What price the Green Bank after the Royal Mail failure?


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The Independent Online

Privatisations are coming thick and fast since the Royal Mail float. First Lloyds, then RBS, and now the Green Investment Bank is set to go under the hammer.

The ongoing Lloyds sale has been an undisputed success. Nursed back to health, there is no point in the taxpayer owning this giant of high street banking. Selling RBS seems premature, although the five-to-seven year timescale reduces the risk of taxpayers missing out on the future rise in its value.

But what of plans to sell the Green Investment Bank, the state-backed fund created to invest in long-term clean energy and infrastructure projects? Predictably, the environmentalists are in uproar, claiming that, without public cash, the bank will now stop funding new schemes that fail to find investment elsewhere.

But it has proved it can make decent money on the 50 projects it’s backed so far: why would buyers want to change that strategy? Even if they inexplicably did, there’s no reason why the government can’t set up a new fund and start again.

Any flood of private cash into green energy should be applauded. The emergence of a big, commercially successful green venture capitalist on to the public markets will be good for the profile of the sector, particularly as the bank will only get bigger as it is given the power to gear up its balance sheet and invest more.

The question should be, how much of the thing we should sell, and at what price? This is up to Bank of America Merrill Lynch, advising the Government, and UBS, advising the board.

Both were on the Royal Mail privatisation ticket, too, with UBS playing a starring role as joint bookrunner. That’s not the greatest comfort if you take the view that the £1bn underpricing of Royal Mail represented a significant failure on behalf of both the Government and its banks. The Government does not take that view, doggedly arguing that the privatisation was a success.

But there’s the problem with that spin. As part of their contract, the banks were offered a “discretionary fee” of many millions of pounds to be paid if the float went well.

Given what we’re told about the sale’s success, the fee will have been paid in full, right?

Wrong. In an answer to a written question in Parliament by Labour’s Chuka Umunna this week – some 20 months since the float, the business department responded that, ahem, “no decision has been made”.

If the Government really believed the sale had been a success, it would have dispatched the cheques long ago. As it is, this is one delivery the Royal Mail will not be making.