BIS to begin lending to green infrastructure projects

The Department for Business, Innovation and Skills (BIS) is to start the process of making direct investments in green infrastructure projects from this month as it awaits state-aid approval for the long-awaited Green Investment Bank.

The confirmation came last night (April 17) from Oliver Griffiths, executive director of the Green Investment Bank team at BIS, who was speaking at an event in the House of Commons.

Mr Griffiths explained that a dedicated team, known as UK Green Investments, had been set up within BIS and was now able to start work.

The team has already started discussions with organisations looking for funding for projects that are covered by the Banks five priority areas – commercial and industrial waste processing and recycling; energy from waste generation; offshore wind generation; non-domestic energy efficiency; and support for the Green Deal.

As the Green Investment Bank (GIB) has yet to be fully established, Mr Griffiths said the investments would be made by UKGI and would be transferred to the GIB at a later date. He said that the budget available for this financial year is 775 million.

He said UKGI will be making investments on market terms working alongside other investors and will be looking at the priority sectors.

We are looking to enshrine the bank in legislation. Approval from the European Commission should come this year. In the mean time we have set up a department transition team which we are calling UK Green Investment (UKGI). It is looking to build our presence in the market and as well as our understanding.

Dumb money

Mr Griffiths said it was the governnments aim to mobilise private sector money, but warned that it didnt want to be a last resort lender.

The worst thing that could happen would be for the bank to be the dumb money at the table, he explained.

The event, entitled Green Investment Bank: Priorities for Investment was hosted by the Associate Parliamentary Sustainable Resource Group (APSRG) in partnership with the Westminster Sustainable Business Forum and Carbon Connect.

Budget

The creation of the Green Investment Bank was confirmed by Chancellor George Osborne in his 2010 Budget (see letsrecycle.com story). The bank is being set up to help attract private investment for environmental projects, with funding of around 3 billion set aside.

In December the five priority sectors were announced along with the fact that they would receive at least 80% of the funding available (see letsrecycle.com story). The remaining 20% would be invested in projects that are not within the five priority areas.

Technology

A panel discussion also took place at the Westminster event which featured Mr Griffiths and four others Gaynor Hartnell, chief executive of the Renewable Energy Association; Matt Denmark, director of Corporate Finance at PwC; Michelle Davies, head of clean energy and sustainability at Eversheds LLP; and, Peter Jones, director at Policy Connect.

Speaking at the event, Policy Connect director and member of the London Waste and Recycling Board (LWaRB) Peter Jones warned that the bank must avoid becoming a political football and that, particularly in the waste industry, it must not focus too much on technology.

Mr Jones said: The technology in this area is not an issue. Most of this stuff is generally out there working somewhere. I would advise them not to get too bogged down by technology but rather standards. The waste industry is about collecting the material, processing it, finding a market for it and then providing the output material to it.

We need the site, the feedstock, the exit market and the appropriate process as well as the market technology.

Investing

Mr Denmark highlighted the importance of the role the GIB could play in the waste industry but warned that it would not fix everything. In his comments he referred to the 100 million that Business Secretary Vince Cable had previously said the GIB would invest in waste projects from April 2012.

He said: What we understand in the short term is that it supports the waste sector in two possible ways. UKGI may consider acting as a lender alongside commercial lenders on PPP projects and secondly through making available 100 million to investing equity alongside private equity.

With regards to the 100 million the challenges are potentially great. Over the last few years we have seen a large number of proposals to develop waste infrastructure projects. Its true to say equity investors dont put aside money to invest in smaller projects so far. They are seen as too risky, too small or both.