The charge that Macquarie is a ruthless asset-stripper that, given half a chance, would dismember the Green Investment Bank clearly stung. As the government unveiled the inevitable sale, for £2.3bn, to a consortium led by the Australian finance house, all sides were anxious to emphasise the buyer’s long-term enthusiasm for its new purchase.
GIB will survive as a discrete entity in Edinburgh. Macquarie will throw a few of its own assets – a couple of windfarms and a waste and biomass plant – into the mix for it to manage. It will report on progress in honouring GIB’s green investment principles. It will aim to invest £1bn a year in green energy projects, more than the £700m-ish that GIB was achieving via taxpayer funding. “We look forward to seeing these commitments from Macquarie delivered, in full, in the months and years ahead,” said Lord Smith of Kelvin, GIB’s chair.
We all look forward to that, naturally. But “commitments” overstates matters. What the government has really secured is a collection of good intentions. It is almost impossible to know how firmly Macquarie can be held to them. Not very, one suspects.
A “special share” arrangement will see five independent trustees monitor and protect GIB’s green ambitions. But the trustees obviously can’t dictate levels of capital allocation. Macquarie is a financial conglomerate operating around the world with competing internal claims on its capital. If, at some point in the middle distance, it decides that green infrastructure in the UK is not as appealing as it used to be, there seems to be nothing to prevent the new owner from liquidating investments, paying itself a fat dividend and reallocating capital to, say, oil pipelines in the US. The £1bn-a-year figure for investment by GIB is a target that may or may not be met.
The problem is partly mitigated by the fact that other investors, notably the Universities Superannuation Scheme, have arrived and will hold stakes in assets directly. That is welcome. And the transaction document, which is not in the public domain, may contain clauses that allow the government to make legal challenges on specific points if Macquarie wriggles on its pledges. Ultimately, however, the success of this deal rests heavily on how seriously Macquarie values its reputation as a good owner. That feels unsatisfactory.
Yes, GIB was always destined for the private sector and we can’t grumble about the £160m profit for the public purse. And, yes, Macquarie is a credible buyer in the sense that it has invested serious sums in green energy in the UK in recent years and has deep pockets.
But Nick Hurd, climate change and industry minister, can’t yet boast that the deal “gives us the best of both worlds” – value for money and committed owner. He’s betting that the interests of a bank known as Australia’s answer to Goldman Sachs will coincide with the ambitions of UK policy on green infrastructure. Let’s see how, five years from now, that gamble has worked out in practice.
Grand plan for Debenhams looks more like self-help
It would be too harsh to say that Debenhams’ plan to become “a Destination, Digital and Different” is “Dreadful Drivel” but one can understand why the shares fell 5% on the unveiling of the grand new strategy.
It is hard to point to any feature of the plan that is genuinely novel. Cafes and restaurants in the shops? Most department stores offer them these days, and the high streets outside are awash with Costas. A better digital offer? Even Marks & Spencer was on the job years ago. Some Debenhams punters may feel that being assaulted by a personal shopper when they pick up their click & collect orders is irritating rather than “engaging”.
To be fair, it is easier to understand how Debenhams could boost turnover in its beauty business from £700m to £1bn over three years. It is a leader in that corner of the market and adding more nail-bars and in-store hairdressing salons sounds entirely sensible.
Maybe such services qualify as an “experience” – the over-worked word in new chief executive Sergio Bucher’s presentation – but almost every retailer is talking the language of “social shopping.” All could say, as ex-Amazon executive Bucher did, that sales would improve if only the shoppers would shop more often.
The £1bn beauty target was the only yardstick of financial success that Debenhams is prepared to share at this point. For the time being, investors will have to digest an increase in capital expenditure, a few store closures and a 6.4% fall in interim pre-tax profits to £87.8m.
A revamp is overdue and Debenhams, carrying substantially less debt than in the bad old days, can afford to experiment. Maybe, as Bucher suggested, the skill lies in the execution. In fact, shareholders should hope so. The self-help plan itself read like a generic “must do better” formula.
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