U.K. Green Bank Sale Can Proceed After Court Backs Macquarie

(Bloomberg) -- A British court backed the government's decision to sell its Green Investment Bank Plc to a consortium led by Macquarie Group Ltd., rejecting a request from a rival bidder to review decisions about the sale made by ministers.

Sustainable Development Capital LLP, or SDCL, had asked the High Court for a judicial review of the planned sale of the bank after it failed to win preferred bidder status. The government in September selected a group led by Australian bank Macquarie as the preferred bidder, but SDCL argued the government wasn't compliant with criteria set out to guide ministers in their decision.

“Even if the claim had been brought in time, permission would have been refused as the grounds of claim do not disclose any arguable error on the part of the defendants,” Justice Lewis from the High Court in London wrote in the ruling on Friday.

Green Investment Bank, set up by the government in 2012 to speed Britain's switch from fossil fuel-fired power generation, has backed projects from wind farms to biogas plants. It was put up for sale last year as part of a drive to raise money from privatization.

“We welcome today's judgment from the High Court,” the Department of Business, Energy and Industrial Strategy said by email. “As we have said, any government decision on the sale of the Green Investment Bank will be driven by what best achieves our objectives, including continued investment in the green economy and a sale which is in the best interests of the taxpayer.”

The government considered the bid by the Macquarie consortium, which also includes Universities Superannuation Scheme Ltd. “financially preferable” over the SDCL-led bid for several reasons, according to the judgment.

SDCL's funding position was “less secure” because it reduced its offer to buy 100 percent of the bank to 75 percent, after one of the members of its consortium pulled out in August. The SDCL consortium also included a public sector body, which would mean the bank could still risk being classified as government owned after the sale, going against the privatization plan, according to the judgment document.

In response to the judgment, a spokesman for SDCL said it reduced the bid to 75 percent because that “offered the best possible outcome for government,” and not because it lost a consortium member.

The government and Macquarie “are now in a position to sign a binding, contractual agreement providing for the sale of the bank,” according to the judgment.

SDCL said it will now seek to redeploy as much as 1 billion pounds ($1.2 billion) for clean energy through a new fund called SDCL EDGE. It's targeting capital commitments of 500 million pounds, together with an additional 500 million pounds of co-investment and financing from a number of the participants in the SDCL-led bidding consortium for the GIB. It is expected to make its first investments later this year, according to a statement on Friday.

“We have to move on to make investment elsewhere,” SDCL Chief Executive Officer Jonathan Maxwell said in a phone interview. “We feel strongly that we put the best possible solution forward. We brought the proceedings as a last resort having exhausted all other attempts to establish a constructive dialog with the government.”

To contact the reporter on this story: Jessica Shankleman in London at jshankleman@bloomberg.net.

To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net, Will Wade, Jeffrey Taylor