green technologies can be a profitable business,” he said. “The challenge now is to build on this success. The bank will still be green, still be profitable, still be a market-leader in financing environmentally sound infrastructure. But free from limitations on where it can borrow money and EU regulations on state aid, the bank will be able to access a much greater volume of capital.”

His comments were echoed by Chancellor of the Exchequer George Osborne, whose deficit reduction targets had effectively blocked the bank from borrowing while it remained a state institution. “In 2012 we set up the Green Investment Bank to support important investment in the UK’s green infrastructure and since then it’s gone from strength to strength,” he said. “That is why we can now begin exploring options for moving the bank into the private sector to enable it to access larger pools of capital and act more freely to invest in a broad range of green sectors. We want the Green Investment bank to attract more investment and we will use the money we raise to pay down the national debt and deliver lasting economic security for working people.”

However, the move has already been criticised in some quarters, with ministers accused of offloading a state asset that has just started to turn a profit and forgoing the opportunity to give the bank the power to borrow at the ultra-low interest rates currently available to the government.

“Providing the bank with greater flexibility to borrow and invest in a wider range of projects is key to the bank’s future success and this could be achieved in many ways,” said Nick Molho of the Aldersgate Group. “But an actual privatisation of the bank has to be weighed against the way a majority sale could be interpreted by low-carbon investors and our international partners in these critical months ahead of the Paris climate summit. Rightly or wrongly, some may see it as evidence of a lack of confidence from the government in its own green policies, particularly in the wake of its retrospective policy change on onshore wind. Ministers need to handle any sale really carefully to ensure investor confidence is retained.”

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