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Macquarie to acquire UK Green Investment Bank for GBP 2.3 billion

The UK Green Investment Bank plc (GIB) will look to invest at least GBP 3 billion (≈ EUR 3.5 billion) into the green economy after a deal was agreed to sell it to Macquarie Group Ltd (Macquarie), UK Climate Change and Industry Minister Nick Hurd has confirmed.

A Macquarie-led consortium, comprising Macquarie Group Limited (Macquarie), Macquarie European Infrastructure Fund 5 (MEIF5) and Universities Superannuation Scheme (USS), has agreed to acquire the UK Green Investment Bank plc (GIB) from the UK government for GBP 2.3 billion (≈ EUR 2.75 billion). Completion of the transaction, which was announced April 20, is conditional on certain regulatory approvals including EU merger clearance and is expected to take around 2 months.

UK Climate Change and Industry Minister Nick Hurd MP (photo courtesy Department for Business, Energy & Industrial Strategy)

UK Climate Change and Industry Minister Nick Hurd MP (photo courtesy Department for Business, Energy & Industrial Strategy).

– The Green Investment Bank has been very successful in attracting private capital to the UK’s green economy. It now makes sense to move it into the private sector where it will be free from the constraints of public sector ownership, allowing it to build further on its success. This deal gives us the best of both worlds. We have secured fair value for the UK taxpayer. GIB has a well-funded new owner that is committed to the Bank’s green mission, with a track record of success in green investment and an ambition to grow the business. The UK will benefit from increased investment in our green infrastructure as we make the transition to a green economy, said UK Climate Change and Industry Minister Nick Hurd in a statement.

Competitive selection

The deal, which has the backing of GIB’s independent board, was secured through a competitive process and will meet the objectives government outlined when it launched the sales process last year. As well as securing value for money for the taxpayer and freeing GIB from the constraints of public sector ownership, it will enable GIB to grow its support for green projects.

– The GIB Board supported the decision to privatise GIB as it believed that attracting new investors was the best available route to securing the long-term future of the business and its growing green impact. There is a compelling logic in the world’s first green bank joining forces with the world’s largest infrastructure investor. When we embarked on this process, we were determined to find a new owner who would build on GIB’s successful history – an owner who would have access to deep pools of capital, a commitment to expand GIB’s activities, and a respect for the unique role GIB has played in the market. Macquarie will bring all of this to GIB, along with its own impressive track record of green investments, said Lord Smith of Kelvin, chair of GIB’s independent board.

Expand geographic investment scope

Launched in 2012, GIB has according to Minister Hurd fulfilled its mission to accelerate private sector investment into the UK green economy “supporting almost 100 green infrastructure projects in the UK so far, and attracting £3 of third party funding for every £1 it invests”.

According to Macquarie, GIB will become the primary vehicle for it’s renewable energy investment in the UK and Europe, with a commitment to target GBP 3 billion (≈ EUR 3.5 billion) of new green infrastructure investment over the next three years, exceeding GIB’s track record of committing GBP 3.4 billion (≈ EUR 4.06 billion) of investment over the four and a half years since it was established.

– The addition of the Green Investment Bank, its people, and expertise, strengthens Macquarie’s commitment to the green energy sector. Our combined platform will build on the legacy of the Green Investment Bank and, alongside our knowledge of energy and infrastructure, will open further opportunities for low carbon investment both in the UK and further afield, said David Fass, CEO EMEA, Macquarie Group.

The deal will support GIB’s international expansion into Europe and developing countries. As part of this, Macquarie is committed to supporting the UK Climate Investments Initiative, a GBP 200 million (≈ EUR 240 million) pilot joint venture between GIB and the government, established to invest in renewable energy and energy efficiency projects in developing countries.

GIB to continue to accelerate investment

Macquarie has published a series of commitments for the future of GIB under its ownership, including:

  • maintaining GIB’s green purpose and green objectives, in line with the ‘special share’ arrangements to safeguard GIB’s green purpose which will be held by five independent trustees
  • maintaining the GIB platform and brand, and to utilise the skills and experience of GIB employees in Edinburgh and London
  • GIB’s Edinburgh office will be home to a new revenue generating project delivery business providing services to the green energy portfolios of GIB and Macquarie in the UK

As part of the transaction, a number of GIB assets will be moved into a new offshore wind investment vehicle that will be managed by GIB, which will retain a 25 percent stake. Investors in this investment vehicle will be long-term institutional investors Macquarie European Infrastructure Fund 5 (MEIF5) and the Universities Superannuation Scheme (USS).

This transaction structure matches GIB’s existing approach to asset ownership following its success in raising a GBP 1 billion (≈ EUR 1.9 billion) offshore wind fund and selling three GIB assets into that fund. GIB was established to accelerate investment in new green energy projects, not to be a long-term owner of operating projects.

Government stake

The UK government will continue to hold a GBP 130 million (≈ EUR 155.3 million) portfolio of a small number of GIB’s existing green infrastructure investments. These assets will continue to be managed by GIB until they are sold on in a way which returns the best value for taxpayers’ money.

Since 2010, Macquarie and its managed funds have invested or arranged more than GBP 8.5 billion (≈ EUR 10.15 billion) of capital into green energy projects globally. In the UK, Macquarie is involved in a number of green energy projects in offshore wind, solar, waste and bioenergy and tidal energy.

The total value of the transaction at the date of signing is GBP 2.3 billion (≈ EUR 2.75 billion), which comprises:

  • GBP 1.7 billion (≈ EUR 2.03 billion) transaction price
  • GBP 0.6 billion (≈ EUR 717 million) estimated future funding commitments for existing GIB projects

At completion, the total value of the transaction will adjust for any further GIB investments made between signing and completion, together with an interest rate applied between the dates of signing and completion.

The total government funding provided to GIB since 2012 is  GBP 1.5 billion (≈ EUR 1.79 billion). The transaction price at the date of signing represents an approximate GBP 160 million (≈ EUR 191.2 million) premium on total government funding.

About UK Green Investment Bank

UK Green Investment Bank plc (GIB) was launched in November 2012. With initial funding from the UK Government, it is the first bank of its kind in the world. It is a “for profit” bank, whose mission is to accelerate the UK’s transition to a greener economy, and to create an enduring institution, operating independently of Government.

GIB is wholly owned by HM Government. The Company is not authorised or regulated by the Financial Conduct Authority or the Prudential Regulation Authority. A wholly owned subsidiary UK Green Investment Bank Financial Services Limited, is authorised and regulated by the Financial Conduct Authority.

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