Energy and Utilities

Is the electric vehicle charging infrastructure sector ready for project finance?

Published on 7th Sep 2020

With fleet operators looking to decarbonise, the "Charging as-a-Service" market is becoming increasingly attractive to project finance lenders who are able to address the model's 'bankability' issues.


The last few years have seen the electric vehicle charging infrastructure (EVCI) sector make some huge leaps forward, whilst sales of electric vehicles (EVs) have continued to accelerate even in the face of COVID-19 related travel restrictions. Whilst there has been plenty of corporate investment activity from the oil majors and VC investors, with one or two exceptions there has been little project finance activity in the sector to date. This Insight looks at some structuring and bankability considerations for non-recourse project finance lenders who are now looking at whether they are ready to fund EVCI projects.

A major factor in holding back project finance involvement to date has been the market and ramp-up risk inherent in the sector, making it difficult to model stable revenues for the purposes of debt sizing. This factor can be mitigated against where the end user is a large fleet operator (as opposed to private domestic car owners), and so we have focussed on this part of the sector in this Insight.

Contract structure

The term "Charging as-a-Service" has been around for some time. Under this structure, the charge point operator (CPO) will procure, install, operate and maintain the EVCI in return for periodic fixed payments from the fleet operator, under a single project contract. These fixed payments can be used to fund loan repayments to the CPO's lender. The CPO would obtain the necessary consents and enter into the various contracts for the installation, operation and maintenance of the charging infrastructure, as well as the grid connection, metering and energy supply arrangements.

The benefits for the fleet operator are that the CPO will pay for the large up-front capital cost of the charging infrastructure and provide a "one-stop shop" for the service. Meanwhile, the CPO will receive a contracted revenue stream, which should be sufficient to: (a) service debt, (b) fund O&M and other payments it is responsible for and (c) provide its equity return.

Bankability issues

There are nonetheless some bankability considerations with this structure that will need to be worked through by lenders and CPOs. We discuss a few of these below:

Credit exposure to fleet operator

Lenders will need to be comfortable with the credit strength of the fleet operator over the course of the debt. Including a minimum credit rating requirement, an obligation to provide credit support, a reserving requirement and/or a restriction on transfers by the fleet operator may all help to mitigate the credit risk.

Tenor of the financing

A balance will need to be sought between

  • a CPO's likely desire to maximise the tenor (and reduce the size of its periodic debt repayments); and
  • a fleet operator's possible preference to have a shorter-term agreement with the CPO. Such a view may be driven by the risk of technology obsolescence and there potentially being more efficient, cheaper EVCI available in the not-too-distant future, as the sector continues to develop.

This may cause a squeeze on the financing "tail" and lenders may want to consider how to mitigate this risk. For example, will the CPO have the ability to buy back the charging infrastructure at the end of the term and reinstall it elsewhere (or will the costs of doing so outweigh the economic benefit)? Conversely, any transfer of ownership in favour of the fleet operator at the end of the term should only occur if the fleet operator has settled all outstanding payments it owes to the CPO (and the CPO has in turn met its debt obligations).

Interface between the finance documents and the agreement with the fleet operator:

Lenders will need to carry out due diligence to ensure that the fixed payments from the fleet operator and debt service payments are appropriately aligned. Consideration will also need to be given to how unscheduled maintenance will be funded. This could be by way of a traditional maintenance reserve, or by a contractual right to have such costs funded by the fleet operator (which could increase the credit risk discussed above). Lenders may also be keen to ensure that risk in the EVCI passes to the fleet operator and avoid minimum performance or similar requirements placed on the CPO, which might oblige the CPO to make compensation payments to the fleet operator.

Enforcement options:

Where there are a large number of sites in the portfolio, it may not be practicable to take mortgages over every charging point site, which reduces enforcement options. Project finance lenders may be comfortable with this given similar considerations apply for large rooftop solar portfolios, and given it should otherwise be possible to take a customary project finance security package. It may be of greater importance that the CPO has the right to be compensated by the fleet operator in an amount sufficient to repay outstanding debt service, should the fleet operator's default cause the arrangement to terminate early. This right would then be assigned to the lender as security for the debt. Again, this type of protection will likely be familiar to project finance lenders from the PPP and private wire power purchase agreement (PPA) markets.


Comparisons between the EVCI sector and the renewables sector have perhaps been unhelpful in the past. There is no guaranteed government subsidy to underpin EVCI revenues, and there isn’t a liquid market for fleet agreements of the type we discuss above, in the way there is for utility PPAs. However a number of the structuring principles we have discussed in this Insight will be very familiar to project finance providers. The market is quickly becoming more mature, and fleet operators are coming under increasing pressure to decarbonise their fleets, which will involve significant capital cost. As a result, it may be that the time is now right for project finance lenders to take a more active role in the market.


* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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