• Bidders needed more time to assess investment before Brexit
  • Former climate minister says political upheval requires pause

The British government is extending the bid deadline for the sale of the UK Green Investment Bank Plc by almost two months because potential buyers need more time to assess the 4 billion pounds ($5.4 billion) they must furnish.

The deadline will now be in early September instead of July 27, a move that was almost inevitable even before the Brexit vote because of the complexity of the deal, said one person with knowledge of the talks who asked not to be identified because the discussions are private. Another person connected to the process said bidders already have been told of the delay.

The government set up the the Edinburgh-based bank in 2012 to spur investments in renewable energy and started a sale process in March. Britain’s decision to leave the European Union and the market turmoil that followed adds another dimension to the consideration. A former climate minister is advising the government to reassess the sale in light of Brexit.

“It’s not the time to sell down its stake in entirety,” said Greg Barker, a member of the House of Lords who served as a minister from 2010 to 2014. “The government needs to think about retaining a stake in it to show that it’s still got skin in the game while they work out what the green agenda is going to be.”

Severing the institution from the state would allow the bank to invest in areas restricted by EU state aid rules. The bank wants more freedom to invest overseas and technologies such as power grids and electric cars. 

Priorities Shift

Exiting the EU means the government now needs to make investing in the U.K. a higher priority, suggesting it ought to keep a bigger stake in the bank, said Sepi Golzari-Munro, head of the U.K. program at the environmental group E3G.

“The Brexit result means years of uncertainty in the U.K.’s relationship with Europe and potentially a major economic downturn,” Golzari-Munro said. “The GIB must now be used to double down on U.K. infrastructure investment, as part of a wider stimulus package.”

The person connected with the talks said the government still intends to find a buyer by the time the financial year ending in April 2017 is finished. It’s currently working to sell 75 percent to 100 percent of the bank and previously said it would prefer to sell it off in its entirety, the person said.

Some buyers need more time to assess and do due diligence on the 80 or so assets held by the GIB, the person said. Officials for Green Investment Bank and the Department of Business, Innovation & Skills, which is helping to oversee the sale, declined to comment.

Investment Need

The bank has invested about 2.8 billion pounds since its establishment. After selling some projects, it currently holds about 2 billion pounds of assets. That, coupled with plans to invest another 2 billion pounds over the next three years means bidders must come up with about 4 billion pounds.

Three groups are vying to buy the bank, including a group led by Sustainable Development Capital LLP, a London-based investment firm that has acted as a fund manager for the GIB. JP Morgan and HSBC Bank Plc are advising the group led by SDCL.

“Our objective is to keep the GIB green and growing, backing management and bringing additional capital and expertise to continue to invest in much needed sustainable infrastructure,” Chief Executive Officer Jonathan Maxwell said in a statement sent by e-mail.

Macquarie Capital, another bidder, may have to redo the numbers of its bid, following the Brexit vote, according to a report in Financial Review. A spokeswoman for Macquarie declined to comment.

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