Macquarie has insisted it will not asset strip the Green Investment Bank in the wake of its £2.3bn acquisition of the lender despite admitting it will sell off parts of the business following the controversial privatisation.
The Government today announced a consortium led by the Australian bank had won the auction for GIB with a deal to buy it for £1.7bn and a pledge to meet a further £600m of the lender’s outstanding commitments. It marks a £160m premium to the total funding ploughed into GIB by the Government since it was set up in 2012.
There had been fears among politicians that a sale to Macquarie, which was selected as the Government’s preferred bidder last year, would compromise GIB’s environmental mission. However, both the Australian firm and the Government were at pains today to stress the new owner’s commitment to green initiatives.
Nick Hurd, the energy minister, said: “GIB will invest more into the green economy than ever before, with £3bn of new investment targeted over the next three years, exceeding GIB’s track record of committing £3.4bn of investment over the four and a half years since it was founded.”
However, despite that pledge, Macquarie’s Daniel Wong conceded the firm also planned to offload some of GIB’s early stage green investments in deals that could total around £230m, sales that are likely to stoke criticism from opponents of the privatisation.
“There are some investments in the GIB portfolio, a minority of them, that we are selling to third parties in the near future,” Mr Wong, the European head of Macquarie Capital, said.
The GIB deal is the first big privatisation since Theresa May became prime minister last July and was delayed by a failed judicial review by unsuccessful rival suitor Sustainable Development Capital earlier this year.
To counter criticism GIB will deviate from its green investment mandate under Macquarie’s ownership, the Government has put in place “special share” arrangements. These will force the Sydney-based bank to publish an annual report on GIB’s performance and host an annual industry day.
Macquarie will also retain GIB’s brand and offices in Edinburgh and London, although bosses at the Australian firm would not be drawn on whether any redundancies would be made, saying it was “very early days”.
On top of the £3bn of new investment Macquarie has pledged, it is also setting up three new funds drawing in investment from its consortium partners.
The Universities Superannuation Scheme (USS), Britain’s biggest pension fund, and one of Macquarie’s funds will invest in one of the vehicles that will be focused on offshore wind developments, while USS and GCP Infrastructure Investments will back the second platform, a financing facility dubbed a “low carbon lending platform”.
The third fund, a so-called “green infrastructure investment platform”, will be supported by the Government and will hold £130m of GIB’s existing investments that will eventually be sold at a later date “in a way which returns best value for taxpayers’ money”. These disposals will be in addition to the £230m of sales Macquarie is eyeing.
Lord Smith of Kelvin, the independent chairman of GIB, said that based on the commitments the Australian firm had made “we believe Macquarie can be a good owner”. But others were sceptical about the deal.
Ed Davey, the former energy secretary, said: “Selling the Green Investment Bank is environmentally irresponsible, and on the eve of an election is politically dubious. The Government clearly hopes to avoid parliamentary scrutiny.”
Re-disseminated by The Asian Banker from The Telegraph