Exclusive: UK Green Bank sale could fetch £3bn

A competitive process to privatise a majority stake in the UK's Green Investment Bank (GIB) could start in about three weeks, according to several people with knowledge of the matter.

Sources told Infrastructure Investor that the auction, which is awaiting final government approval, would happen in two stages of eight weeks. Prospective participants would first be asked to submit indicative bids, after which an information memorandum will be given to interested parties. Would-be buyers would then likely consolidate in several consortia before presenting binding offers.

Potential bidders have to commit to providing £2 billion (€2.6 billion; $2.9 billion) in funding to the bank over the coming three years as part of pre-conditions to entering the process, the sources said, on top of offering a price for the GIB’s existing £2 billion portfolio of assets. With the government looking to sell about 75 percent of the lender, they estimated that a sale could fetch about £3 billion.

The GIB declined to comment.

A number of parties have already expressed preliminary interest in the bank, the people said, with indicative bids expected to come from the likes of pension funds, insurers, infrastructure vehicles, sovereign wealth funds and financial institutions.

Earlier this month, Infrastructure Investor reported that Australia’s Macquarie Group and UK-based M&G Investments were considering taking part in the auction.

The UK government announced its intention to privatise the GIB last June, under the rationale that a sale would allow the bank to secure fresh equity funding, remove shackles linked to state aid rules and benefit from a wider range of financing options by giving it access to the debt markets.

A stumbling block in the process was removed two weeks ago when the government announcement the creation of a special “golden” share enabling it to veto any of the lender’s investments deemed contrary to its founding green principles.

The bank expects to invest £700 million annually over the coming three years. Sources said the GIB’s pipeline was fairly firm for the first two, with third year projects still to be assessed in light of how government policies will have evolved by then.