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The Green Investment Bank, Rob Cormie, Group Operations Director, GIB (20.01.14)

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Part of our Business and Climate Change Series, this presentation explored how the Green Investment Bank has delivered on its objectives and its plans for future development.The GIB, the first of its kind in the world, was formed as a public company in May 2012, and became fully operational in October 2012 when it was granted State Aid approval by the European Commission to make investments on commercial terms. Its remit is to co- invest in UK projects which are both green and commercial alongside private sector finance. Since its creation the GIB has co-invested over 600m on a range of projects totalling 2.3billion.

Its mandate from Government is to deploy at least 80% of its capital in offshore wind; waste recycling and energy from waste energy efficiency, including support for the Government's Green Deal. It measures its green impact in terms of reducing greenhouse gas emissions; increasing natural resource efficiency; protecting the natural environment; enhancing biodiversity and promoting environmental sustainability.

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The Green Investment Bank, Rob Cormie, Group Operations Director, GIB (20.01.14)

  1. 1. UK Green Investment Bank plc Rob Cormie – Group Operations Director January 2014
  2. 2. ONE YEAR OLD Mobilising private sector investment in the UK’s green economy. We are up and running and investing Our business model is working But we are facing some restrictions We want to do more Our context Up and running Model is working Restrictions Next steps 2
  3. 3. OUR STARTING POINT Our statutory commitments … Our context Up and running … demand unprecedented investment Model is working Restrictions Next steps Notes: 1) vs 1990 levels; 2) from 3% in 2010; 3) vs 1995 levels; 4) Source: Vivid Economics. Estimates of required green investment in the UK varies between £220bn and £500bn depending on sources 3
  4. 4. INVESTMENT SO FAR Historic and projected investment run-rate is consistently half the required amount Our context Up and running Model is working Restrictions Next steps 4
  5. 5. 2013 GLOBAL CLEAN ENERGY INVESTMENT DOWN 12% • • Global investment in clean energy reduced for second year in a row This decline is steepest in Europe (c.40%), while investment in Asia continued to increase Global Renewable Energy Investment by Region, £bn -9% 21% -12% $103bn 34% $109bn $78bn 0.6% $121bn 17% $49bn 44% 45% 46% $22bn $68bn $39bn $63bn $29bn $58bn $24bn $35bn 2005 2006 $127bn $109bn $45bn 2004 $66bn $115bn $23bn $71bn $50bn $42bn $18bn $13bn $88bn $62bn $70bn 2007 $82bn $84bn 2008 2009 EMEA Source: BNEF AMER $68bn 2010 2011 2012 2013 ASOC 5
  6. 6. 3,500 INSTITUTIONAL INVESTORS ARE INCREASINGLY ACTIVE 3,000 2,500 • Institutional investment in renewable energy has more than doubled between 2007-13, with listed funds being the 2,000 preferred route to the market for pension funds and insurers • Insurers and pension funds are building infrastructure teams and increasing allocation to the sector – for example: 1,500  Axa recently announced that is aiming to invest €10bn (c.£8.5bn) in infra debt  Allianz GI raised a £1bn fund for UK Infra in 2013 1,000  Legal & General announced an aim to commit up to £15bn in the sector  Pension Denmark are actively involved in European infra 500 market and closed renewable energy deals in the UK  Blackrock is growing its EU Infra Debt team 0 2007 2008 2009 2010 2011 BearingPoint Institute Survey Institutional Investors and Infrastructure (Europe) Institutional Investors Commitment to European Renewable Energy Projects ($m) 3,500 PE/infrastructure fund Quoted fund Bond Direct 3,000 2,500 2,000 PE/infr Quoted Bond Direct 1,500 1,000 500 0 2007 2012 2013 In the next 3-5 years a significant number of insurers and pension funs will develop their own internal infrastructure teams to manage investment? 2008 2009 2010 2011 2012 Prequin Research on Insurers Capital Allocation Targets Infrastructure investment allocation by insurance companies, proportion of investors (%) 100 6% 6% Agree Strongly 2013 10-49.9% 80 5-9.9% 19% Agree 60 1-4.9% 40 Disagree 20 69% No opinion Less than 1% 0 Current Source: BearingPoint Institute, BNEF, FT, Prequin Medium-term Targets 6
  7. 7. OUR JOB Our vision: green and profitable Our context Up and running Our task: crowding-in capital Model is working Restrictions Next steps 7
  8. 8. OUR FOCUS Our proposition • • • • • We have £3.8bn of capital to invest, provided by the UK Government We expect to commit this capital by March 2016 We have the ability to structure products across the capital structure, from senior debt to equity We deal on commercial terms; GIB does not provide grants, „soft capital‟, regional assistance or development capital Investment must be additional. Our involvement must be necessary for the project to go ahead. We aim to crowd-in other private sector capital 8
  9. 9. WE‟RE UP AND RUNNING Our context Up and running Model is working Restrictions Next steps 9
  10. 10. WE ARE INVESTING Over £750m committed We have backed 25 projects We have invested in all our main sectors and in each part of the UK Financed the UK‟s first large scale coal to biomass conversion Invested in 30% of the UK‟s operating OSW capacity First ever minority refinancing of an OSW project Financed NI‟s largest waste wood power plant Delivered the UK‟s first listed renewable energy infrastructure fund Backed a large scale NHS energy efficiency project (will save the Trust £20m) Closed the funding gap for a new high-technology waste plant that had been stuck for 4 years When built, our investments will produced enough renewable electricity to meet energy needs of 2.7 million homes When built, our investments will cut CO2 emissions equivalent to taking 1.4 million cars off the road Our context Up and running Model is working Restrictions Next steps 10
  11. 11. AN EXAMPLE - TOMATIN 11
  12. 12. INVESTING IN OFFSHORE WIND 12
  13. 13. WE ARE MAKING AN IMPACT 2012/13 2013/14 so far 43% 48% market share market share Our context Up and running Up and runningis working Model Model is working Restrictions Restrictions Next steps Next steps 13
  14. 14. BUT WE ARE FACING SOME RESTRICTIONS State aid: Policy uncertainty: Financial volatility: Our context Up and running Model is working Restrictions Next steps 14
  15. 15. WE WANT TO DO MORE Our context Up and running Model is working Restrictions Next Steps Notes: 1) vs 1990 levels; 2) from 3% in 2010; 3) vs 1995 levels; 4) Source: Vivid Economics. Estimates of required green investment in the UK varies between £220bn and £500bn depending on sources 15
  16. 16. WHERE WE BEGIN AND END Operating on fully commercial terms is the only way to achieve scalable, long-term green impact. Our context Up and running Model is working Restrictions Next Steps 16
  17. 17. CONTACT US Headquarters Atria One Level 7 144 Morrison Street Edinburgh EH3 8EX Tel: +44 (0)330 123 2167 London Office 21-24 Millbank Tower Millbank London SW1P 4QP T +44 (0) 330 123 3070 The information in this document and any accompanying material (“The Document”) is confidential and commercially sensitive. This Document is provided to each recipient on a confidential basis solely for information purposes only. No reliance can be placed on this Document by any recipient or any other person. This Document and its contents are confidential to the person to whom it is delivered and must not be reproduced or distributed, either in whole or in part, nor its contents disclosed by such persons to any other person without the prior written consent of UK Green Investment Bank plc. Except as required by law, neither UK Green Investment Bank Plc nor any of its connected persons accepts any liability or responsibility for the accuracy or completeness of, or makes any representation or warranty, express or implied, with respect to the information contained in this Document or on which this Document is based or any other information or representations supplied to the recipient. UK Green Investment Bank Plc will not act and has not acted as your legal, tax, accounting or investment adviser. This Document does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase, any investment and UK Green Investment Bank Plc does not arrange investments for/introduce parties as a result of sharing the information set out in this Document. Registered Office: Atria One, Level 7, 144 Morrison Street, Edinburgh, EH3 8EX. Company Number SC424067. UK Green Investment Bank Plc is wholly owned by HM Government. The company is not authorised or regulated by the Prudential Regulation Authority or the Financial Conduct Authority. 17

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