International legal practice Osborne Clarke has advised long standing client and leading independent infrastructure and private equity investment manager, Foresight, on an £80 million investment by two of its funds into a portfolio of biomethane Compressed Natural Gas (“Bio-CNG”) refuelling stations for HGVs, which will enable fleets to switch from diesel to carbon-neutral fuel.
Foresight Inheritance Tax Fund and JLEN Environmental Assets Group (JLEN) have provided an initial funding line for a joint venture (JV) with CNG Fuels Limited (CNG Fuels), the UK’s leading developer and operator of CNG refuelling infrastructure. This injection of capital will be used to acquire existing refuelling sites enabling CNG Fuels to fund the construction of a further 14 stations on the UK’s major trucking routes. The investment forms part of a wider strategy to tackle the carbon intensity of the transport sector and is fully aligned with the UK’s 2050 net-zero target.
The transport sector is the UK’s largest source of carbon dioxide emissions. In 2019 it accounted for 34% of total UK greenhouse gases of which 4.5% were attributed to HGV operations specifically.
The five refuelling stations currently operated by CNG Fuels offer a low-carbon, low-cost alternative fuel source for HGV operators that are looking to make the switch from diesel. It will extend its strategic network with 14 new refuelling stations across the UK over the next two years, responding to a surge in demand for renewable fuel from major brands and facilitating a significant 80+% reduction in carbon emissions by operating fleets.
The joint venture follows the launch of the UK Government’s Ten Point Plan, which included the proposal of a consultation on the phase out of new diesel HGVs to put the UK in the vanguard of zero emission freight.
All the Bio-CNG supplied by CNG Fuels is approved under the Department for Transport’s Renewable Transport Fuel Obligation (RTFO) scheme as renewable and sustainable. It is currently the leading commercially available solution at scale to reduce HGV transport industry emissions and contribute to cleaner air. The fuel cuts vehicle greenhouse gas emissions by more than 80% compared with diesel and will gradually become fully carbon neutral from 2021 as the biomethane is increasingly sourced from manure, a heavy emitter of greenhouse gas.
While the Government has committed to maintain a clear advantage for gas powered vehicles until 2032, Bio-CNG will have a favourable fuel duty positioning compared to diesel vehicles. This offers fleet operators a financial incentive to make the switch to CNG, accessing fuel that is 35% - 40% cheaper.
Partner Matthew Bodfield and Associate Director Alex Underwood from Osborne Clarke’s Corporate team advised Foresight. The team were supported by Partner James Watson and Associate Director Amy Stray (Energy) Associate Director Charlotte Walker (Real Estate), Partner Matthew Germain and Associate Director Caroline Bush (Environment), Partner Carl Thompson (Construction) and Associate Director James Hamon (Tax).
Osborne Clarke has an established and well-respected position as one of the leading law firms advising on low carbon projects and transactions. As businesses strive to meet the challenges of decarbonisation and achieving net zero, Osborne Clarke is supporting its clients on projects to procure, fund and develop the sustainable infrastructure, buildings and land use of the future. The team’s experience and sector expertise means they are well placed to advise on your decarbonisation journey.