Days after calling a snap general election, Theresa May finalised the first privatisation of her tenure — and just in time to avoid the purdah period too.
The Green Investment Bank, one of the success stories of the coalition government, was sold to Australian bank Macquarie for £2.3 billion following an arduous few months during which the deal was nearly derailed.
It was, in the words of the FT’s political correspondent Jim Pickard, “a good week to bury one of the most controversial privatisations of recent years.”
What made the sale controversial?
It was mainly because the Green Investment Bank (aka GIB) is so well-liked, having directed billions of pounds towards clean energy projects and helped Britain become a world leader in offshore wind power.
It was quite a sight when, in a series of parliamentary debates earlier this year, ministers of every party bickered to claim credit for the GIB’s success.
If the GIB was so popular, why sell it?
Well according to Tory ministers, the GIB has basically done all it can do in public hands, and in order to raise even greater sums it has to head to the private sector.
There is something to that, but it kind of misses the point.
The appeal of a government-backed GIB was that its investment in a project was a sure sign of Westminster’s confidence — it made risky renewables projects less risky.
It also requires trust that the buyer Macquarie will use the Bank to support the kind of economically immature technologies for which cost and efficiency gains could really benefit the UK, even though there’s nothing compelling them to do that.
Macquarie could just as easily draw upon the GIB team’s proven expertise in offshore wind investment (which was once immature) and turn the project into a profitable top-tier fund for more advanced renewables.
They could even use the GIB to fund fossil fuel projects such as fracking, documents obtained by Energydesk suggest.
The special share, set up to ensure the GIB’s ‘green purpose’ stays green, is pretty toothless — and gives government no veto.
Wait, so the GIB could invest in fossil fuels after the sale?
I mean theoretically it could do that now. But the government is accountable to the people, whereas Macquarie is only accountable to its shareholders.
And this isn’t to say Macquarie would do that, they could always fund fossil fuels using one of their many other ventures — plus they do seem pretty keen on offshore wind.
But the Australian investment firm is heavily invested in fossil fuels, including fracking firms in the UK, an Energydesk investigation last year found.
What else should we know about these guys?
Well this all brings us to the scandal that nearly scuppered the whole deal at the beginning of the year.
Once it became clear that Macquarie was the preferred bidder for the GIB, questions were raised by ministers and the media over what it would do with the project.
Vince Cable warned that he feared the GIB’s core assets would be sold off for profit at the expense of the taxpayer.
Energydesk discovered that the GIB had created 14 new companies at the end of 2016, which experts called a classic warning sign of an impending asset strip.
And the Sunday Times reported that Macquarie had lined up bidders for the GIB’s biomass and offshore wind assets, which it would sell for 30% profit.
Following the controversy over Macquarie’s handling of Thames Water, these stories sparked a a series of parliamentary debates, select committee inquiries, legal challenges and even a possible alternative to sale.
What happened then?
The deal was changed – so that government could ringfence certain GIB assets – and enough time passed that the outrage died down.
Then, with a general election in the background, the sale took place far from the front page.
Read our Green Investment Bank series: