UK Green Investment Bank plc

1. UK Green Investment Bank plc Euan McVicar, General Counsel October 2013

2. WHERE WE BEGIN • The UK has signed up to demanding environmental targets... • *New projects only Note: Q1 2013 BNEF data adjusted according to GIB database and converted to GBP using annual average exchange rates Source: BNEF, GIB • …these targets will require £200bn of new investment. So far, we’re seeing investment levels fall well short of what’s required.

3. Our job Our vision: green and profitable Our task: crowding-in capital

4. OUR MISSION Our proposition • We have £3.8bn of capital to invest, provided by the UK Government • We expect to commit this capital by March 2016 • We have the ability to structure products across the capital structure, from senior debt to equity • We deal on commercial terms; GIB does not provide grants, ‘soft capital’, regional assistance or development capital • Investment must be additional. Our involvement must be necessary for the project to go ahead. We aim to crowd-in other private sector capital To accelerate the UK’s transition to a greener economy and to create an enduring institution independent of Government.

5. Our investment strategy • Work with the market to recycle and re-use capital already committed to the sector • Begin to establish offshore wind (post construction) as a recognised ‘asset class’ with both institutional debt and equity investors • Aim to catalyse investment appetite at construction stage • Allocation of capital to small waste fund managers • Pursue opportunities for equity investment in smaller-scale projects (<£30m) • At the larger scale, direct investment; range of products with scope to innovate • Investment in non-domestic energy efficiency • Partnership with fund managers • Direct investment in projects as market matures • Support for the Green Deal

6. The story so far

7. We’re INVESTing Over £700m committed We’ve backed 21 projects We’ve invested in all our main sectors and in each part of the UK Financed the UK’s first large scale coal to biomass conversion Invested in 30% of the UK’s operating OSW capacity First ever minority refinancing of an OSW project Backed a large scale NHS energy efficiency project (will save the Trust £20m) Delivered the UK’s first listed renewable energy infrastructure fund Financed NI’s largest waste wood power plant Closed the funding gap for a new high-technology waste plant that had been stuck for 4 years Produced enough renewable electricity to meet energy needs of 2.5 million homes Our investments will cut CO2 emissions equivalent to taking 1 million cars off the road

8. OUR FIRST YEAR • October 2012 to 31st March 2013 2.7Mt CO2e saving per year once all projects operational

9. SOME OF OUR PARTNERS SO FAR • Working with private capital

10. Living with state aid rules • £3 billion • Our “mandate” vs our “permission” • Specified Sectors • Level 1 / Level 2 • Green Deal • We received State Aid Clearance in October 2012 . We have an open and constructive relationship with the Commission. • Being clear with customers • Evidence of additionally • MEIP Compliance • Internal Approval Process • Ability to consult Commission • Decision is only part of the story • Dialogue and communication are important • Additionally (funding refusals, lack of reasonable terms, lack of capacity) • MEIP • The future • Additional £800m • Borrowing Powers? • Other Sectors?

11. CASE STUDY: realm energy centres fund • Summary • GIB committed £50m to the Aviva Investors REaLM Energy Centres Fund, a new fund managed by Aviva Investors which specialises in investments in non-domestic UK energy centres • The fund made its first investment of £36m (£18m provided by GIB) in Cambridge University Hospitals’ NHS Foundation Trust Green Impact • Expected CO2e savings of approximately 8000 tonnes per annum • Reduce the Trust’s overall energy bills by £20m over the 25 year operation of the project • Help the Trust achieve its 2020 carbon reduction goals Finance • GIB’s investment into the Fund has mobilised c£18m of private capital into the project from Aviva Investors REaLM Infrastructure Fund to support its first investment • GIB’s full investment commitment of £50m will eventually mobilise a total of at least £50m private capital into this sector

12. CASE STUDY: RHYL FLATS WIND FARM Summary GIB made its first direct equity investment in offshore wind through the acquisition of a 24.95% stake in a 90MW wind farm off the coast of Wales GIB acquired the stake in Rhyl Flats Wind Farm from companies owned by RWE for a cash consideration of £57.5m Green Impact • Expected to provide enough clean, green electricity to power around 61,000 homes • Reduced reliance on imported gas • Helping to meet greenhouse gas emissions and renewable energy targets Finance • Investment alongside Greencoat UK Wind Plc, first company to invest solely in operating UK wind farms • GIB’s investment helped RWE meet its wish to sell a 49% holding • Investment will allow RWE to redeploy funding from the sale in further UK offshore wind developments

13. CASE STUDY: WAKEFIELD WASTE PFI PROJECT • Summary • GIB provided up to £30.4m of senior debt funding to Shanks Group Plc in support of its 25 year PFI funded contract with Wakefield Council • Investment will fund construction and operation of waste management infrastructure including facilities to recycle, treat waste and generate sustainable power Green Impact • Diversion of c.200,000 tonnes p.a. of municipal solid waste from landfill helping to increase local authority’s landfill diversion rate to 90% • Increase local authority’s recycling rate to at least 52%, greater than UK’s 2020 target • Provide potential annual emissions savings of approximately 34,300 tonnes of CO2e Finance • GIB is providing senior debt and equity bridge facilities pari passu with three commercial lenders • GIB was invited to join banking club in mid-2012 providing necessary additional liquidity to ensure achievement of financial close • Mobilised three times GIB investment

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