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First appeared in Informer: Real Estate Newsletter - Spring 2013
Further to our previous pieces, (Green Investment Bank – ready for takeoff and Green Investment Bank to start investing from April 2012) the Green Investment Bank ("GIB") finally opened for business in October 2012 with the objective of accelerating funding for the transition to a greener economy. Armed with £3 billion government funding and full borrowing powers from 2015 it hopes to partner lenders and attract private investment. It is yet to set a strategy for its business but it is clearly taking its responsibility seriously by appointing highly experienced individuals such as Robert Mansley, former Managing Director and Head of European Renewables at Morgan Stanley, and Peter Knott former Group Head of Operational Risk at Standard Chartered.
It certainly isn’t a shy newcomer in the market either. In its first five months the GIB has committed £100 million to the Drax Power Station in North Yorkshire, for the conversion of three of its coal units to biomass, and £30 million to a waste recycling facility in Wakefield. The 25 year contract between Shanks Waste Management and Wakefield Council provides for a treatment facility at South Kirby and improved household waste recycling centres throughout Wakefield. The council expects it to treat and recycle up to 230,000 tonnes of municipal solid waste a year and create 250 jobs as part of the construction and refurbishment work and an additional 60 jobs at the new facilities.
The GIB will not however invest in projects it considers high-risk and low reward. As an example, it did refuse to invest in new wave and tidal energy proposals on the ground they are too risky.
When approaching the GIB for support energy providers will need to show their projects are developing new ideas to reduce waste or finding cleaner energy sources but are also doing so cost effectively. They will also need to identify the synergy between their project and the GIB's priority sectors: Offshore Wind; Green Deal; Waste and Bio-Energy and Non-domestic Energy Efficiency schemes.
While it is still early days for the GIB, it will undoubtedly facilitate greater support for investment in future projects associated with cleaner energy – hopefully to a significant degree. We will continue to watch its evolution and will keep you updated on its progress.
Carlos Pierce, Partner, Energy and natural resources group at Field Fisher Waterhouse LLP
Maryam Collett, Associate, Energy and natural resources group at Field Fisher Waterhouse LLP