The UK’s Edinburgh-based Green Investment Bank today reported an operating loss of £5.7 million in its first full financial year.
But the bank also announced its plans to launch a £1 billion Offshore Wind Fund to acquire equity stakes in operational offshore wind projects in the UK.
This is an important development for the UK’s offshore wind sector. 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.
The bank’s role extends beyond that of a traditional investor by taking on ‘tough’ investment projects, de-risking new technologies and lowering the cost of capital for the sectors
Last month, the bank received State Aid approval from the European Commission to promote and manage funds and other co-investment structures for mobilising upfront private sector investment into its designated sectors.
This widening of GIB’s activities is a significant strategic development as it will enable GIB to promote and manage funds and all other types of structured co-investments within any of its designated green sectors, allowing it to raise and deploy private sector capital in addition to its current £3.8bn of equity funding from the UK Government.
With only 18 months of activity so far – the Green Investment Bank began operations in October 2012 – the vast majority of the bank’s investments (88% by value) remain under construction. Consequently, it made a loss of £5.7 million in the current year – a reduction from the £6.2 million recorded in its first five months.
Lord Smith of Kelvin, Chairman of the Green Investment Bank, said: “We have emerged from our start-up phase as the most active investor in the UK’s green economy. 2013-14 was a good year for GIB in a difficult market – we backed 18 new projects, more than double our first year, committing an additional £668m of capital.”
UK Business Secretary Vince Cable said: “We established the UK Green Investment Bank (GIB) to jump-start investments in cleaner, greener technology.
“These results show the impact they are having with £4.8bn pumped into green energy projects in just 18 months.
“Headquartered in Edinburgh, 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.”
Bank chief executive Shaun Kingsbury, added: “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.”
The bank is on track to reach sustained profitability once its current portfolio is built and operating and management will hold two annual review meetings – tomorrow (Wednesday) in London and in Edinburgh on Thursday to explain performance and future strategy to stakeholders.