World’s first offshore wind fund raises initial £463m

The UK’s green bank is committing £200m, with a major sovereign wealth fund and UK-based pensions contributing the rest.

The UK’s Green Investment Bank (GIB) has raised an initial £463 million ($683 million; €636 million) for the world’s first offshore wind fund, which is also the bank’s first-ever fund.

GIB is contributing £200 million toward the first close, with an unnamed “major sovereign wealth fund” and a group of “UK-based pension funds” contributing the remainder. In addition to the first close funds, the bank said there is a “significant amount of investor capital available to co-invest into projects alongside the fund”.

The 25-year fund is targeting a final close of £1 billion – with a £1.5 billion hard cap – and has already been seeded with the GIB’s investment in two operational offshore wind farms. The latter have a combined generating capacity of 1,290GWhours per year, enough to power 305,000 homes. The fund is already eyeing a pipeline of future opportunities, the bank said.

“By 2020, we expect [offshore wind] to be providing enough clean energy to power the electricity needs of 8.2 million homes across the UK. A sector this size needs a broad range of long-term investors and those investors need products they can confidently, and commercially, invest in – like this fund,” commented GIB chief executive Shaun Kingsbury.

In a previous interview with sister publication Low Carbon Energy Investor, GIB head of investment banking Edward Northam explained the fund is intended to serve as a secondary market catalyst:

“With any maturing industry that wants to attract more capital, it’s fundamental to have an active secondary market. What that does is give people confidence they can invest in the development phase and build these projects out safe in the knowledge they can then recycle their capital. And that’s why we chose to raise a vehicle on the operating end: to stimulate the secondary market and ultimately encourage more capital into the construction phase.”

Northam estimated the operational offshore wind market in the UK to be worth some £15 billion.

Evercore Private Funds is acting as adviser and placement agent for the fund. The bank has created a new subsidiary – UK Green Investment Bank Financial Services – staffed by a dedicated team to manage its new asset management activities.

The first close announcement coincides with the end of GIB’s financial year 2014/15. Over that period, it has committed £723 million to 22 green energy projects. Overall, the bank has invested across 46 projects in the UK worth close to £7 billion.

Recently, the GIB said it was getting an extra £200 million from the government to finance a pilot programme to make its work international. The pilot programme will see the bank set up a dedicated team to target renewable and energy efficiency projects in East Africa, South Africa and India over the next three years.

This article was first published on Low Carbon Energy Investor.