BQ Newsletter
Green Deal

Green mutiny

Friday 8 June 2012 6:00

Andrew Mernin

EXCLUSIVE: 13 of the 40 businesses which are expected to finance the Government’s Green Deal scheme say the initiative is in jeopardy, in a letter obtained by BQ.

THIRTEEN of the 40 businesses which are expected to financially back the Government’s Green Deal energy efficiency scheme say the initiative is in jeopardy, in a letter obtained by BQ.

The companies, including major blue chips such as Carillion, E.On and RWE Power, have written to deputy PM Nick Clegg to warn that they will not be carrying out any further work on the scheme until their fears are addressed.

They warn that the delay to the tranche of start-up funding required by The Green Deal Finance Company  (TGSFC) means that work has been halted.

“As prospective Green Deal Providers we have a vested interest in the success of the Coalition’s flagship Green Deal policy. It is both a commercial opportunity and one which will allow the country to meet its climate change targets and reduce fuel poverty,” it says.

“However, these outcomes are now in jeopardy.”

The letter, which is also endorsed by Gentoo, Insta Group, Scottish Power Energy Retail and Scottish and Southern Energy, goes on to say: “TGDFC is now in a position to start the complex task of constructing and implementing its operating model. Yet work cannot progress further without funding. It requires a 2 stage loan totalling circa £40m to cover the initial construction and then early operating expenditure.

“A further loan of approximately £260m from the Green Investment Bank (currently ‘UKGI’) in hybrid Junior Asset Finance then provides the gearing to secure access to capital market funding.

“However, the requirements for providers to meet the initial funding being placed upon it by Government cannot be met. The expectation that members of TGDFC take an equity stake is both unrealistic and undermines the Not For Profit vehicle’s core purpose – to be off balance sheet.”

The non-profit consortium, TGSFC, was set up to provide low-cost loans to UK residents keen to embrace energy-efficiency systems and measures when the Green Deal gets underway this autumn.

The thirteen unhappy members of the consortium say, given that Government funding is being held up, the board of TGDFC has taken the decision to hold development further to prevent unnecessary expenditure.

While this action is in the best interest of the Government, it says, this will inevitably delay the introduction of market-wide financing for Green Deal loans.

It warns that if this is not available at the outset, there will be significant risk to both providers and any early adopting consumer. The letter also predicts that SMEs could be excluded from the scheme at launch because they will be unable to access competitive finance.

Consumer choice could also be severely restricted, it says, as there will be very few providers and potentially no recognised brands to support the new market.

A Government spokesperson, unsurprisingly, told BQ that the Coalition remains fully committed to the Green Deal. “The Green Deal Finance Company is a commercial organisation which has submitted a business plan for Government investment.  Discussions on this plan are ongoing but we cannot comment on any specific commercial detail.

“The Green Deal has been identified as a priority sector for GIB investment and UKGI will consider proposals from any commercial organisation interested in helping to deliver the Government's proposed Green Deal.”

Earlier this week a survey claimed that less than half of MPs will promote the Green Deal to their constituencies when it launches in October.

The survey of 100 MPs found that more than a fifth were unlikely to promote the scheme, 20 per cent said they were neither likely nor unlikely to champion it while 11 per cent were still unsure.

The research, conducted on behalf of group members VELUX, Land Securities and the Glass and Glazing Federation (GGF) by Dods, revealed a lack of familiarity among MPs with the Government’s flagship green policy.