Posted by: Nick Duxbury09/08/2012
There has been a flurry of green deal based news in the last week. On the face of it, much of it is good. Indeed, climate change minister Greg Barker tweeted as much when he yesterday tweeted ‘lots of progress on green deal today’. So there – it must be progress, right?
Firstly, the government announced that the green deal would be an ‘early candidate’ inclusion in the government’s UK guarantee scheme which is underwriting the risk on stalled infrastructure projects worth up to £40 billion. This doesn’t equate to actual cash for the green deal, but it is a sensible call from Treasury, and the prospect of government guarantees are a welcome boost. Certainly The Green Deal Finance Company indicated that inclusion in the scheme was very good news.
Of course, it is only an early candidate for these guarantees, and right now would be green deal providers will need the financing to stack up before they are reassured. But the government tried to provide some reassurance on this front too yesterday. The Department of Energy and Climate Change also yesterday agreed to make a £7 million loan to TDGFC so the organisation is able to start providing low cost finance early in 2013.
Again, this would appear to be good news. The TGDFC can crack on with its work after stalling some months back due to a lack of progress from central government. Paul Davies, partner at PWC told Business Green this loan would ‘see it through to Christmas’. He said it meant the organisation could get a credit rating and procure loan administration services. What he didn’t mention was that the organisation was supposed to have secured a credit rating by June. But no matter – progress towards getting cheap(ish) cash for green deal providers is underway again.
However, it does beg the question: what does it mean when the DECC – a department not known for its fondness of writing cheques – makes a loan to TGDFC? To me it does rather smack of desperation to reassure. If you wanted to read between the lines further, you could argue it also suggests that the crucial £300 million the TGDFC has been assured is heading its way from the Green Investment Bank is still some way from coming into fruition. Is this £7 million loan a plaster over a gaping wound? The GIB is reliant on receiving State Aid sign off. This can take a very long time – up to 18 months – and although for some time now DECC has been adamant that this laborious EU process is on-track, it is hard not to feel that there might be some delays in the pipeline. Fingers crossed not.
Uncertainty around financing is one of the biggest problems right now. It is having a palpable effect on investor confidence and appetite for risk. Just look at the Birmingham Energy Savers procurement framework where a bidder dropped out leaving just two still in the running. Speaking to Dave Allport this week, it was clear that he put this down to a general sense of uncertainty around the sector about the green deal. All eyes will then be Newcastle’s £200 million procurement framework which had its bids in last Friday to see how private sector investors have received the news that the green deal could be backed by government guarantees.
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