Law firm sets up innovative electric bus investment and deployment deal

Law firm Burges Salmon has advised FirstGroup on two projects relating to the investment and deployment of up to 1,000 electric buses with a combined value of approximately £200 million.

The transactions, part of FirstGroup’s ambitions of becoming a net-zero business by 2050 and decarbonising its bus fleet by 2035, will see up to 1,000 diesel buses being removed from its fleet and replaced with new electric buses, saving up to an estimated 56,000 tonnes of CO2 a year.

The deal sees FirstGroup partnering with Hitachi in a 50-50 joint venture called NextGen which is responsible for the acquisition, deployment and management of the batteries to be used within the EV buses.

The joint venture, involving an initial equity investment by each of FirstGroup and Hitachi and debt funding from MUFG, SMBC and Natwest, involves the purchase of up to 1,000 EV batteries by NextGen and onward leasing to FirstGroup’s operating bus division, with Hitachi providing battery and charging management services including smart charging software and on-site zero carbon power generation.

Burges Salmon has also advised FirstGroup on the funding of the residual electric bus bodies (the chassis and drivetrain, excluding the battery). The transaction, which is structured as an up to £150 million syndicated hire-purchase funding arrangement with Lloyds, NatWest and Bank of America and documented as a green loan, centres on the acquisition and operation of the buses.

Burges Salmon’s role required a thorough understanding of the wider matrix of commercial arrangements in place for the buses to ensure integration and interoperation with the NextGen documentation, FirstGroup’s operating requirements, and to manage the different funding arrangements and the funders’ differing interests and requirements.

Burges Salmon partner Rupert Weston commented, “Combining sector expertise and cross-disciplinary capabilities, we’re committed to supporting our clients on their transition to a sustainable future and it has been a pleasure working with FirstGroup on this innovative and progressive partnership. This is a great example of the transport and technology sectors working as a collective to drive the net zero agenda and support the decarbonisation of vital infrastructure.”

Christy Baker, General Counsel at FirstGroup said, “As leaders in sustainable mobility, we are keen to work with suppliers, partners, and stakeholders as we work towards our goal of a zero emission bus fleet by 2035. This innovative and progressive partnership with Hitachi exemplifies that we are eager to explore and create greener solutions for the future. We’re grateful to the team at Burges Salmon for their support; their understanding of the transport and energy sectors is impressive and their advice always commercial and on-point.”

Burges Salmon’s Sustainable Transport team works across the entire transport sector including rail, highways, road transport, aviation and marine and ports.

Burges Salmon is hosting two round table sessions running within Interchange at Manchester Central on 27/28 February. You’ll find full details including how to book your free place at Interchange-uk.com