Green Deal development work comes to a halt

The Green Deal Finance Company (GDFC) was created last year by the accountancy firm PwC. As a not-for-profit aggregator, it was formed to “provide finance to all Green Deal providers on an equal and open basis”, taking over the loan risk from all putative Green Deal Finance providers. It is intended to prompt the launch of an investment bond attractive to pension funds to finance further loans (see EiBI Oct 2011, Nov 2011).
Practically every firm considering becoming a Green Deal provider has joined the aggregator. Most of the companies involved have now written privately to all relevant government ministers, setting out their ultimatum.
They warn that, even after the first £40m is released, it will require six to nine months to establish the GDFC. Any further delays will place the entire Green Deal Finance concept “at significant risk” for both businesses and customers.
“Given that government funding is being held up, the board of GDFC has taken the brave decision to hold all further development to prevent unnecessary expenditure,” the letter said.
“While this action is in the best interest of government, this will inevitably delay the introduction of market-wide financing for Green Deal loans. If this is not available at the outset, there will be significant risk both to providers and any early adopting consumers.”
They state that further delay is increasing the risk for Green Deal providers, which may be forced to fund loans through third-party finance institutions. This could force them to “overprice interest rates to negate the risk of stranded debt”.
“Early adopters will therefore be penalised on the interest rate” as “a low capital market rate will not be available. SMEs will be excluded from the scheme at launch” because “they will be unable to access competitive finance.”
The Green Deal scheme is still officially set to launch this October. Within days of receipt of the financiers’ warnings, government moved back the first date that Green Deal contracts may begin being charged to January 28 2013.  Even that delay may yet prove to be over-optimistic.