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Saturday 19 August 2017
19 August 2017 - NEWS UPDATE
Renewable Energy

Green Investment Bank to launch £1 billion offshore wind fund

The Green Investment Bank (GIB) has announced plans to launch a £1 billion fund to invest in offshore wind projects in UK waters.



The GIB is looking to acquire equity stakes in operational projects and is now seeking a suitable group of strategic, long-term co-investors to participate in this innovative capital raising exercise.

The Fund will be managed by a GIB subsidiary which is currently regulated by the Financial Conduct Authority (FCA) and will be seeking permission from the FCA to become a regulated fund manager.

The move is seen an important development for the UK’s offshore wind sector. With 3.6GW of installed capacity, 1.4GW in construction and a number of further projects in the pipeline, the UK sector is set to grow significantly in the coming years.

To support that growth, it is vital that developers – typically large utilities – are able to refinance part of their investments in operating assets to reinvest in new developments. This requires a significant broadening of the number of long-term investors in UK offshore wind projects.

Equity investments in operational wind farms can offer a compelling opportunity for investors seeking long-term, inflation-linked returns. These attributes can be well matched to the needs of long-term infrastructure investors such as sovereign wealth funds and pension funds.

The news was confirmed as the GIB board today reported its performance for the financial year to 31st March 2014.

Highlights of the report include:

• GIB committed £668m to 18 green energy projects, more than doubling the number of green projects it backed in its first year. GIB is now the most active investor in the UK’s green economy
• An additional £1.9 billion of private money has been committed to these projects alongside GIB’s own investment, taking the total to £2.5bn of new investment in the UK’s green economy in 2013/14
• GIB’s current portfolio, once built, is projected to earn taxpayers an average return of 8% per annum, with every investment on track to make a profit
• Once built, GIB’s existing portfolio of investments will: reduce the UK’s annual CO2e emissions by 3.5m tonnes each year, equivalent to taking 1.6m cars off the road; produce 12.8 TWh of renewable energy, enough to power 3m homes; and avoid 1.3m tonnes of waste going to landfill, equivalent to the annual domestic waste produced by 1.3m homes
• GIB has now co-invested with more than 70 domestic and international private investors and has delivered the mobilisation of approximately £3 of private capital for every £1 it invests
• Since its inception in 2012, GIB has itself committed £1.3bn, with up to an additional £3.5bn successfully committed from private investors, resulting in a total of up to £4.8bn of UK green infrastructure projects.
With only 18 months of activity so far, the majority of GIB’s investments (88% by value) remain in construction and, in line with standard accounting practice, a significant proportion of income is deferred to future years. As a consequence and in line with expectations, GIB recorded an operating loss of £5.7m in the current year

In May 2014 GIB received State Aid approval from the European Commission to promote and manage funds and other co-investment structures for mobilising upfront private sector investment into its designated sectors.

This widening of GIB’s activities is a significant strategic development as it will enable GIB to promote and manage funds and all other types of structured co-investments within any of its designated green sectors, allowing it to raise and deploy private sector capital in addition to its current £3.8bn of equity funding from the UK Government.

GIB is targeting a first close on the Fund by the end of the calendar year.

Lord Smith of Kelvin, chair of the Green Investment Bank, said: “We have emerged from our start-up phase as the most active investor in the UK’s green economy. 2013-14 was a good year for GIB in a difficult market – we backed 18 new projects, more than double our first year, committing an additional £668m of capital.”

And Shaun Kingsbury, chief executive, added: “Our role goes well beyond that of a traditional investor. We are providing a positive demonstration effect by successfully committing capital to profitable, green infrastructure investments. We are making a difference across the UK by taking on the tough projects, de-risking new technologies and lowering the cost of capital for our sectors.
“We want to do more to maximise our green impact. We plan to extend our reach into new markets like community-scale renewables. And we plan to raise new capital for the first time through the creation of a new £1billion fund for operating offshore wind assets.”

Business Secretary Vince Cable said: “We established the UK Green Investment Bank (GIB) to jump start investments in cleaner, greener technology. These results show the impact they are having with £4.8bn pumped into green energy projects in just 18 months. Headquartered in Edinburgh, the bank’s current investments have supported 3,500 jobs in the UK’s growing green economy and will cut CO2 emissions equivalent to taking over half the cars off London’s roads.

“GIB’s plans for a dedicated offshore wind fund are a real boost for our industrial strategy in a sector where we have a strong competitive advantage compared to other countries. There are great opportunities for British companies and the industry has the potential to create 30,000 jobs for the UK.”

Huub den Rooijen, Head of Offshore Wind at The Crown Estate said: “The UK continues to be the most attractive place to invest in offshore wind globally and today’s announcement by the GIB to raise a £1bn fund to attract new private investment is another vote of confidence in the UK’s maturing sector.

“Offshore wind is already making a material contribution to the UK’s electricity demand, around 3-4 per cent annually, and employing nearly 7,000 people directly – today’s announcement is a further boost to unlocking offshore wind’s full potential and the UK’s transition to a low carbon economy.”

And Greenpeace UK energy campaigner Louise Hutchins added: “One year on, the Green Investment Bank is clearly a success story, driving investment where it is needed in Britain’s cutting edge renewable industries. But the level of investment still doesn’t match Britain’s strategic requirements.

“George Osborne should now give the Bank freedom to borrow to invest at a much bigger scale, to modernise Britain’s decaying, polluting energy system and give a boost to the economy. The market is failing - the big 6 energy firms show no appetite for making the scale of investments needed to keep the lights on, cut energy waste and fossil fuel imports or meet our climate targets.

“There’s still room for improvement in their investment criteria - a green bank should have no role in backing unsustainable biomass – but the Bank’s new plans to boost offshore wind in the year ahead shows the right priorities.”
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