According to the Department for Business, Innovation and Skills (BIS), a transfer to the private sector will allow the GIB “to maximise investment into green energy projects by attracting greater private sector investment, which has so far been constrained by rules governing how public bodies can raise capital”.
BIS explained that moving the wholly-government-owned GIB into private ownership would give it access to more capital than if it had remained in public hands, allowing it to increase its investments and have a “bigger impact”.
Launched in November 2012 by then-Business Secretary under the coalition government, Vince Cable, the GIB made investments in the waste and recycling sector totalling £200 million in its first two years of existence (see letsrecycle.com story).
This included £64 million backing for Shanks’ energy from waste plant set to open at Sinfin in Derbyshire next year, as well as £20 million investment in the West London Waste PFI project.
But independent chair of the GIB, Lord Smith of Kelvin, said attracting new investors was “vital” to fund plans to double the size of the Bank’s business and that the he was confident the sale would provide the Bank with “good new owners who will support GIB’s continued growth”.
“The GIB is a world first, and it is a sign of its success that the idea is being copied globally. Having proven the business model works, we now want it to make an even greater impact.”
Sajid Javid
Business Secretary
He said: “This launch, and the wider plans to introduce new capital and new owners to GIB, has the full support of GIB’s independent board.”
Reacting to the news, Environmental Services Association (ESA) executive director Jacob Hayler said: “The GIB has performed a valuable role to date for our sector, investing in a number of residual waste and organics projects in particular. ESA hopes that the GIB attracts the private capital it is aiming for and continues to work with project developers in our sector to bring forward the waste and recycling infrastructure we desperately need.”
GIB
In just over three years, the GIB has helped mobilise a total of £10.6 billion investment into almost 70 projects covering offshore wind, energy efficiency and waste and bio energy, the government said.
However, the Bank has also faced criticism from consultancy Eunomia over its perceived failure to follow the waste hierarchy in its investment choices (see letsrecycle.com story).
And, some in the waste sector have suggested that the Bank charged high interest on its investments, particularly for smaller projects, and fear its interest rates could rise further still in future.
GIB chief executive Shaun Kingsbury said today: “In three years the team at GIB have built a special business that is green, profitable and admired around the world. GIB is an exciting investment opportunity, providing new investors with predictable returns and significant growth opportunities. The business is perfectly placed to play a leading role as the world moves decisively towards an unprecedented programme of green infrastructure investment.”
Sale
A bidding process for the Bank is expected to begin later in 2016, but the sale has met with criticism from the Labour Party and MPs on the Environmental Audit Committee after privatisation was first mooted last year.
Commenting today, Greenpeace chief scientist Doug Parr voiced concern that privatisation could see the GIB “cease to be UK-owned. Or green. Although it’ll still be an investment bank.”
However sustainable economy alliance the Aldersgate Group welcomed the government’s “rethink” on the GIB, although it stressed the importance of maintaining the Bank’s focus on ‘novel’ projects to ensure its long term success.
Executive director of the Aldersgate Group, Nick Molho, said: “What has made the GIB unique to date has been its ability to be a step ahead of the market by supporting projects that weren’t getting sufficient support from mainstream private investors such as complex energy efficiency projects and offshore wind farms using new technologies. This focus on projects that are both green and novel has allowed the GIB to help tackle important market failures in the area of green infrastructure. Identifying investors with a clear plan and commitment to maintain this current focus must be an important part of the GIB sale process.”
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