Government sells GIB to ‘Vampire Kangaroo’ Macquarie
The government has completed the sale of the UK Green Investment Bank (GIB) to Australian investment firm Macquarie Group in a £2.3 billion deal after delays caused by political opposition and a legal challenge.
In a statement released this morning (20 April), the Department for Business, Energy & Industrial Strategy (BEIS) said that the sale ‘secures a profit on the government’s investment in the bank, provides value for taxpayers and ensures GIB continues its green mission, in the private sector’. The bank has already set out a target to invest £3 billion over the next three years in green projects.
However, the choice of Macquarie, referred to in some circles as the ‘Vampire Kangaroo’, has enraged many, who fear that the bank’s green intentions will be lost while investments already made will be stripped and sold off by the firm.
Asset stripping fears
The GIB was established in 2012 to support green infrastructure that would struggle to find support on the open market in the UK. Since then it has committed over £3.4 billion to green infrastructure projects, with most of the investment in the waste industry going to incinerators and other energy-from-waste facilities.
However, in 2015, then-Business Secretary Sajid Javid announced that the bank would be sold off to private investors, ostensibly to increase the bank’s access to capital and reduce the impact of EU regulations on state aid.
Announcement of the bank’s privatisation prompted fears that the institution’s green mission would be lost and after Parliament’s Environmental Audit Committee (EAC) called the sale process ‘rushed’, Javid announced that a ‘golden share’ would be created to protect its green credentials through a veto power to block any move that contradicted the bank’s purpose.
This share will be retained by five independent trustees, but will not be able to stop the new owner from selling off investments that have already been made.
Macquarie last year sold off Thames Water after investors reportedly banked profits in foreign accounts and dramatically cut the amount of taxes paid by the company. The prospect of the firm taking over the GIB was called ‘deeply troubling’ by Scottish Economy Secretary Keith Brown, who said the process is more akin to ‘fragmentation or asset stripping’.
Commenting in January, when Macquarie emerged as the government’s preferred buyer for the GIB, EAC Chair Mary Creagh MP said: “The GIB should continue to exist as a low-carbon investor or its sale should not proceed. Ministers have rushed to privatise the bank without consultation or proper consideration of the alternatives. Taxpayers do not want to see a repeat of the Royal Mail debacle where public assets were sold at bargain basement prices, and they do not want to see a landmark British institution sold off to an asset stripper.”
Responding to confirmation of the sale today, Creagh said: “The GIB is a unique institution, and the largest green energy investor in Europe. The government has decided to sell it off without transparency or consideration of the alternatives. Macquarie executives and government ministers need to give concrete guarantees about the bank’s future and the capital investments it will make.
“By announcing this with only days to go before MPs break up for an unnecessary early election, Theresa May has got herself off the hook and avoided Parliamentary scrutiny of this controversial sale.”
As well as the political opposition, Sustainable Development Capital, a rival bidder for the bank, further delayed confirmation of the sale by challenging the deal at the High Court. The consortium claimed that Macquarie’s bid was not compliant with the rules of the bidding process, but the challenge was thrown out earlier this month.
GIB targeting ramped up investment in coming years
Pre-empting criticism of the deal, the government says that Macquarie has the backing of the GIB’s independent board and has ensured that the bank will continue its green mission ‘free from the constraints of public-sector ownership’.
The GIB has targeted £3 billion of new investment over the next three years and ‘will become the primary vehicle for Macquarie’s renewable energy investment in the UK and Europe, allowing GIB to expand internationally’.
Macquarie has also committed to continue GIB’s investment approach, targeting investments across all areas of the green economy and across all stages of the project lifecycle, including the critical phases of development and construction. The sale proceeds will be received on completion of the transaction, which the government expects to take around two months. The bank, based in Edinburgh, will also continue to operate its two offices in Edinburgh and London.
BEIS’s statement reads: ‘GIB has been a real success story since it was created in 2012 – the world’s first dedicated green investment bank, established to accelerate private-sector investment into the UK green economy.
‘It has fulfilled that mission, supporting almost 100 green infrastructure projects in the UK so far, and attracting £3 of third party funding for every £1 it invests. It has shown, as it set out to do, that green investment can be both green and profitable. Having demonstrated its success, the government decided to move GIB into the private sector where it can continue its success on an even greater scale.’
Private GIB ‘can and should’ play important role in global low carbon transition
Lord Smith of Kelvin, independent chair of the GIB, said: “Macquarie has made significant and important commitments to the UK Government to maintain GIB as a discrete entity within its business, maintaining GIB’s investment focus and approach with a target to invest more capital each year than GIB has historically. Macquarie will also uphold GIB’s green investment principles and report transparently on GIB’s green impact. Macquarie will utilise the market-leading expertise of the existing GIB team and will build on GIB’s deep commitment to Edinburgh.
“On the basis of these commitments, we believe Macquarie can be a good owner of GIB and we support the government’s decision to sell GIB to Macquarie. We look forward to seeing these commitments from Macquarie delivered, in full, in the months and years ahead.
“GIB in private ownership can, and should, continue to play an important leadership role in supporting the global low carbon transition and the UK Government’s ambitious plans for a strengthened industrial strategy and emissions reduction.”