Macquarie bets big on renewables with purchase of UK green bank

Sydney-based financial services heavyweight Macquarie Group has entrenched its position as a key player in the global renewable energy market overnight, after its bid to buy Britain’s Green Investment Bank was finally approved by the UK government for $A3.9 billion (£2.3 billion).

The takeover – which has not been without controversy – puts the so-called “billionaire factory” in charge of more than $A6.8 billion of green infrastructure assets and projects notched up since the GIB’s establishment in 2012.

Indeed, the green bank’s overwhelming “success story” as a government owned entity – 85 projects, including the world’s first offshore wind farm, and a return of three times every Pound invested in third-party funding – has opponents to the deal arguing that privatisation was unnecessary.

Meanwhile, for the ASX-listed Macquarie, it is not their first renewables rodeo, either, with recent activity in the sector including this month’s reported $600 million deal to buy a large solar portfolio from India’s Hindustan Power Projects.

And last year, in July, Macquarie inked a major deal with California-based Advanced Microgrid Solutions, to bankroll the development of a $200 million fleet of major distributed energy storage projects at a variety of US commercial, industrial and government sites – a transaction that Greentech Media described as possibly the “largest dedicated energy storage finance vehicle.”

But Macquarie’s purchase of the Edinburgh-based GIB takes it to a new level in the booming global renewables market, while also handing it a responsibility some have argued it is not fit to meet.

“The deal raises questions about whether the bank’s valuable green mission can be maintained by a private company like Macquarie,” said former Liberal Democrat MP Vince Cable, who has also described Macquarie as “the worst kind of company” to be charged with the GIB, due to its propensity for “asset stripping” and its “notorious” pursuit of “short-term profitability at the expense of long-term sustainability.”

But Macquarie says it plans to use its power as the largest infrastructure investor in the world to “create a market leading platform dedicated to investment in the low carbon economy in the UK and beyond.”

“We understand the responsibilities that come with this ownership, and we are fully committed to maintaining its green purpose as we grow the business,” said the head of Macquarie Capital in Europe, Daniel Wong.

As well as its word, Macquarie has also offered a number of concessions to the UK government, including a commitment to £3 billion of green energy investments, to retaining the GIB platform, brand and Edinburgh office, and to publishing an annual report on green performance.

“Upon completion, Macquarie will be the owner of the Green Investment Bank with ‘special share’ arrangements to safeguard its green purpose which will be held by five independent trustees,” Macquarie said in the statement.

“Upon transaction completion, the Green Investment Bank will manage or supervise over £4 billion of green infrastructure assets and projects, with investors including MEIF5, USS, GCP Infrastructure and the UK Government.

“Specifically, the Green Investment Bank will establish three new investment vehicles – an offshore wind investment vehicle, a low carbon lending platform and a green infrastructure investment platform.”