GIB offshore wind fund in £818m second close

Sweden’s AMF Pensionsforsakring AB and the Strathclyde Pension Fund helped the vehicle add £355m to first close commitments.

The UK’s Green Investment Bank (GIB) has reached a second close for its pioneering offshore wind infrastructure fund on £818 million ($1.2 billion; €1.1 billion).

Swedish life insurance and pension provider AMF Pensionsforsakring AB and the UK’s £14 billion Strathclyde Pension Fund backed the fund at second close with £355 million. Strathclyde councillor Paul Rooney called its £50 million commitment to the fund “our biggest investment to date in green infrastructure in the UK”.

The two institutional investors join first close investors the Abu Dhabi Investment Authority, and the Worcestershire County Council and West Yorkshire pension funds. The GIB also contributed £200 million of its own money towards the £463 million first close.

GIB fund managing director Karl Smith said the bank is “in advanced discussions with other potential investors and progressing quickly towards final close and reaching our £1 billion target”. That confirms what a source familiar with the fundraising told us in May, when he pointed out the fund was on track to “comfortably” get to its £1 billion target and had a “good chance” of hitting its £1.5 billion hard-cap by year-end.

The fund’s second close was marked by the acquisition of a 10 percent stake in a 576-megawatt (MW) offshore wind farm in Liverpool Bay. That brings the fund’s portfolio to three operational assets generating over 900MW and means the fund has already managed to invest half of its capital.

Energy and Climate Change Secretary Amber Rudd welcomed “this long-term, private sector involvement in what is now the largest renewable energy fund in the UK. This demonstrates how we are open for business and the best place in the world to invest in offshore wind”.

But despite Rudd’s encouraging words, the offshore wind industry is somewhat apprehensive after Energy Minister Andrea Leadsom seemed to raise the prospect of a subsidy review during a Parliamentary debate. Following a question from Conservative MP Peter Aldous calling for clarity on offshore wind subsidies, Leadsom replied:

“We are fully committed to the continued growth and development of that sector. As part of the spending review, we need to look at the impact on consumer bills and make sure that we can manage the ongoing development to reach that subsidy-free point while not impacting too much on the bills for hard-working consumers. We will set out plans later this year.”

Since being elected in May, the Conservatives have implemented sweeping reductions to renewable energy support mechanisms. They include a review of the feed-in tariff framework, which may result in its possible end; an earlier than expected end to onshore wind subsidies; and the abrupt end of the Climate Change Levy for renewable energy producers, a decision currently being challenged in the courts by biomass plant operator Drax and Terra Firma-owned renewables firm Infinis.

This article was first published on Low Carbon Energy Investor, Infrastructure Investor’s sister publication focused on energy transition markets.