LONDON - In an ambitious move to advance their decarbonization strategies, UK transport operator FirstGroup plc has joined forces with Hitachi (OTC:HTHIY) ZeroCarbon Limited to establish a joint venture named NextGen AssetCo Limited. This strategic partnership, unveiled today, is set to acquire up to 1,000 electric bus batteries, valued at approximately £100 million, to power FirstGroup's transition from diesel to electric buses.
The new joint venture aims to significantly reduce carbon emissions by replacing 1,500 diesel buses with electric alternatives. This switch is anticipated to cut CO2 emissions by around 84,000 tonnes each year. The initiative not only underscores the commitment of both companies to environmental sustainability but also marks a substantial stride towards cleaner urban transportation.
Graham Sutherland, CEO of FirstGroup, highlighted the efficiency and financial clarity this alliance brings to the electrification of their fleet. He emphasized that FirstGroup will retain a considerable portion of the batteries' residual value after their use in buses. This aspect ensures that the company benefits from future value creation opportunities.
NextGen AssetCo Limited has been capitalized with an initial £20 million investment shared equally between FirstGroup and Hitachi. The rest of the funding necessary for the battery acquisition will be procured through debt financing. Furthermore, Hitachi will take on the responsibility of overseeing the battery and charging services for the buses equipped with these new batteries.
The financial implications of this agreement are significant. The partnership is expected to add £3 million annually to FirstGroup's adjusted earnings by the fiscal year ending March 2026, not accounting for operational benefits. Additionally, there will be a cost saving of £20 million in this fiscal year alone, with projected savings reaching £40 million by 2027.
Hitachi's involvement extends beyond immediate plans; they have committed to expanding their support to an additional 500 vehicles past 2026. Through Hitachi ZeroCarbon's decarbonization solutions, FirstGroup is set to secure a minor stake in the broader market for decarbonizing global commercial fleets.
This joint venture marks a pivotal moment in the UK's efforts to transition public transportation into a more sustainable future, showcasing how strategic partnerships can accelerate progress towards environmental goals while also delivering financial benefits.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.