UK Green Bank sale kicks off

The starting gun has been fired on an auction to sell a portion of the UK government's shareholding in the Green Investment Bank (GIB).

Edward Northam, head of investment banking at the GIB, told Infrastructure Investor that the process would take place in two stages, with a buyer likely to be selected by the end of the summer.

The first phase would see prospective participants submit indicative bids, after which an information memorandum would be given to interested parties. The government would then sit down with Bank of America Merrill Lynch, who is advising it on the sale, to decide on which contenders to push through to the next round.

Bidders would subsequently be given access to all common facilities allowing them to do due diligence on the bank and prepare binding bids.

The bank so far has invested about £2.6 billion ($3.7 billion; €3.4 billion), which accounting for recycled capital has generated a portfolio of about £2 billion, sources told Infrastructure Investor last month.

On top of the portfolio, new shareholders have to commit to funding the GIB for at least three years. Given that the bank invests about £700 million to £800 million a year, a sale could value the business at more than £4 billion.

The UK government announced its intention to sell off shares in the GIB last June, which it says will allow the bank to raise fresh capital, remove shackles linked to state aid rules and give it access to the debt markets.

The process was given a boost last month when the government announced the creation of a special “golden” share giving it the right to veto any of the lender's investments judged contrary to its original green principles. Sources say the UK government is looking to sell 75 percent of the lender.

The GIB's most recent investment, announced earlier this week, saw it disburse £9.8 million to acquire and expand a renewable energy plant and district heating network in Wick, northern Scotland, alongside London-based Equitix .