Green bank’s big ticket agenda is blow for wave and tidal energy

GREEN Investment Bank chairman Lord Smith has dealt a blow to the expectations of Scotland’s nascent tidal and wave energy technology companies by saying small projects will not be able to access the bank’s £3 billion capital in its first three years.

Instead, the bank’s focus will be on making about 20 big ticket deals between the £50 million to £200m range as the money has to be spent by April 2015 on commercially viable projects that will deliver a return.

Expectation has been high that the bank would bolster the wind and tidal sector in Scotland.

However, Smith said: “Wave and tidal technology and carbon capture and storage are quite far away from becoming commercially viable.That is real venture capital stuff. That would be a step too far for us.”

He said the bank’s small staff of up to 140 would focus on making about 20 deals.

“We have three years. This is a sprint. It is not a huge amount of time.”

Smith confirmed the bank was continuing its search for a headquarters location in Edinburgh city centre that will be suitable for hosting world dignitaries, and that there will be deal teams based at the Scottish office in addition to back office functions.

The Edinburgh office will also host the bank’s board meetings, but he estimates that 70 per cent of the bank’s staff will still be based near Westminster.

Smith, giving his first briefing since his appointment, outlined his vision for the government-inspired bank adding that he had been “inundated” with interest from potential employees and investment projects.

The bank still requires state aid approval from the European Commission which is expected in autumn.

He added that the bank’s status as an entity independent from government will be enforced in legislation. Smith, who is also chairman of Scottish FTSE 100 companies Weir Group and Scottish & Southern Energy, as well as the Glasgow 2014 Commonwealth Games, said he hoped the bank could have the same effect on investment in the renewables sector that the Industrial Commercial and Finance Corporation (ICFC) had on investment in post-war Britain.

“My dream for this thing is when we get to 2015-16, we will have the possibility to raise outside capital.

“It will be wonderful if we have an enduring institution and divorce ourselves from government entirely. But if also at that time I can turn around and say lots of other institutions are in this area big time, competing with us directly, we will have created an industry out of this and I will feel the job has been very well done.”

He said the bank will have a commercial focus and is expected to see a 3.5 per cent return on its investments.

The bank’s initial £3bn will be used to fund developments in five areas: waste processing and recycling; waste energy; non-domestic energy efficiency; offshore wind; and the Green Deal, which encourages businesses and home owners to make their buildings more energy efficient.

While the bank’s deal teams would take advantage of London’s place as a global financial centre, much of the funding would back development in Scotland.

He said: “A lot of renewable infrastructure will be here in Scotland. We have black gold now in a different form. A lot of the actual build will be based here.”