1 E3G Briefing Macquarie’s acquisition of the UK Green Investment Bank Detail: 1. Introduction – p1 2. Investigation Findings – p2 3. Diagram on Findings – p3 4. Concerns raised by former government Ministers, MPs and Lords – p4 5. About Macquarie – p5 Annex: Investigation Methodology – p 7 1. Introduction The UK’s Green Investment Bank (GIB) is to be sold by the UK Government to its preferred bidder, Australian investment bank Macquarie for an estimated £2 bn. The sale and process surrounding it has created significant opposition, given Macquarie’s controversial track record and known business model and a lack of clarity on safeguards secured by Government as part of the process. Investigative research by E3G and Greenpeace show changes in the corporate structure of the GIB being made in the final stages of the sale process. The measures, synonymous with those used in asset stripping, could well mean Macquarie is planning fundamental changes to the GIB following completion of the acquisition, many of which could be detrimental to the UK’s national interest. Irrespective of Macquarie’s present intentions, safeguards proposed by Government as part of the sale – establishing an independent ‘special share’ which has final say over the Bank’s green purposes in its articles of association – would be impotent in preventing asset stripping or the break-up of the Bank post-sale. This background briefing outlines the changes being implemented at the GIB, Macquarie’s existing track record of asset stripping in the UK and context on growing opposition to the sale.
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1
E3G Briefing
Macquarie’s acquisition of the UK Green Investment Bank
Detail:
1. Introduction – p1
2. Investigation Findings – p2
3. Diagram on Findings – p3
4. Concerns raised by former government Ministers, MPs and Lords – p4
5. About Macquarie – p5
Annex:
Investigation Methodology – p 7
1. Introduction
The UK’s Green Investment Bank (GIB) is to be sold by the UK Government to its preferred bidder,
Australian investment bank Macquarie for an estimated £2 bn. The sale and process surrounding it
has created significant opposition, given Macquarie’s controversial track record and known business
model and a lack of clarity on safeguards secured by Government as part of the process.
Investigative research by E3G and Greenpeace show changes in the corporate structure of the GIB
being made in the final stages of the sale process. The measures, synonymous with those used in
asset stripping, could well mean Macquarie is planning fundamental changes to the GIB following
completion of the acquisition, many of which could be detrimental to the UK’s national interest.
Irrespective of Macquarie’s present intentions, safeguards proposed by Government as part of the
sale – establishing an independent ‘special share’ which has final say over the Bank’s green purposes
in its articles of association – would be impotent in preventing asset stripping or the break-up of the
Bank post-sale.
This background briefing outlines the changes being implemented at the GIB, Macquarie’s existing
track record of asset stripping in the UK and context on growing opposition to the sale.
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2. Investigation Findings
An investigation by think tank E3G and Greenpeace UK, has uncovered a process within the
Green Investment Bank (GIB) establishing corporate structures commonly used in preparations
for ‘asset-stripping’, ahead of its purchase by controversial Australian bank Macquarie from the
UK Government for an estimated £2bn.
Between 22 November and 1 December 2016, 10 new companies have been incorporated and
registered to GIB’s London offices. This sudden proliferation of companies is uncharacteristic of
the GIB, which has to date had a simple, stable and transparent structure (see fig.1).
These new companies correspond to the GIB’s largest assets, and create significant complexity in
the GIB company structure (see fig.2 and Annex).
The establishment of holding companies, and multiple corporate layers, is often synonymous
with practices such as excessive debt, asset stripping and financial engineering, including tax
avoidance.
The timing suggests this is being done to accommodate an asset stripping by Macquarie, the
company who were strongly rumoured to be preferred bidder in October. It was expected that
the outcome of the sale process would be formally announced in December 2016, but
widespread opposition has delayed the process to mid January.
This new evidence suggests that the GIB, under Macquarie ownership, could be stripped of its
four largest assets, totalling almost £1 billion:
o Galloper Offshore Wind Farm – £119 million
o Rampion Offshore Wind Farm – £306.5 million
o Westernmost Rough Offshore wind farm – £240.8 million
o GIB Offshore Wind Fund – £200 million (GIB share)
What would this mean?
Not a significant asset base and not an enduring institution: selling down the GIB’s assets
means it will be a less substantial institution with less capital to invest in the UK economy. This
puts at risk the GIB as an ensuring institution making productive investments in the UK economy.
No guarantee on capital commitment: The Government has not provided any information on
what guarantees/commitments there are from Macquarie on new capital commitments going
forward. Based on Macquarie’s track record, it is most likely that money from any asset sales will
not be reinvested in the UK, but transferred out of the UK economy with little or no tax paid on
profits.
Green promises mean nothing: After much campaigning the Government has agreed to protect
the GIB’s green purposes through an independent trustee company. But if the assets are sold,
there will be little to which this ‘special share’ would apply. The effect would be to undermine or
circumvent the application of the special share, the creation of which provided a significant basis
on which Parliament agreed to allow the sale to proceed.
Who will benefit?: The structuring suggest that these asset sales could be imminent. Based on
Macquarie’s track record, it is most likely that money from any asset sales will not be reinvested
in the UK, but transferred out of the UK economy with little or no tax paid on profits. If so,
Macquarie could be set to make a windfall at the taxpayer's expense.
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GIB Structure – 31 March 2016 (fig.1)
GIB Structure – 1 December 2016 (fig. 2)
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3. Concerns raised by former Government Ministers, MPs, Lords
Conservative: Rt. Hon. Gregory Barker, the Lord Barker of Battle – former Energy & Climate
Minister, 2010 – 2014
“Am increasingly alarmed that sale of #GIB will now see it broken up it threatens its future as
enduring institution #slamonthebreaks” (Twitter, 16 Dec 2016)
Liberal Democrat: Rt. Hon Vince Cable – former Secretary of State for Business, 2010 – 2015
Macquarie is "notorious for pursuing short-term profitability at the expense of long-term
sustainability. This is the worst kind of company to be entrusting maintaining the integrity
and green mission of the bank,"1
The government risks "effectively destroying" the Green Investment Bank (GIB) as an
institution if it presses ahead with its plan to sell the bank into private hands.2
“The @GreenInvBank I helped establish secured billions of investment in green projects now
#Gov wants to sell off & stripped by #MacQuarie?” (Twitter, 20 Dec 2016)
SNP: Keith Brown MSP – Scottish Government Economy Minister, 2016 – present
“I have been made aware of some concerning reports that the privatisation has become
more of a fragmentation or asset stripping process which runs counter to the previous
commitments made to the Scottish Government. This is deeply troubling...”3
Mr Brown said that he was "disappointed" by the Conservative Government's approach,
which he said had been "characterised by an unacceptable lack of communication".4
Green: Caroline Lucas MP
“Macquarie, have a deeply regressive approach to environmental issues, and, in selling off
its stake without the appropriate safeguards, the Government is placing the GIB at risk of
being dismantled – putting at risk all the green projects it has invested in.”5
Labour: Clive Lewis MP, Shadow Business Secretary, 2016 - present
Safeguards are required “to ensure beyond any doubt that the bank will be retained as a
single institution … even if it causes Macquarie to pull out of the deal."6
UNISON General Secrerary, Dave Prentis on Macquarie takeover of National Grid:
“Macquarie has poor form already — in building up huge company debt, repatriating
massive dividends to the southern hemisphere and charging more for a poorer service. The
company has proved it can’t be trusted with the nation’s water supply, but now it is to be in
charge of gas pipes to millions of homes and businesses.”7