Ministers are poised to sanction an inaugural sale of shares in the Government’s Green Investment Bank (GIB), a state-backed lender to green infrastructure projects, in a move that will accelerate the Conservatives’ £50bn post-Election privatisation spree.
Sky News has learnt that advisers from Bank of America Merrill Lynch have been drawing up plans with Whitehall officials to sell a stake in the GIB, which has funded dozens of waste and energy ventures since its launch in 2012.
Insiders said that details of the plan could be included in George Osborne’s Emergency Budget on 8 July.
The move to attract private shareholders will underline the GIB’s transition from a state-funded institution into the financial mainstream, although the Government is expected to retain a stake in it over the long term.
Sajid Javid, the Business Secretary, will attend a GIB event this week where he will speak alongside Lord Smith of Kelvin, its chairman, and Shaun Kingsbury, chief executive.
It was unclear on Sunday whether Mr Javid will address the share sale proposals at the organisation’s annual stakeholder event on Thursday.
UK-based pension funds and overseas sovereign wealth funds are expected to be among the institutions attracted by the prospective returns from a direct investment in the GIB.
The structure of a share sale is still being finalised, but insiders said it was likely to be undertaken privately rather than through a stock market listing.
It will form part of a massive privatisation programme which includes the taxpayer’s stakes in Lloyds Banking Group and Royal Bank of Scotland, as well as the remaining 15% shareholding in Royal Mail.
Speaking shortly before the Election, Vince Cable, the then business secretary, said: “We are looking at a range of options for bringing private capital into the Green Investment Bank, and to give it greater operational freedom and enable it to borrow in capital markets.
“That will provide it with an alternative channel of funding, and ensure its future as a lasting and enduring institution.”
A separate £1bn fund to invest in offshore wind projects has also been launched by the GIB, with the Abu Dhabi Investment Authority, one of the world’s biggest sovereign wealth funds, thought to be among its largest investors.
Strathclyde’s public pension fund was also a significant investor in that fund.
The green bank separately advised the Government on its 25% stake in Greencoat Capital, a London-listed vehicle, which it subsequently sold for a profit.
News of the GIB’s plans comes just days after the Government announced that it would end a year earlier than expected public subsidies for onshore wind projects.
The GIB, whose board is being advised by UBS, does not yet have powers to borrow in the debt markets, although both Labour and the Liberal Democrats had committed to enabling it to do so in their election manifestos.
Launched with £3.8bn of public funding, it has so far committed just over £2bn to 50 projects, including £35m to a renewable power facility in Tilbury, Essex, and £240m to Sheringham Shoal offshore windfarm near the Norfolk coast.
That £2bn of public money has been supplemented by £6bn of private capital, reinforcing the GIB’s status as one of the largest green-focused investment institutions in the world.
The GIB moved into profit in the second half of its 2014-15 financial year, and is understood to be planning to report a modest surplus for the full year at this week’s stakeholder event.
Current projections imply a rate of return on its portfolio of 9%, which it expects to increase over time.
A GIB spokesman declined to comment.