Exclusive: Macquarie, M and G mulling bids for UK Green Bank

The creation of a ‘golden share’ allowing the government to veto non-green investments could speed up a privatisation process that is expected to be finalised by October.

Australian fund manager Macquarie Group and London-based M&G Investments, the asset management arm of insurer Prudential, are among the firms currently assessing a potential bid for the UK’s Green Investment Bank (GIB), Infrastructure Investor has learnt.

Both firms are currently in the early stages of evaluating the opportunity, according to several people with knowledge of the matter, who added that investor interest was likely to perk up after the government removed uncertainty over the shape of its future involvement in the GIB yesterday.

The creation of a “golden share” is now set to allow the government, which announced its intention to privatise the lender last June, to veto any investment deemed contrary to the GIB’s stated “green purposes”.

The move is intended to allay fears that the bank could deviate from its original mandate once in private hands. It grants the government a degree of oversight over the lender’s strategy without forcing it to hold a controlling stake, which would have run contrary to its aim of taking the business’ debt off the Treasury’s balance sheet.

Recent changes to public account rules now state that the debt load of entities under state control must appear on public books even if the government holds less than 50 percent of the business, making ownership of a sufficiently large minority stake much more onerous in balance sheet terms.

The measure calling for the creation of a golden share is now going through parliament, sources said. Its effect on public books also has to be approved by the National Audit Office.

The move is likely to make the path clearer for the privatisation process to progress, with critics opposed to the divestment on environmental grounds now less inclined to thwart a potential sale.

Sources with knowledge of the hoped-for timetable expect the process to take about six months to complete, with the finalisation of a deal anticipated for early autumn. The timing of a potential referendum on the UK’s EU membership was unlikely to play a meaningful role in the privatisation’s timing, the people said.

Neither Prudential nor the GIB responded to a request for comment, while the UK Treasury couldn’t be reached before press time. Macquarie declined to comment.