Will developers recycle Green Investment Bank's £460m?

Everybody likes a spending spree, and few can match that of the pace and scale of the one by the UK’s Green Investment Bank.

Last week alone, Shaun Kingsbury and his team committed a further £460m to offshore wind projects. The investments in Westermost Rough (£240m) and Gwynt y Mor (£220m) will see the bank pick up equity stakes of 25% and 10% respectively.

These add to the bank’s three existing offshore wind investments made since its inception in November 2012 – Walney, Rhyl Flats and London Array. The two new purchases are two of the largest single investments that the bank has made to date; and bring its total offshore wind financial commitment to nigh on £600m.

These deals are significant because the bank has a mandate to mobilise capital within this emerging sector. It is imperative that it enables developers to free up fresh capital for future projects.

Moreover, Kingsbury has always maintained that, by making these investments on fully commercial terms, the bank can “crowd in” future funding; and create a clear and viable model that future prospective investors can follow.

In principle, this plan makes sense. And there’s no denying that the bank has – and continues to – play a critical role within securing the industry’s future.

But it is not clear whether all of the current developers are indeed using this fresh capital, which is injected back onto their balance sheet, to finance a fresh round of offshore wind energy projects.

Dong Energy certainly is. The Danish firm maintains that it wants to triple its current installed capacity by 2020. Its strengthened financial partnership with Marubeni – which took a 25% stake in Westermost Rough last week alongside the Green Investment Bank – certainly helps underscore this goal. Dong's project development pipeline remains strong, as do its ties with key manufacturers and contractors throughout the supply chain.

However, for RWE Innogy, part of German utility RWE, questions remain. In January, it confirmed plans to reduce its renewable energy investments by half, to €500m in 2014. Meanwhile, it continues to seek partners for its 504MW Galloper Offshore Wind Farm to further dilute its current 50% interest.

That makes for a curious situation. While the Green Investment Bank must - and will - continue to place strategic financial bets on future projects, the extent to which this capital will get recycled back into the system by all developers is a decision that remains out of the control of the bank.

The bank is an innovative and increasingly powerful investor, and it is able to crowd in fresh capital. But it has much less power to control or influence the strategic decisions of developers.

The Green Investment Bank will continue to grow in stature. As this happens, the extent to which it can dictate development terms with existing developers remains one to watch.

Everybody likes a spending spree, and few can match that of the pace and scale of the one by the UK’s Green Investment Bank.

Last week alone, Shaun Kingsbury and his team committed a further £460m to offshore wind projects. The investments in Westermost Rough (£240m) and Gwynt y Mor (£220m) will see the bank pick up equity stakes of 25% and 10% respectively.

These add to the bank’s three existing offshore wind investments made since its inception in November 2012 – Walney, Rhyl Flats and London Array. The two new purchases are two of the largest single investments that the bank has made to date; and bring its total offshore wind financial commitment to nigh on £600m.

These deals are significant because the bank has a mandate to mobilise capital within this emerging sector. It is imperative that it enables developers to free up fresh capital for future projects.

Moreover, Kingsbury has always maintained that, by making these investments on fully commercial terms, the bank can “crowd in” future funding; and create a clear and viable model that future prospective investors can follow.

In principle, this plan makes sense. And there’s no denying that the bank has – and continues to – play a critical role within securing the industry’s future.

But it is not clear whether all of the current developers are indeed using this fresh capital, which is injected back onto their balance sheet, to finance a fresh round of offshore wind energy projects.

Dong Energy certainly is. The Danish firm maintains that it wants to triple its current installed capacity by 2020. Its strengthened financial partnership with Marubeni – which took a 25% stake in Westermost Rough last week alongside the Green Investment Bank – certainly helps underscore this goal. Dong's project development pipeline remains strong, as do its ties with key manufacturers and contractors throughout the supply chain.

However, for RWE Innogy, part of German utility RWE, questions remain. In January, it confirmed plans to reduce its renewable energy investments by half, to €500m in 2014. Meanwhile, it continues to seek partners for its 504MW Galloper Offshore Wind Farm to further dilute its current 50% interest.

That makes for a curious situation. While the Green Investment Bank must - and will - continue to place strategic financial bets on future projects, the extent to which this capital will get recycled back into the system by all developers is a decision that remains out of the control of the bank.

The bank is an innovative and increasingly powerful investor, and it is able to crowd in fresh capital. But it has much less power to control or influence the strategic decisions of developers.

The Green Investment Bank will continue to grow in stature. As this happens, the extent to which it can dictate development terms with existing developers remains one to watch.

Everybody likes a spending spree, and few can match that of the pace and scale of the one by the UK’s Green Investment Bank.

Last week alone, Shaun Kingsbury and his team committed a further £460m to offshore wind projects. The investments in Westermost Rough (£240m) and Gwynt y Mor (£220m) will see the bank pick up equity stakes of 25% and 10% respectively.

These add to the bank’s three existing offshore wind investments made since its inception in November 2012 – Walney, Rhyl Flats and London Array. The two new purchases are two of the largest single investments that the bank has made to date; and bring its total offshore wind financial commitment to nigh on £600m.

These deals are significant because the bank has a mandate to mobilise capital within this emerging sector. It is imperative that it enables developers to free up fresh capital for future projects.

Moreover, Kingsbury has always maintained that, by making these investments on fully commercial terms, the bank can “crowd in” future funding; and create a clear and viable model that future prospective investors can follow.

In principle, this plan makes sense. And there’s no denying that the bank has – and continues to – play a critical role within securing the industry’s future.

But it is not clear whether all of the current developers are indeed using this fresh capital, which is injected back onto their balance sheet, to finance a fresh round of offshore wind energy projects.

Dong Energy certainly is. The Danish firm maintains that it wants to triple its current installed capacity by 2020. Its strengthened financial partnership with Marubeni – which took a 25% stake in Westermost Rough last week alongside the Green Investment Bank – certainly helps underscore this goal. Dong's project development pipeline remains strong, as do its ties with key manufacturers and contractors throughout the supply chain.

However, for RWE Innogy, part of German utility RWE, questions remain. In January, it confirmed plans to reduce its renewable energy investments by half, to €500m in 2014. Meanwhile, it continues to seek partners for its 504MW Galloper Offshore Wind Farm to further dilute its current 50% interest.

That makes for a curious situation. While the Green Investment Bank must - and will - continue to place strategic financial bets on future projects, the extent to which this capital will get recycled back into the system by all developers is a decision that remains out of the control of the bank.

The bank is an innovative and increasingly powerful investor, and it is able to crowd in fresh capital. But it has much less power to control or influence the strategic decisions of developers.

The Green Investment Bank will continue to grow in stature. As this happens, the extent to which it can dictate development terms with existing developers remains one to watch.