First enters partnership with Hitachi for fleet battery supply

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First and Hitachi have created a joint venture to support the operator’s fleet replacement programme. FIRST BUS

FirstGroup says it is pleased to announce that it has agreed a strategic partnership with Hitachi as part of its bus fleet and infrastructure decarbonisation programme. The partnership will operate via a newly formed 50-50 joint venture, NextGen AssetCo Limited, to purchase up to 1,000 electric bus batteries valued at around £100m as part of First’s expanding electric bus fleet.

The Group says it expects an anticipated contribution to its adjusted earnings of approximately £3m per annum by 2026 before any potential operational benefits, plus a roughly £20m saving in its 2024 capital expenditure, combined with future savings of around £40m to 2027.

The partnership with Hitachi ZeroCarbon also includes an option for FirstGroup to participate in future value creation through the deployment of Hitachi ZeroCarbon’s decarbonisation solutions to commercial fleet operators worldwide. The batteries will be leased from NextGen to First Bus over an initial eight-year period, with the potential to extend the lease by a further two years at zero cost depending on battery capacity. Battery and Charging Management Services (BCMS) will be provided by Hitachi ZeroCarbon for 1,000 buses powered by the new batteries, as well as a further commitment of 500 vehicles beyond 2026 as part of First’s fleet decarbonisation, to ensure efficient energy utilisation, maximise battery health and residual value, and to potentially extend battery bus useful life for a further two years beyond the OEM warranty period.

FirstGroup Chief Executive Officer Graham Sutherland 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.” Executive Vice President & Executive Officer and General Manager of Green Energy & Mobility Strategy Planning Division at Hitachi Alistair Dormer 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.”

The strategic partnership builds on the existing relationship the Group has with Hitachi through its First Rail division where Hitachi supplies and maintains electric trains for First-owned Hull Trains and Lumo as well as some of the First-managed train operating companies.