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AMP Capital

CLIENT STORY

Accelerating electric bus deployment to reduce carbon emissions in Latin America

Around the world, private companies are racing to develop electric vehicles (EVs) to meet growing government and consumer demand for pollution-free transportation. While automobile innovations may dominate the media headlines, electric buses are already in widespread deployment. We worked with AMP Capital, a global investment manager, in its efforts to form a joint venture with Enel X, the energy services division of a global utility business with extensive footprint in Latin America. We provided detailed market and on-the-ground analysis to help structure an effective partnership and terms that would help reduce carbon emissions in the region.

 

Key successes

  • provided extensive market, economic and technology analysis on the joint venture to inform a ‘go’ decision

  • applied real-world expertise in global development, providing a realistic view of market growth prospects and timeframes

  • accelerated an investment decision by developing a detailed market study and analysis in just two months

Addressing the impact of urban pollution

As high-mileage, defined-route vehicles, urban buses are a natural for electrification. They provide safe, clean and affordable transportation for area residents, while also reducing fuel costs and the pollution problems that arise in large cities. The global electric bus market was valued at $17.95 billion in 2019 and is projected to reach $31.45 billion by 2027.

As a region that is dominated by fast-paced urbanization, widespread public transportation and low air quality, Latin America has the opportunity to transform the quality of life for residents by adopting e-buses. Not only does it have some of the worst air quality in the western hemisphere, but countries there have the highest per capita usage of bus services globally.

Conventional buses release 25 per cent of the global transportation sector’s black carbon which could be reduced by rolling out zero-emissions fleets. With only 2,000 e-buses in service in Latin America, comprising just one per cent of the total buses used, there is room to grow this emerging market. In fact, the Latin America e-bus market is anticipated to register a CAGR of about 15 per cent during 2020-2025.

During the COVID-19 pandemic, pollution has decreased temporarily, as many city residents abide by stay-at-home restrictions. However, the pollution that exists can still be extremely harmful, as COVID-19 is a respiratory illness, and those stricken often struggle to breathe. Even before the pandemic, 50,000 regional residents died prematurely each year due to respiratory illness.

Improving city air quality with zero-emissions e-bus fleets is a top priority for Latin American governments. In fact, in June 2019, the Chilean government launched an environmentally friendly urban development policy, which includes a program to replace all current city buses with new-energy vehicles by 2040.

Assessing the potential of clean energy technology

AMP sought to help accelerate clean energy transformation and drive economic value by participating in a wide-open regional market. Like other investment firms, AMP Capital considers new investment opportunities in a time-compressed, capital-constrained manner. The company’s goal is to understand risk and reward accurately, to deploy the right amount of capital on the best opportunities.

With extensive expertise in clean energy transformation and deregulation, our team was well-placed to support AMP Capital to evaluate a late-stage funding opportunity with Enel X. We have a combined team of 250 energy and utility experts who have been involved with more than 300,000 MW of transactions around the globe. And we’ve supported multiple city governments to develop strategies and plans to achieve 50 per cent EV penetration on aggressive timetables.

We were excited about the electric vehicle joint venture opportunity, which could provide a steppingstone to enter multiple Latin American markets. PA’s experience in sustainability and transaction processes in the clean energy sector enabled us to do a deep dive on the opportunity from multiple perspectives to validate the potential of this investment.

Anthony Hadley
Head of Clean Energy for the Americas at AMP Capital

Supporting a fast-paced investment decision

After discussing AMP Capital’s investment goals, we provided market, economic and technology research and analysis on the joint venture, as well as analyzed the target’s business case projections for a three-day “go decision” to explore the investment. Throughout the project, we remained in direct dialogue with AMP Capital as new insights and questions were uncovered to ensure opportunities and risks were understood in real-time.

With our deregulation experience, we were able to provide insight into how this process could proceed in Latin America. Our partners in the region enhanced our analysis with on-the-ground input on the political and governmental context, including how bus concessions are awarded, how this process will change over time, and what it costs to operate e-buses in the region. We summarized our findings and projections in a comprehensive report that served as a springboard for our discussions with the firm’s investment committee.

PA’s real-world expertise in global development and best practices helped us identify key hurdles we would need to overcome and develop a rational, realistic view of market growth prospects and timeframes informing our investment terms. We enjoyed working with such a first-class group of advisors on this deal and look forward to the next one in due course.

Anthony Hadley
Head of Clean Energy for the Americas at AMP Capital

Analysts predict that 90 per cent of Latin America’s population could be urbanized by 2050, meaning that time is of the essence for creating pollution-free transportation. AMP Capital’s investment will give Enel X the capital it needs to rapidly scale production and provide regional governments with the sustainable transportation model they seek. By doing so, AMP Capital will help reduce the region’s dependence on carbon-emitting fossil fuels and support governments in their fight to create cleaner air.

As a result of the project, AMP was recgonised as Sustainable Investor of the Year, Global and the Transport Investor of the Year, North America in Infrastructure Investor’s 2020 annual awards. 

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Analysts predict that 90% of #LatAm’s population could be urbanized by 2050, meaning that time is of the essence for creating pollution-free transportation. Read how we helped @AMPCapital in accelerating electric bus deployment to reduce carbon #emissions

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Mark Repsher

PA energy and utilities expert
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