Macquarie to boost U.K. Green Bank after $3 billion purchase

A consortium led by Macquarie Group Ltd. vowed to beef up global spending in clean energy technologies after it agreed a deal to buy U.K. Green Investment Bank from the British government for 2.3 billion pounds ($3 billion).

The Sydney-based bank will set up three investment vehicles to deliver on the Green Investment Bank’s target for 3 billion pounds in new spending over the next three years. It would fund technologies ranging from offshore wind power to battery storage and tidal lagoon, according to a statement accompanying the deal on Thursday.

The much-anticipated sale to Macquarie was delayed following a failed legal challenge by a rival bidder and political opposition from lawmakers and former ministers who said Macquarie may not continue to drive investment in clean energy following the privatization.

“We will create a market leading platform dedicated to investment in the low carbon economy in the U.K. and beyond,” Daniel Wong , head of Macquarie Capital in Europe, said in an emailed statement. “We understand the responsibilities that come with this ownership, and we are fully committed to maintaining its green purpose as we grow the business.”

The deal would make Macquarie and the Green Investment Bank the third biggest lender to renewable energy assets in the U.K., according to Bloomberg New Energy Finance.

The deal shows Macquarie is committed to investing in U.K. renewable energy and infrastructure more broadly following the country’s decision last year to exit the European Union, Mark Dooley, capital head of infrastructure, utilities and renewables in Europe, said by phone.

Macquarie is already advising Tidal Lagoon Plc on a planned project in Swansea Bay and would be keen to take an equity stake in the lagoon if it gets approval from the U.K. government, he said. “We’re strong believers in the technology.”

Staying Green

Green Investment Bank was set up by the government in 2012 to speed Britain’s switch from power generation fired by fossil fuels. It has backed projects from wind farms to biogas plants. It was put up for sale last year as part of a drive to raise money from privatization.

“This deal gives us the best of both worlds,” Climate Change Minister Nick Hurd said in a statement from the Department for Business, Energy & Industrial Strategy. “We have secured fair value for the U.K. taxpayer.”

In the process of the sale the government established a “golden shareholder” to ensure the bank maintains its obligation to invest “exclusively in accordance with its green purposes”. Macquarie said it would publish annual reports on its green performance and hold annual industry days to focus on the issue.

Caroline Lucas, lawmaker for the Green Party said Macquarie’s “assurances are worthless.” Writing on Twitter, she said the bank could invest in hydraulic fracking of oil and gas reservoirs and may not invest all of the 3 billion pounds in the U.K.

Macquarie’s commitment to spending “is a promising start,” said Nick Molho, director of the Aldersgate Group, a group of U.K. business and political leaders developing policy proposals to benefit the environment.

New Vehicles

The sale is expected to be completed in the first half of 2017, after which Macquarie will establish three funds that are designed to leverage investment from other organizations, and enable the bank to recycle funds into new deals, said Dooley.

It will set up an offshore wind investment vehicle that will be funded by Universities Superannuation Scheme Ltd. and Macquarie European Infrastructure Fund 5. Another “low carbon lending platform” will be funded by USS and GCP Infrastructure Investments Ltd.

On Thursday GCP said it agreed a deal with Macquarie to subscribe for a series of loan notes with a value of as much as 140 million pounds that will be used to purchase or finance investments secured against 23 U.K. based projects connected to the GIB Transaction.

A third “green infrastructure platform” will be backed by the U.K. government and will allow the government to retain ownership of “a pool of assets,” such as in bioenergy and waste to energy, said Dooley.

‘Not Asset Stripping’

Macquarie plans to sell a minority of investments currently owned by the Green Investment Bank, with a value of around 230 million pounds, said Dooley. Those investments relate primarily to early stage investments made by GIB that are “not core” to its purpose or have done their job, he said.

Environmental groups and lawmakers have expressed concerns that the sale of the GIB could cause the bank to lose its environmental mission. An investigation by advocacy groups E3G and Greenpeace suggested Macquarie is seeking to sell off the bank’s assets, including offshore wind farms and waste-to-energy plants.

The sale of those assets doesn’t constitute “asset stripping,” said Dooley.

The Edinburgh-based Green Investment Bank will take over Macquarie’s existing European renewable energy business. It will manage about 4 billion pounds of green assets, said Dooley. No decisions have been taken on headcount yet, he said.

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