UK Green Bank part-privatisation sets off hostile response

The government could sell an up to 70% stake in the Green Investment Bank, netting some £1.4bn.

Shortly after announcing retroactive cuts to onshore wind subsidies, the newly-elected Conservative government has said it intends to part-privatise the UK’s Green Investment Bank (GIB).

“In 2012, we set up the GIB to support important investment in the UK’s green infrastructure and since then it’s gone from strength to strength. 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,” Chancellor of the Exchequer George Osborne said in a statement coinciding with the bank’s annual results.

Business Secretary Sajid Javid, speaking at the GIB’s annual review event in London on Thursday, added: “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.”

The government did not disclose how much of the bank will be privatised, but the Financial Times quotes sources saying that a stake sale of up to 70 percent could be in the cards, which would net the government some £1.4 billion ($2.2 billion; €2 billion).

Even though GIB chief executive Shaun Kingsbury said “it was always part of the plan that we would need to raise additional capital from the private sector”, that hasn’t stopped a hostile reaction to the privatisation plans.

“Selling off a majority stake in the GIB would be completely reckless. The GIB is not just the government’s most lauded innovation in the war against climate change. It has played a critical role in supporting the UK economic recovery. Privatisation threatens to destroy investor confidence which in turn will damage both energy security and the UK economy. On no account should more than 49% of the public stake in the GIB be sold now,” argued Nick Mabey, chief executive of think-tank E3G.

Ben Caldecott, an associate fellow of think-tank Bright Blue and a former advisor to the UK GIB Commission, added: “The last thing we need is a publicly supported, but privately owned, asset manager using subsidised capital and jobs to compete with the private sector.”

The GIB said it has backed 22 new green energy projects in 2014-15 financial year, investing £723 million in projects worth some £2.5 billion. Overall, the bank has now committed £2 billion to 50 projects worth over £8 billion, catalysing £3 of private sector capital for every £1 it invests. After two-and-a-half years in operation, the GIB has also turned a profit for the first time.

The world’s first green bank, the GIB is also raising the world’s first offshore wind fund, which recently held a first close on £463 million.

This article was first published on Low Carbon Energy Investor.