Minister responds to fears over GIB restructuring

He told committee chair Mary Creagh that changes to the bank’s structure had followed discussions between itself and the government, and assured her that its green mission would not be compromised by privatisation.

In a letter sent to the energy minister in February, Creagh had demanded an explanation for the formation of 12 new “special purposes vehicles” in November and December, which she feared had been created to enable “asset-stripping” by the new owner.

She noted that several of the newly formed companies appeared to correspond with assets owned by the Green Investment Bank (GIB), including its three largest investments: the Galloper, Rampion and Westermost Rough offshore windfarms.

Reiterating his response to previous parliamentary questions on the subject, Hurd said that one of the companies – UK Green Investment Lyle Limited – had been incorporated to support the GIB’s investment in the Lincs offshore windfarm as part of “business-as-usual”.

He said the remaining eleven were created to facilitate private investment in a number of the bank’s offshore wind assets “following discussion between GIB and the UK government” and added that they are “currently dormant and own no assets”.

Hurd also repeated the reassurance that the government’s main objective in the privatisation process is to “ensure that any sale protects GIB’s green values and enables the business to grow and continue as an institution supporting investment in the UK green economy”.

He once again said that he couldn’t provide any further details because of “commercial confidentiality” but that the government was “committed to keeping parliament as informed as possible”. He said a full report would be provided to parliament “as soon as possible” following the completion of the sale.

Replying to an urgent question on the restructuring of the bank in January, the business and energy minister had told the House of Commons that he did not think it “sensible” for investments institutions to “hold on to assets forever” and that bank’s management needed a free hand to manage its portfolio.  “If they get attractive offers to divest assets we expect them to look at those offers seriously,” Hurd added.

Australian bank Macquarie – dubbed the kangaroo vampire by some – has been selected by the government as its preferred bidder, according to unconfirmed media reports. Earlier this week Macquarie announced the sale of its 26.3 per cent interest in the UK’s largest water company, Thames Water, to Borealis Infrastructure and Wren House Infrastructure Management.

A number of people, including former business secretary Vince Cable and former energy minister Greg Barker, have warned that the sale of the GIB to Macquarie could lead to the bank being broken up and sold off. Barker said the process should therefore be halted.

Nick Mabey, chief executive and founding director of climate think tank E3G, has called for the GIB to instead be transformed into a “real citizens bank” in which members of the public could invest via a special green ISA or savings bond.

Mary Creagh has previously written to business and energy Greg Clark to express concerns that the GIB is being sold too cheaply, urging the government not to repeat the “Royal Mail debacle”.