Much time is required and significant legislation needs to be enacted before the UK’s Green Investment Bank (GIB) can start in earnest. It will first need state-aid approval, to get a structure up and running, and then legislation to agree to borrowing powers for its initial £3 billion capitalisation – a process expected to take until 2015.
Its existence is also subject to public sector net debt falling as a percentage of gross domestic product and further state aid approval being granted.
However, all is not lost. Its first incarnation, UK Green Investments (UKGI), is making moves to get cash flowing into the sector – it hopes this year.
The forerunner to the GIB, working under the Department of Business Innovation and Skills (BIS), is in the process of recruiting fund managers who will initially focus on two areas for investing cash – waste infrastructure and non-domestic energy efficiency infrastructure.
UKGI says each fund manager will get £100million to invest, part of a total £775million pot raised through the UK Government selling off assets.
But will the cash flow in sufficient enough quantity to the right sectors and soon enough?
Craig Mackenzie, head of sustainability at Scottish Widows Asset Management, highlighted offshore wind, not one of the first priority sectors for UKGI, as being in need of finance as banks pull out of the industry.
“We see big banks withdrawing over the next five years almost entirely,” he said. “They have been the source of about half the funding of offshore wind farms, which means we will have to look to other capital markets.”
Unlike onshore wind, which was able to demonstrate a number of projects to investors more easily and quickly, time is running out on offshore wind, according to Andrew Jamieson, ScottishPower Renewables regulation and markets director.
Paul Brewer, senior partner at PricewaterhouseCoopers, said a challenge for the GIB would be finance through construction phases, where there was still a lot of perceived risk in offshore wind.
Wind will be next on the hit list for UKGI, along with energy from waste power generation, it says.
Sir Adrian Montague is chairman of the GIB advisory group. An announcement on the bank’s chairman and another senior role is imminent.
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