Burges Salmon has advised longstanding client, FirstGroup plc, on two connected projects relating to the investment into, and deployment of, up to 1,000 electric buses with a combined value of approximately £200million.
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 c.56,000 tonnes of CO2 a year.
In November 2023, FirstGroup partnered with Hitachi in a 50-50 joint venture called NextGen focussing on 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 advised FirstGroup on all aspects of the transaction across corporate, projects and finance teams, led by Rupert Weston (partner), supported by Lucy Pegler (Partner) and senior associate Guy Francis in the firm’s corporate team and Chris Lewis (director) and Charlotte Robinson (senior associate) in the Projects team and Graham Soar (partner) and Alistair Rattray (director) in the Banking team.
Burges Salmon has now also advised FirstGroup on the funding of the residual electric bus bodies (the chassis and drivetrain, excluding the battery) powered by the batteries leased via the NextGen arrangements. The transaction, structured as an up to £150million syndicated hire-purchase funding arrangement with Lloyds, NatWest and Bank of America and documented as a green loan (adopting the LMA’s “Green Loan Principles”), centres on the acquisition and operation of the buses (after the sale and leaseback of the batteries to and from NextGen).
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. The Burges Salmon team advising on these funding arrangements was led by Rachael Ruane (partner) and Alistair Rattray (director) and supported by Amelia Turner (solicitor) in the banking team, drawing support from across the Corporate and Projects teams.
Rupert Weston says: “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, comments: “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. With strong expertise and insight into the sector, the firm covers all aspects of transport law; from funding and operations to construction, development and disputes. Working at the forefront of new transport technologies, the firm recently won The Legal Award at the 2023 Self-driving Industry Awards.