Technology

GIB announces 2013-14 results and new £1bn fund

The UK Green Investment Bank (GIB) released its annual report yesterday (24 June) for the financial year to 31 March 2014.

The report shows that GIB has committed £668 million to 18 green energy projects, a figure that more than doubles the number of green projects that it backed in its first year.

Active for 18 months, the majority of GIB’s investments (88 per cent 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 according to the bank, GIB recorded an operating loss of £5.7 million in the current year.

GIB says it is on track to reach sustained profitability once its current portfolio is built and operating.

The company has also reported that it intends to raise a £1-billion fund to encourage private investors to back offshore wind farms in the UK.

2013-14 results

In addition to the £668 million that has been spent on projects, the results for the financial year were as follows:

• An additional £1.9 billion of private money has been committed to these projects alongside GIB’s investment, taking the total to £2.5 billion of new investment in the UK’s green economy in 2013/14;

• GIB says its current portfolio, once built, is projected to earn taxpayers an average return of eight per cent per annum, with every investment on track to make a profit;

• Once built, GIB says its existing portfolio of investments will: reduce the UK’s annual CO2-equivalent (CO2e) emissions by 3.5 million tonnes each year, equivalent to taking 1.6 million cars off the road; produce 12.8 terra-watt hours (TWh) of renewable energy, enough to power 3 million homes; and avoid 1.3 million tonnes of waste going to landfill, equivalent to the annual domestic waste produced by 1.3 million 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 committed £1.3 billion, with up to an additional £3.5 billion successfully committed from private investors, resulting in a total of up to £4.8 billion of UK green infrastructure projects.

‘The most active investor in the UK’s green economy’

Lord Kelvin Smith, Chair of GIB, is very positive about the financial situation, stating that the company emerged from its start-up phase as “the most active investor in the UK’s green economy.”

Business Secretary, Vince Cable commented: “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 £4.8 billion 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 £1billion offshore wind farm fund

GIB has also announced plans to launch a £1-billion fund to acquire equity stakes in operational offshore wind projects in the UK. It is seeking a suitable group of 'strategic, long-term co-investors' to participate in this capital-raising exercise.

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

GIB says that this new fund is an important development for the UK’s offshore wind sector. With 3.6 gigawatts (GW) 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, the banks says it is vital that developers 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.

GIB has said that the widening of its activities is a significant strategic development as it will enable the bank 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 £3.8 billion of equity funding from the UK government.

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

Shaun Kingsbury, Chief Executive of GIB, said: 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 £1 billion fund for operating offshore wind assets.”

Vince Cable added: “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.”

Read the full annual report.