UK Green Investment Bank announces first close on world’s first offshore wind fund

The UK Green Investment Bank plc (GIB) has announced that its FCA regulated subsidiary, UK Green Investment Bank Financial Services Limited (GIBFS), has reached first close on commitments of £463m on its planned £1bn fund to invest in operating offshore wind farms in the UK.

First close marks the completion of the first stage of fundraising and is triggered by the commitment of an initial group of investors.

The initial investors comprise UK-based pension funds and a major sovereign wealth fund. GIB is also investing £200m in the fund. Fundraising continues and GIBFS expects to raise additional funds from other investors to reach the £1bn target.

In addition to the £463m of fund commitments raised, an additional significant amount of investor capital is available to co-invest into projects alongside the fund.

The fund is an innovative, first-of-a-kind transaction. It is the world’s first fund dedicated to investments in offshore wind power generation and, once fully subscribed, will be the largest renewables fund in the UK. The fund has an expected life of 25 years, allowing a new class of long-term investor to enter the sector.

This is the first fund raised by the GIB group and its first step into asset management. It is also the first private capital to be managed by the GIB group. It will be managed by a new FCA-regulated and authorised subsidiary called UK Green Investment Bank Financial Services Limited which is staffed by a dedicated team.

GIB has now transferred its investments in two operating assets into the fund, which will produce immediate cash yield for investors. They include:

• Rhyl Flats. A 90 MW, 25 turbine wind farm operated by RWE Innogy UK off the coast of North Wales. It has been operational since December 2009. GIB has sold its full 24.95% equity stake in the project to the Fund.
• Sheringham Shoal. A 317 MW, 88 turbine wind farm operated by Statkraft and located in the Greater Wash area off the coast of Norfolk. It has been operational since October 2012. GIB has sold its full 20% equity stake in the project to the fund.

These two offshore wind farms are able to produce 1,290 GWh of renewable energy annually, enough to power 305,000 UK homes. The fund also has a strong pipeline of future investment opportunities.

Evercore Private Funds Group is acting as advisor and exclusive global placement agent for the fundraise and King & Wood Mallesons is acting as legal counsel to the fund.

"Offshore wind is playing an important role in the UK’s energy infrastructure. By 2020 we expect it to be providing enough clean, green energy to power the electricity needs of 8.2m homes across the UK. A sector this size needs a broad range of long-term investors and those investors need products they can confidently, and commercially, invest in – like this fund.

The fund will create significant benefits for the UK by mobilising capital into the UK offshore wind sector from new, long-term investors seeking good, risk adjusted returns. Attracting additional capital and creating a liquid market for operating assets is an important step in reducing the cost of offshore wind and supporting the continued growth of the sector. New investors will allow the original developers to sell down their stakes and use the proceeds to finance new renewable energy projects."

Shaun Kingsbury
Chief Executive of the UK Green Investment Bank

"This successful first close reflects investor confidence in the UK offshore wind sector’s ability to generate strong returns and in GIBFS’s ability to source, execute on and manage offshore wind investments on their behalf.

The fund gives GIB a new opportunity to create value for its investors through active asset management, leveraging its deep industry insight, relationships and significant capital base."

Karl Smith
Fund Managing Director

2014/15 round-up

GIB’s financial year ends on 31 March 2015. During the year 2014/15, in addition to reaching first close on the Offshore Wind Fund, GIB has:

• invested in 22 projects, committing £723m to projects with a total value of £2.5bn.
• backed projects ranging in size from a £7m investment in hydro power to a £240m investment in an offshore wind farm.
• backed projects across the UK in areas including County Down in Northern Ireland, Speyside and Lanarkshire in Scotland, Merseyside, Derbyshire, Yorkshire and Essex.
• committed, in total and since it began operations in November 2012, £1.8bn to 46 projects with a total value of £6.9bn.
• agreed a £200m pilot programme with DECC to invest in international renewable energy and energy efficiency projects.

GIB will publish its Annual Report for 2014/15 in June and hold its Annual Review meetings on 24 June in Edinburgh and 25 June in London.

Download full details of all GIB’s activity for 2014/15.