Octopus Energy Generation – best known for investing in solar and wind farm renewable energy – has turned its attention to the UK’s electric vehicle (EV) charging infrastructure with an investment in Be.EV, Greater Manchester’s largest public EV charging network.
Investing from its Sky Fund, an institutionally backed vehicle that targets renewables deals, Octopus Energy Generation has provided up to £110m to Be.EV, which will be used to fund the company’s roll-out of 1,000 new charging points to its network by 2024. In a statement following the deal, Matt Setchell, co-head of Octopus Energy Generation’s fund management team, said: “As a nation, we need to rapidly build more EV charge points to meet the growing number of drivers going electric. Easy and fair access to chargers will help phase out petrol-guzzling cars once and for all.”
Right fit
Octopus Energy Generation – one of the largest renewables investors in Europe, managing a portfolio of solar and wind assets worth £5bn across 10 countries – has taken its time to find the right asset in the UK EV charging space, even though the market has been expanding rapidly and is expected to continue growing at pace for the next decade and beyond.
According to a study by consultancy Vision Research Report, the global electric vehicle charging infrastructure market was valued at $19.5bn (£17bn) at the end of 2021 and was forecast to expand at a compound annual growth rate of 34.5% from 2022 to reach an estimated value of around $217.45bn by 2030. In the UK specifically, the government has committed to a tenfold expansion in the number of charge points by 2030 and has set aside £1.6bn of funding to expand the UK charging network. The UK has around 60 different charging networks, and EV ownership is expected to increase from 300,000 to 12m by 2030.
“EV charging is a really interesting market, unlike any other infrastructure roll-out that’s gone before because of the pace of change and deployment we need in EV charging,” says Louise Shaw, energy and infrastructure corporate finance partner at EY, who acted as lead adviser to Be.EV for the Octopus deal. “Within roughly a five-to-10-year period, the market is aiming to do something that was delivered over 100-plus years with petrol forecourts.”
Unsurprisingly, given that timeline, the upward trajectory of the EV charging network has not been without its growing pains. The sector contains a complex, wide-ranging group of players, from oil and gas majors (as seen with BP’s acquisition of the UK’s largest EV charging company Chargemaster) and energy companies to start-ups and infrastructure funds.
Business models are still evolving, and operators and investors are grappling with how best to build out infrastructure at pace. This has led to problems around reliability and pricing (see ‘Raising the bar’, right) as well as access, with the current charging infrastructure heavily skewed towards London.
Be.EV has been set up to address the issues of nationwide access and reliability head on. The company already operates 140 public EV charging points across Greater Manchester and has followed a strategy of building concentrated, community-based charging networks where demand is greatest.
“In the basic sense we are an EV charge point operator, but we see the business as doing much more than that,” Be.EV chief executive and co-founder Asif Ghafoor says. “The plan is to build out infrastructure in this new technology that actually involves the community. We are an infrastructure business, but we have looked at what we do from a technology, data and sustainability perspective. Before we build anything, we are looking at data, traffic flows, population movements and where people charge. We grow the network based on how people are using it. It is all about the end user.
“We focus on building out concentrated networks because most journeys will be within a 30-mile radius and nobody wants to be switching from app to app and driving around trying to find places to charge,” he adds. “If somebody wants us to build just one charger, we will walk away because that’s not going to create a concentrated network. If we can get an anchor in a region and then develop out from that anchor and create a great experience that instils confidence in going electric, then we will be interested.”
Conducting the deal
After successfully growing its Manchester network, Be.EV brought in EY at the end of November 2021 to explore its options for third-party investment to fund the next stage of its development. EY’s Shaw says it was decided to deliberately run a relatively broad process to test interest across the wide spectrum of players looking at the EV charging market, but that the focus was on finding a financial partner for Be.EV that would enable it to retain operational control.
“The management team didn’t want a strategic partner at this point,” she says. “They wanted the independence to continue delivering the business and strategy that they intended. There was a significant interest in the proposition. Investors are getting to grips with the sector and looking for a differentiated story because there are plenty of investment opportunities out there. From the initial outreach we quite quickly filtered down to a manageable number of parties that we felt were deliverable, and ended up selecting Octopus.”
Thorough preparation pre-deal (see ‘Well advised’, left) proved crucial to keep the transaction on track during a period of macro-economic challenges. “We managed to shield the deal from the macro-economic headwinds through the deal structure. The view of the growth opportunity for the EV charging sector more broadly and also the quality of the Be.EV business played a key role, too,” Shaw says. “Getting a commercial view on two key variables – the pace of uptake of EVs and the resulting utilisation and the deployment of chargers – was an important piece because there’s not really one clear view on the sector at the moment. There was also a lot of work done on the technical elements so we could demonstrate that the Be.EV team have the processes in place to really manage the installations and make sure the chargers are going to carry on working.”
For Ghafoor, the key was that Octopus understood how they ran the business and that they could run it: “For me, this wasn’t just about getting money. It was about finding a partner we could work with day in and day out, and one who gets what we do and believes in the community values that are so important to the business.”
Well advised
Preparing electric vehicle (EV) charging company Be.EV to receive outside investment alongside lead adviser EY, says Be.EV’s company chief executive Asif Ghafoor, “was like being pulled apart and rebuilt”.
This rigorous approach to pre-deal preparation, however, was exactly what Be.EV had been looking for when first appointing EY to explore a deal. “The work done before we came to market was EY asking all the questions and challenging us again and again on our answers,” Ghafoor says. “It was an incredibly demanding undertaking, but that is what we employed EY to do because we are a relatively new business in a new sector and we wanted to be ready.”
Be.EV first engaged EY at the end of 2021 with the goal of securing around £110m of capital to fund the build-out of another 1,000 charging sites across its network.
Marshalling an investment process was a key ask from the brief, but the ultimate deciding factor in hiring EY was the firm’s deep experience across the EV and charging infrastructure space.
“We wanted to bring EY on board not only to get the base job done on raising funding, but also for insight into the charging space and all the related sectors,” Ghafoor says. “When you get into EV charging you soon bump into other technologies. Battery is an important bit, which would be part of the mix, so we needed an adviser who could pull up their battery team. When we bumped into electric buses, EY had electric buses expertise. There wasn’t a sub-sector where EY didn’t have the expertise. It delivered the core deal for us, but it did a lot more on top of that and is still doing more with us going forward.”
Raising the bar
Electric vehicle registrations in the UK are rocketing – even though overall car sales have dropped. According to the Society of Motor Manufacturers and Traders, battery electric vehicle sales climbed by 56% over the first half of 2022, versus a contraction overall of 11.9% over the same period.
But the growing numbers of electric vehicle owners are finding that powering up their new wheels away from home can be a complicated business. A recent survey by consumer rights research platform Which? of 1,500 of its EV-driving members found that 74% were dissatisfied with the quality of the UK’s public charging network, citing reliability, access and byzantine payment arrangements as major issues. The situation is so dire that it may be putting off potential EV buyers from taking the plunge.
For Manchester-based EV charging infrastructure business Be.EV, making sure none of these problems crop up has been at the heart of its strategy and is one of the main reasons why Octopus Energy Generation has invested in the business.
Be.EV has led the way in addressing the charging infrastructure imbalance between London and the rest of the UK by building out sites across Greater Manchester and has focused on site design and location selection to ensure that charging is accessible and reliable.
“For us, it’s not just about putting infrastructure in, but making sure it’s a seamless and quite enjoyable experience for the customer, who can count on us to provide a reliable network,” Be.EV chief executive and co-founder Asif Ghafoor says. “There are still loads of broken chargers out there. These are quite basic things that you would think should be obvious, but the sector isn’t getting it right.”