The UK offshore wind sector received a major boost yesterday after the Green Investment Bank revealed plans for a dedicated £1 billion investment fund.
The Edinburgh-based bank said it was on the hunt for suitable long-term co-investors – likely to be sovereign wealth or pension funds – to participate in raising the new fund which will be used to take stakes in operational wind farms.
The GIB said the investments would allow wind farm developers to recycle their cash and move on to other developments.
The new fund will be managed by a GIB subsidiary which is currently seeking permissions from the Financial Conduct Authority to become a regulated fund manager.
The GIB yesterday said it expected the fund would make its first investment before the end of the year.
“This is an important development for the UK’s offshore wind sector,” the bank said yesterday.
“With 3.6GW 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, it is vital that developers typically large utilities 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.”
Details of the offshore wind fund were revealed as the GIB – which taxpayers have capitalised to the tune of £3.8bn – posted results for its full year in operation.
The document shows the bank invested £668 million in 18 projects during 2013/14 and mobilised a further £1.8bn from the private sector as a result.
The accounts show the total amount invested since GIB launched in November 2012 has reached £1.3bn, with a further £3.5bn of private capital brought forward.
The bank made a pre-tax operating loss for the year of £5.74m but said its portfolio of investments were on track to deliver an 8% annual return to taxpayers once the various projects were operational.
At present, the vast majority (88%) of GIB assets – which include projects with the capacity to power three million homes and reduce UK CO2e emissions by 3.5m tonnes per year – remain in the construction phase.
“Our role goes well beyond that of a traditional investor,” GIB chief executive Shaun Kingsbury said.
“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 £1billion fund for operating offshore wind assets.”
Business Secretary Vince Cable – which led the charge to establish the bank – said the GIB was making a real difference in driving ahead the UK renewables industry.
“These results show the impact they are having with £4.8bn pumped into green energy projects in just 18 months,” Mr Cable said.
“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 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.”
GIB chairman Lord Smith of Kelvin said it had been a “good year for GIB” in a difficult market.
“We have emerged from our start-up phase as the most active investor in the UK’s green economy.”