Providing funding for EVs on short-term lease will require collaborative approach: Mistral Group MD
The pace of electric bus development is likely to present challenges for potential funders that are looking to provide finance facilities on them, says Mistral Group MD Steve Low.
“Electric technology is here, but key to building a business case around electric buses will be the length of the contract offered to allow operators to justify the capital investment in buses and infrastructure,” says Mr Low.
“In the medium term it’s likely that the industry will move to zero-emission buses, especially for urban routes in proposed low emission zones.
“Many operators will not want to fund them on their own balance sheets and they will instead prefer to enter into leases mirroring the contract length offered by the awarding authority, which is typical of the tendering structure in London,” he adds.
Uncertainty on second lives for electric buses will affect the view taken by credit underwriters. Key to any operating lease is the ability to remarket the buses at the end of the primary term, and funders will look at the route back to market for them. At the moment there is no certainty on that.
Mr Low adds that difficulties with articulated buses that were prematurely removed from London service will affect funders’ outlook on electrics. In the former case, they were left with mid-life, high value assets that proved very difficult to redeploy into the market. He believes that the key to tackling this will be a consultative approach to give a whole-life view on investment in assets.
“Developments with London’s ULEZ and the likely introduction of similar schemes elsewhere will drive demand for electric buses, so it’s key that local authorities recognise this and work with funders and operators on contract lengths that allow the funding model to work successfully.” That, says Mr Low, will potentially require innovative contract structures and imagination from all concerned, “but it is eminently achievable.”
