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ACE staged its second investment roundtable on 9 May, bringing together members of the Treasury, TfL, URS/Scott Wilson and a number of major investment firms.
ACE’s roundtable recognised that unlike other markets, there was no laissez-faire default option for environmental infrastructure. The market was, in effect, entirely created by government policy to overcome classic market failures.
It was also noted that, along with the new Green Investment Bank, government had already put forward a plethora of mechanisms for spurring investment, including the Renewable Heat Incentive, the carbon price floor, the landfill tax, and many more.
However, with that said, some concerns were raised about the ambitious nature of the government targets in place. In particular, with so much technology unproven, and with such ambitious targets in place, there may simply not be the levels of capital required to match the needs of those who want to create the assets.
The group discussed the role of the Green Investment Bank, which would operate commercially and make rational decisions to address financing gaps in projects that are ready to go, such as offshore wind or energy efficiency projects.
Technologies that are not currently viable (in terms of cash flow, e.g. tidal) will not be considered. This was deemed relatively significant ahead of the Renewables Roadmap, which might set out degrees to which some technologies are or sre not yet viable.
In regards to the current status of the bank, it was stated that the advisory group was being created for implementation. However, full implementation was likely to take time as the EU would need reassurance in regards to state aid rules when faced with a formation of a new state owned bank.
Instead of initial full implementation, £775 million would be available by 2012, with the bank hoping to be fully set up for 2013-14.
Because the market remained a political market, some hope was expressed that the new bank would serve to mitigate the political risks attached to investment. In particular it was hoped that government would prove reluctant to legislate in ways that undermined Green Investment Bank investments.
Alongside that the prospects for the future tended to suggest that the new bank would enter a market, help to demonstrate its viability, and then move out to make way for the private sector.
By way of support it was agreed that government was right not to back investments with its own AAA rating. It was felt this allowed investors to invest freely but never understand the market, and thus never develop it further in future.
While the Green Investment Bank might help to drive wider development of the market, the group concluded that, as financial risk passed, alternative risks such as planning and the localism agenda might press developments in a different direction as well.
Attendees
Duncan Hale, Senior Investment Consultant, Towers Watson
Gareth Elliott, Senior Policy Adviser (Infrastructure), British Chambers of Commerce
Andy Matthews, Managing Director, Barclays Infrastructure Funds
Jerome Munro-Lafon, Group Managing Director, UK & Ireland, URS/Scott Wilson
Nelson Ogunshakin OBE, ACE Chief Executive
Gavin Reid, Special Adviser Trade Finance, BP Oil International Limited
Doug Segars, Infrastructure UK, HM Treasury
Julian Ware, Joint Acting Director of Corporate Finance, TfL
Matthew Woodeson, Managing Director, Macquarie Capital Funds (Europe) Ltd
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