UK Government to start sell-off of pioneering Green Investment Bank

The UK Business Secretary Sajid Javid will today announce plans to partly-privatise the Edinburgh-based Green Investment Bank.

Speaking at the annual meeting of the UK Government’s “green” bank, which invests in environmentally-friendly infrastructure projects, he will say that he is to start “exploring options” to bring private investors into the world’s first dedicated green investment bank.

The pioneering project has invested about £2 billion of public money in about 50 projects with a total value of more than £8 billion since its creation three years ago.

And results for the bank announced in April, show that the GIB, which started making profits in the year to March 31, invested £723 million in 22 new green-energy schemes, worth a total of £2.5billion in 2014-15 alone.

Its support ranged from a £1.5million investment in an anaerobic digestion plant in Northern Ireland to £6million for low energy street lighting in Glasgow and £240 million for an offshore wind scheme off the Norfolk coast.

The bank’s Chairman Lord Smith of Kelvin will tell today’s gathering in London that the GIB has “established a successful business model” and played a key role in strengthening energy supply and security, while reducing energy demand and “decarbonising our economy”.

Today’s announcement comes immediately after the disposal of stakes in Royal Mail and Lloyds Banking Group and the beginning of the same process for the taxpayer’s 80 per cent stake in Royal Bank of Scotland.

The Financial Times has reported that the government could be set to sell-off about 70 per cent of the bank at a sale price of well above £1bn.

The GIB was launched with a pledge to provide loans to “green” projects that have also attracted private sector money, and critics have called plans for a sale “reckless”, and said that the move calls into question the government’s commitment to a low carbon economy.

The GIB says that for every £1 spent a further £3 is contributed by private sector investors.

But there are restrictions on its borrowing, and Mr Javid hopes that full access to the capital markets will increase its lending powers.

Mr Javid, is set to say today that the bank “has shown that investment in green technologies can be a profitable business. The challenge now is to build on this success.

“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.”

Critics argue that a sale would dilute the bank’s purpose and undermine the UK’s commitment to the green economy.

Patrick Harvie, Scottish Green MSP for Glasgow and a member of Holyrood’s economy and energy committee said: “The sell-off of the Green Investment Bank proves that David Cameron’s comment about wanting to ‘cut the green crap’ has now become a full-blown mantra for a right-wing Government determined to wreck our renewable energy opportunities. The bank was a half-hearted effort by the Tory-Libdem Coalition, with limited powers and funding. Rather than taking another backward step we need governments to go further and faster on developing new energy sources and cleaner industries as the need to leave fossil fuels in the ground becomes ever more urgent.”

Think-tank E3G, which advised on the original plans to established a green bank, said a sell-off would be “reckless” and damage investor confidence.

Chief executive Nick Mabey said: “The Green Investment Bank is not just the government’s most lauded innovation in the war against climate change. It has kept investment in the real economy going at a time when bank lending had fallen to an all-time low. It has played a critical role in supporting the UK economic recovery.

Bank of America Merrill Lynch has been appointed to advise on the financial details and timetable for the sale.