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Sovereign fund invests in bank

Exclusive: Abu Dhabi’s £150m backing for Britain’s wind farms

Abu Dhabi Investment AuthorityAbu Dhabi Investment Authority is spending £150 million to help Britain build more offshore wind farms.

Daily Business has learned that the sovereign wealth fund, owned by the Emirate of Abu Dhabi, is providing a third of the external capital so far raised by the Westminster-backed Green Investment Bank.

ADIA manages the Emirate’s excess oil reserves, estimated to be as much as $500 billion. It has never publicly admitted how much it has in assets, but estimates put it at between $800bn to $875bn.

GIB, which invests in huge renewables projects to enable them to go ahead, said three weeks ago it had raised £463m towards a £1 billion pot to create the world’s first dedicated offshore wind fund.

But it has declined to identify any of its backers, beyond saying they include pension schemes and government-backed funds. Last night it again said it would not identify individual supporters.

When fully subscribed it will be the largest renewables fund in the UK with an expected life of 25 years, allowing long-term investors to enter the sector.

A source familiar with the deal said ADIA is investing in the fund because it will provide a good yield, rather than for its green credentials. “These are red-blooded investors who are looking to put their money behind good assets,” said the source.

It is the first fund raised by the GIB group and its first step into asset management. It is also the first private capital to be managed by the GIB group. It will be managed by a new regulated and authorised subsidiary called UK Green Investment Bank Financial Services Limited which is staffed by a dedicated team.

GIB has transferred its investments in two operating assets into the fund, which will produce immediate cash yield for investors.

The fund will take equity stakes of 10% to 30% in projects over 25 years, enabling existing investors such as utilities to re-invest capital in more facilities. The bank hopes this will help drive down costs of offshore wind.

At the end of 2014 Britain had 55% of all installed offshore wind farms, the largest amount anywhere, according to estimates from the European Wind Energy Association.

GIB is unable to borrow, though it is understood the Labour and LibDem parties are committed to giving it those powers.

 

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