The UK’s Green Investment Bank is “very confident” it will be able to attract third-party capital to its investment funds, as wind farms are the “perfect” asset for pension schemes.
Lord Smith, chairman of the state-backed institution, said that while the £1bn (€1.2bn) offshore wind farm fund was only recently announced, the GIB had done “a wee bit of homework” and was sure it would see outside investors commit capital to both the fund and the fund management subsidiary.
Speaking as the bank launched its annual report, Michael Fallon, government minister in the Department for Business, Innovation & Skills and Department of Energy & Climate Change, indicated that Lord Smith’s certainty could stem from more than simple confidence.
The Conservative MP said that while privatisation of the GIB was one option for attracting private capital, co-investment with other institutions would be another “preliminary route” that would enable the bank to become an “enduring institution”.
“There is already some co-investment going on with the Saudi Arabian fund,” he told attendees at the event in London.
A spokeswoman for the GIB said she was not familiar with the fund alluded to by the MP, but added that any fundraising announcements would be made in due course.
The bank earlier this week singled out pension and sovereign wealth funds as the target market for its wind farm vehicle.
Saudi Arabia’s central bank, the Saudi Arabian Monetary Authority, has so far managed the currency reserves and revenue from the country’s oil production – estimated at $730bn (€536bn) – but there have been discussions to launch a formal sovereign wealth fund.
The GIB’s chief executive, Shaun Kingsbury, was also confident pension funds would be interested in the proposed wind farm fund, as he said the asset class was “perfect” for the industry due to its low operating costs and resulting high cash outflows.
A trustee of the BT Pension Scheme previously said banks such as GIB would be “quite critical” in creating co-investment vehicles that would allow for the financing of smaller deals, sharing out the risk of each transaction.
Kingsbury joked that he would need “a little while” before the next fund was announced, as the wind farm vehicle was only unveiled this week, but he was nonetheless positive about its potential impact on the market.
“We will see if we can get BT interested in the first [fund], and then of course if we do it and it works, and it’s successful, then the market will copy us,” he said.
“Then, not only will we be raising the next fund, but there will be other folks out there doing it, and that’s great.”