Green Investment Bank seeks funding extension

30 Apr 13
The Edinburgh-based Green Investment Bank is in talks with ministers about extending its funding for at least a further year, Public Finance has been told.

By Keith Aitken in Edinburgh | 30 April 2013

The Edinburgh-based Green Investment Bank is in talks with ministers about extending its funding for at least a further year, Public Finance has been told.

The bank, the first of its kind in the world, has been set up to pump £3bn of public money into clean energy projects over three years. It became a fully operational public company last October.

Group Operations Director Rob Cormie told PF the bank has already invested more than £500m. ‘We think it’s been a great success, frankly, from a standing start,’ said Cormie. ‘To invest that amount of money within a year is incredibly impressive.’

He added that the bank was in discussion with the government in the run-up to the June Spending Review. ‘In effect, we’re looking for a one-year extension with additional capital – we don’t know what that [will be], but that’s a process that’s ongoing.’

GIB is still operating out of temporary offices in Edinburgh, which was chosen as the location for the headquarters against competition from 19 other towns and cities. Some saw the location as a spoiler for Scottish independence, although Cormie insisted it reflected Scotland’s strengths in both finance and renewable energy. The bank also has a financial team in London.

Its mission is to bridge funding gaps for projects in key green energy sectors – primarily offshore wind, waste recycling and energy efficiency. It can also invest money in wave and tidal, biomass, carbon capture and heat networks. It must provide less than half a project’s finance, and cannot be the biggest funder.

Under European Union additionality rules, the bank must become involved only when it is necessary for a project to happen. Investments must be made on market terms and rates, although the bank has no formal targets for leverage levels, overall rates of return or project survival.

‘We need to be seen to be crowding in capital, not crowding it out,’ Cormie said. ‘The perfect scenario for us is a project that has 75% of its funding but has had a market competition and failed to raise the last piece, so we are able to fill the gap.’

Cormie said GIB’s mix of environmental and financial expertise makes it exceptionally good at judging the viability of funding bids, and so sends positive signals about successful bidders.

‘We are very, very aware of our responsibilities to our shareholder, the taxpayer. We are a guardian of their funds, and we will be rightly criticised if we invest unwisely. To invest wisely, we need a clear strategy and the structures in place to make sure we make informed decisions.’

Around 60 of a likely 100-strong workforce are now in place, including all the senior management team. According to Cormie, the staff are a diverse mix, and have been drawn from backgrounds in banking and finance, environmentalism and the civil service.

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