FirstGroup PLC and Hitachi forge alliance over £100 million worth of electric bus batteries

  • FirstGroup PLC and Hitachi announce a strategic partnership revolving around electric bus batteries.
  • The 50:50 joint venture, NextGen AssetCo Limited, will acquire £100 million worth of electric bus batteries.
  • Anticipated benefits include boosted adjusted earnings, substantial savings, and a significant step towards FirstGroup’s 2035 decarbonisation target.

FirstGroup PLC and Hitachi create NextGen AssetCo Limited, to acquire 1,000 electric bus batteries

FirstGroup PLC has joined forces with Hitachi to propel its bus fleet and infrastructure into the era of decarbonisation. The strategic partnership involves the creation of NextGen AssetCo Limited (NextGen). This joint venture will acquire up to 1,000 electric bus batteries and is valued at a staggering £100 million.

This groundbreaking collaboration will make waves in multiple arenas. First and foremost, it anticipates a substantial boost to the Group’s adjusted earnings—hovering around £3 million annually by the fiscal year 2026. Moreover, the strategic move will yield significant savings. The Group will shave off an estimated £20 million from its capital expenditure in FY 2024 and achieve an additional £40 million in future savings stretching to FY 2027.

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A pivotal element of this partnership is the leasing arrangement. NextGen will lease the batteries to First Bus over an initial eight-year period. This provides flexibility for potential extensions by an extra two years at zero cost contingent upon battery capacity. What’s more, at the end of their useful life, the Group retains around 75% of the batteries’ residual value. That opens avenues for second-life value opportunities.

Graham Sutherland, FirstGroup Chief Executive Officer said:

“The pioneering alliance with Hitachi is a major strategic partnership for the Group as we progress towards our ambitious 2035 decarbonisation target for our bus fleet. It will allow us to continue the electrification of our fleet and depots with increased efficiency and greater visibility of our financial commitment, and unlike other possible arrangements, we will retain much of the residual value in the batteries as they are taken off our buses. Looking ahead, we are also excited about the possibilities for future value creation as Hitachi ZeroCarbon delivers market leading decarbonisation solutions to transport operators worldwide, leveraging our joint experience.”

Hitachi ZeroCarbon Limited will offer battery and charging management services for 1,000 buses powered by the newly acquired batteries. Additionally, there’s a commitment to extend these services to an extra 500 vehicles beyond FY 2026. That marks a significant step in First Bus’s fleet decarbonisation journey.

Alistair Dormer, Executive Vice President and Executive Officer, General Manager of Green Energy & Mobility Strategy Planning Division, Hitachi said:

“Hitachi is committed to becoming a climate change innovator. We continuously strive for growth through collaboration and co-creation with our partners and customers, and this specific partnership enables us to use our innovative technologies and global expertise to help decarbonise fleets efficiently, discover untapped revenue streams and maximise the residual value of assets. I’m delighted we’ve successfully grown our existing relationship with FirstGroup, which will further add to our decarbonisation experience and combined learnings, in developing solutions for transport operators globally.”

This partnership builds on the existing rapport between FirstGroup and Hitachi, particularly in the First Rail division. The electrification of the First Bus fleet will save a whopping 84,000 tons of CO2 emissions annually. That underscores the vital importance of fleet decarbonisation, and their success as a collaboration could facilitate even further success.

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