Green Investment Bank to be partially privatised

25th June 2015


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Shirley Pinheiro De Oliveira

The government is to sell "at least a majority" of its shares in the Green Investment Bank (GIB), it announced this morning.

The bank, which was launched in 2012, has so far provided funding of £2 billion to 50 projects. In announcing the plan to partially privatise the GIB, business secretary Savid Javid said the bank was now making and profit, with the rate of return on its portfolio around 9%.

"The detail and timing will depend on the outcome of discussions, but our plan is now very clear: to sell at least a majority of the government's shares to private investors during the lifetime of this parliament," he said.

Javid highlighted how the bank's approach to investment over the past three years had helped to attract sovereign wealth funds, pension schemes and private equity investors to the "green" sector for the first time.

The business secretary denied that move to sell off the bank meant the government was reneging on its environmental commitments. "The bank will still be green, it will still be profitable, it will still be a market-leader in financing environmentally sound infrastructure.

"But it will be free from limitations on where it can borrow money, and free from EU regulations on state aid," he said.

Shaun Kingsbury, the bank's chief executive, confirmed that the bank was "very close" to its long-term investment rate of £800 million to £1 billion a year. "While capital from the UK government was an important start it will not be enough to sustain our level of investment. From the outset it was always part of the plan that we would need to raise additional capital from the private sector to supplement government funding," he said.

The Aldersgate group said that the government must retain a "significant and sufficient" shareholding in the GIB to convince the market that it is fully supportive in the bank's mission. The right level of private ownership should be agreed through transparent analysis and in-depth consultation with the finance community, it said in a statement.

Nick Molho, the group's executive director, said: "The injection of private capital into the GIB could be a positive development but only if the bank's public mission to drive investments in low carbon projects perceived as riskier is fully maintained and the government retains at least a significant shareholding, allowing it to demonstrate a meaningful stake in the continued success of the bank."

Failure to do so would send negative signals to investors in low-carbon technologies and undermine the sector's contribution to the UK's economic recovery, particularly as the announcement comes just a week after retrospective policy changes on onshore wind, Molho said.

John Swinney, deputy first minister of Scotland, echoed this concern, and urged the UK government to commit to maintaining a public stake in the bank, and to ensure it retains its original purpose to fund green industries and technologies.

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