The UK government's Green Investment Bank (GIB) will be sold to Australian bank Macquarie Group for £2.3bn, in a deal that involves Universities Superannuation Scheme (USS) becoming an investor.
The GIB was first launched by the government in 2012 to invest in renewable energy, but its board decided the right route was privatisation as this would attract new investors. It has so far backed 99 green infrastructure projects, committing £3.4bn to the UK's green economy into transactions worth £12bn.
The transaction is expected to complete in the first half of 2017 subject to regulatory approvals.
It is an important move given Macquarie is the biggest infrastructure investor globally, while USS is one of the UK's largest pension funds with around £57bn in assets under management.
Once complete, the GIB will manage or supervise over £4bn of green infrastructure assets and projects, with investors including Macquarie European Infrastructure Fund 5 (MEIF5), USS, GCP Infrastructure, and the UK government.
Under the plans, the GIB will establish three new investment vehicles: an offshore wind investment vehicle, a low carbon lending platform and a green infrastructure investment platform.
New investments are expected to cove energy efficiency, bioenergy, energy from waste, onshore and offshore wind, solar and tidal energy and energy storage. The GIB will target investments in both equity and debt and at all project stages including development, construction and operation.
The GIB will become Macquarie's platform for principal investments in green infrastructure projects in the UK and Europe. Macquarie will also integrate its existing UK green energy principal investing business into the GIB.
Macquarie Capital Europe head Daniel Wong said: "The Green Investment Bank is a pioneering business, with outstanding people, expertise, credentials, brand and networks.
"By combining the Green Investment Bank with the largest infrastructure investor in the world, we will 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."
He added the move will also provide pension funds that invest in the MEIF5 fund with "long-term exposure to well-managed businesses in well-regulated and established markets".
USS will invest in the new offshore wind investment vehicle, and has also acquired a significant portion of the GIB's existing loan portfolio via a number of its wholly owned subsidiary undertakings.
The scheme's head of private markets Mike Powell said: "This transaction has enabled USS to acquire a portfolio of high quality renewable energy assets on behalf of our members. The assets include offshore wind projects and a portfolio of renewable loans, illustrating our capability to invest across the capital structure. We look forward to continuing our relationship with the Green Investment Bank and finding new opportunities to invest in the low carbon economy in the UK."
In 2014 USS acquired a portfolio of approximately £320m loans in renewable energy through its subsidiary L1 Renewables, which will be expanded as part of the new deal with GIB. Once the transaction is complete, L1 Renewables and other subsidiary undertakings of USS will have combined commitments of over £500m to UK renewables.
The government will set up an infrastructure bank to support investment and to co-invest alongside investors including pension funds.
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