Pulse Autumn 24

PULSE

ISSUE NO.2

AUTUMN 24

Introducing the future of automotive financing.

Welcome to PULSE

Welcome to the second edition of Pulse, brought to you by Zeti.

We’ve seen some considerable developments in the clean transport sector over the last six months, particularly with the deployment of zero emission heavy goods vehicles, buses and coaches. At the same time there’s been a change of governing party in the UK and the potential of the same in the USA. It’s also been a busy time at Zeti with new investment enabling further product features and geographical reach. It’s an exciting time the transport and mobility industry and we’re proud to share these insights with you. Thank you for reading.

Dan Saunders Founder & CEO, Zeti

IN THIS ISSUE...

ZETI HUB FEATURE HIGHLIGHT

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ENSO TYRES

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ZETI SERIES A INVESTMENT

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BURGES SALMON, THE ROAD TO FUNDING

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LABOUR’S GREEN AGENDA

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zeti.group @ZetiGroup

NEW YORK SCHOOLS GO ELECTRIC

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In Q2 of this year, Zeti introduced one of its most innovative features to date: the NOx emission-saving heat map, which accurately visualises localised emission savings within any given 100m wide area. This feature enables both Financiers and Fleet Operators to clearly observe the impact of their transition to cleaner transportation solutions. Such data not only facilitates compliance with emission mandates, but also bolsters relationships with local authorities by demonstrating tangible environmental benefits. The motivation behind developing this feature stemmed from our ongoing efforts to present emission savings over time, currently expressed in CO2 and NOx metrics, through the Zeti Hub. Simultaneously, we had been amassing extensive GPS data for each vehicle. When the idea of integrating these datasets was proposed, it was met with enthusiasm from both our internal team and our customers and by combining these data points, we were able to generate a geospatial analysis that captures emission savings on a granular level. However, this process resulted in an enormous volume of data (spanning multiple terabytes) posing the challenge of visualising it in a user-friendly manner without compromising performance.

This was no mean feat for our developers and work began by taking vehicle location once every three minutes, as is standard in the Zeti Hub, and creating ‘zones’ by plotting the mileage that vehicles had driven to group locations together. When our fleet size expanded into the thousands, we adapted our approach and shifted to hourly GPS data collection, while still retaining access to the more frequent three-minute data, then started incrementally expanding the heatmaps and caching the results, ensuring the heat map remained accurate and responsive. Following this development, we were confident in launching the feature across Zeti Invest and Zeti Operate, allowing users to provide feedback and enabling us to make iterative improvements to the user interface. The customer response to the heatmap since its launch has been overwhelmingly positive and it’s been encouraging to see the likes of Otto Car affirming its value, particularly in discussions with local authorities regarding the improved environmental impacts of their fleet operations. We’re also seeing this positive feedback across the pond in the US, from an American green bank operating under a localized emission-savings mandate in New York City, who expressed great interest in using the heat map to verify the environmental benefits of their financed assets. Looking ahead, the potential applications of the heat map are vast. We are already working on enhancements that will allow us to quantify emission savings, rather than simply categorising them from ‘low’ to ‘high,’ as the current format does. The same principles can also be applied to track reductions in other localised pollutants, such as microplastics from standard tyres. Our collaboration with companies like ENSO Tyres, which are advancing the use of sustainable tire technologies, will enable us to visualise these additional savings geospatially. As we continue to refine and expand the capabilities of the NOx emission-saving heat map, we remain committed to driving innovation that not only meets the needs of our users but also contributes meaningfully to the global effort to reduce emissions and protect our environment.

Article by Ed Stapleton, Director of Product & Operations, Zeti

Reinventing the wheel to save costs every mile

Article by Gunnlaugur Erlendsson CEO & Founder of ENSO

Tyres are essential to keep a fleet moving. Saving downtime and costs on tyre replacements also means higher productivity, healthier profits, and happier fleet operations. ENSO’s Earthshot Prize-nominated EV tyres save costs for EV fleets, while extending EV range and reducing tyre pollution

More fleets are transitioning to electric vehicles (EVs), making driving range and charging critical considerations. However, tyres are increasingly the most expensive maintenance item for EV fleet operators. Tyres impact overall energy- efficiency, so choosing the right tyres can save substantial costs.

EVs Need Better Tyres

ENSO is a tyre technology company that makes better tyres for EVs, to extend EV range and reduce tyre pollution. The world needs EVs to be successful, as they help to combat climate change and eliminate harmful tailpipe pollution. However, EVs, like all vehicles, still run on tyres that wear down and release microscopic tyre pollution. Globally, tyres emit over six million tons of tyre pollution each year. Tyre pollution is a major contributor to microplastic pollution, is toxic to aquatic environments and creates invisible air pollution in cities. ENSO, recently recognised by Prince William as an Earthshot Prize finalist, aims to future-proof the tyre industry by addressing this environmental impact.

Tyre pollution is a growing issue with EVs. Their higher weight, instant torque, and predominantly urban driving all lead to faster tyre wear, increasing fleet maintenance costs, especially for high-mileage operators. To save costs and prevent tyre pollution from worsening, ENSO believes it's crucial that we start making better tyres, specifically for EVs.

ensotyres.com

Reducing Costs for EV Fleets in London

ENSO’s technology helps EV fleets to be more successful by saving on their energy bills and the cost of replacement tyres. For fleet operators in practical terms, this means tyres that deliver more EV range, last longer and are more affordable. London’s iconic black cabs and electric delivery vans are already enjoying these benefits, reducing their total cost of ownership (TCO) and aiding the shift to cleaner transportation. In partnership with ZETI, ENSO is equipping electric cabs in London with its advanced EV tyres. Cabbies driving on ENSO’s tyres are earning more at the end of each day, while enjoying enhanced performance and safety that’s two levels above the standard OEM tyres. Leading EV fleet operators, including HIVED, Royal Mail, and Delivery Service Providers (DSPs) for major companies like Amazon and DPD, are also adopting ENSO’s tyre technology, to save costs every mile.

ENSO tyres are precisely optimised for high-mileage commercial EV duty cycles, and have been shown to save costs by extending EV range by up to 10%, and reducing particulate pollution by up to 35%. Our ‘Fleet-First’ approach unlocks substantial improvements—more affordable tyres that extend EV range and reduce pollution, while delivering significant TCO savings every mile.

Gunnlaugur Erlendsson CEO & Founder of ENSO

ENSO is coming to America

ENSO recently announced its plans to establish America’s first carbon-neutral tyre factory, set to produce 5 million EV tyres annually by 2027. This U.S. factory will initially create 600 green-collar jobs and address a key gap in the market with energy-efficient and cost-effective tyres ,crucial for the successful transition to electrification. The U.S. tyre industry consumes around 320 million tyres annually, but only produces a third of that volume. ENSO’s factory will onshore more tyre production in America, securing the supply chain and driving innovation in the tyre industry. ENSO is partnered with global sustainable development firm ARUP and factory automation leader Rockwell, as well as leading US venture capital investors like 8090 Industries and Galway Sustainable Capital. ENSO has also signed a Letter of Interest with the Export-Import Bank of the United States and is engaging with other U.S. Federal and State agencies. ENSO is seeking partners to support their Series A and join their journey to realise America’s first carbon-neutral tyre factory. ENSO will also launch tyre sales in the U.S. later this year, targeting high-mileage EV fleets and drivers who want to save costs every mile.

For more information and to join ENSO’s journey to make EVs more successful, please visit ensotyres.com or contact team@ensotyres.com.

This summer Zeti announced a £5m (USD $6.5m) investment from HYCAP Group, the UK-based net zero energy transition investor, as part of Zeti’s series A financing. This marks a significant milestone in Zeti’s growth and further enhances and accelerates the distribution of its pioneering Zeti Hub digital platform, to provide a fully financed and integrated Transport as a Service (TaaS) solution. Zeti’s Founder & CEO Dan Saunders shared his insights into this development. Zeti secures £5m in series A funding

Zeti had (quietly) been making a name for itself

by a number of financings our technology had

enabled. I was at an event in NYC when I

received a call asking if we wanted to meet the HYCAP team. We met on my return to London, had a meeting of minds and the rest is history!

(L) Dan Saunders, CEO & Founder (R) Daniel Bass, CTO & Co-Founder

What initially drove you to start Zeti? I was working in institutional investment management and saw a report stating that transport was the biggest emitter of pollution in the UK. At the same time I knew that there was demand from investors to fund sustainable assets other than renewables, ie. solar, wind and battery storage. I thought that if financing of vehicles could be more flexible and data driven, then people would use it to purchase cleaner vehicles.

What does this latest funding enable Zeti to do? Lots! Whilst I'm confident that Zeti's Hub platform is market-leading, it has the potential to deliver so much more. The investment will be used to deliver this potential and scale its impact. Which customers are you targeting post-raise? We have growing demand from the logistics and mass-transit operators, as well as financial institutions wanting to use the software for their own ESG financing initiatives. These will no doubt feature in our near term activities. What new product features are you most looking forward to? We're continually incorporating new asset types and services to provide a simplified holistic financing solution for our customers. I'm excited to see what value this capability will help these organisations unlock. What are you most excited about for Zeti's near-term future? I anticipate we will broaden the asset- types and markets that Zeti's technology can serve. We are seeing increasing demand for our services to support heavier vehicles, such as buses and HGVs, but we’re also seeing an increased demand from suppliers of clean energy generation, those of transportation infrastructure and even from suppliers of green construction equipment.

How did you first connect with HYCAP?

Zeti had (quietly) been making a name for itself by a number of financings that our technology had enabled. I was at an event in New York when I received a call asking if we wanted to meet the HYCAP team. We met on my return to London, had a meeting of minds and the rest is history!

The road to funding

Article by Alistair Rattray Director

As the UK advances towards its goal of net zero emissions by 2050, with many businesses aiming to achieve carbon neutrality even earlier, the shift from conventional petrol and diesel vehicles is becoming increasingly crucial for fleet operators, whether they lease or own their vehicles.

For the most part, the funding options available in the consumer-facing market are no different to those traditionally used for ICE vehicles - although a number of EV-specific salary sacrifice schemes are available, hire purchase, PCP and other types of personal finance remain the most common source of finance. Whilst traditional models of financing assets remain relevant for commercial funding of EV, the growth of ESG lending (or sustainable finance) has paved the way for less vanilla funding models. In the last 12 months we have seen increasing numbers of non-traditional funding structures. Many companies will be familiar with leasing, where the funder owns the vehicle and leases it to the operator. However, we are seeing traditional loans increasingly used to fund fleet acquisitions, where a funder will make a loan available to the company to purchase the relevant vehicles outright. In return, the funder will typically require security in its favour, often in the form of a debenture comprising a floating charge over the relevant vehicles. Since the first sustainable loan was introduced in 2014, the use of green and sustainable financing has grown exponentially. These loans provide borrowers with incentives for using the funds for green initiatives or achieving specific ESG targets. Historically, however, such loans have rarely been used to finance vehicles, particularly within leasing structures. In Q1 2024, FirstGroup plc secured a £150 million green asset finance facility to fund up to 1,000 electric buses. This innovative transaction, one of the first of its kind, incorporated green loan principles into a syndicated hire purchase facility with Lloyds, NatWest, and Bank of America to finance the bus husks. Uniquely, FirstGroup funded the batteries and bus husks separately. In November 2023, FirstGroup partnered with Hitachi in a 50-50 joint venture to acquire, deploy, and manage the batteries with separate funding from MUFG, SMBC, and NatWest, with Hitachi providing battery management and zero-carbon power generation. While the structure adopted by FirstGroup is somewhat unique, we anticipate that similarly innovative approaches will become more common as businesses seek the most balance sheet-efficient ways to refresh their vehicle fleets. As funders and companies increasingly embrace ESG funding, and as the market continues to evolve, we expect alternative funding options to gain prominence.

burges-salmon.com

Labour's Green Agenda: Transforming the UK into a Clean Energy Superpower by 2030

Article by Manjot Heer, Investment Manager, Zeti

What does a Labour Government mean for clean technologies and the country’s net zero roadmap?

On July 4th, the Labour Party won the UK general election, securing 412 out of 650 seats and replacing the Conservative Party. The Labour manifesto included ambitious pledges, notably Ed Miliband’s commitment as Secretary of State for Energy Security and Net Zero, to make Britain a clean energy superpower with zero- carbon electricity by 2030. This goal is one of Prime Minister Starmer’s five national missions to advance Britain’s net zero efforts. To support this, two new entities, the National Wealth Fund and Great British Energy, are being established.

Let’s take a look at the key pledges to enhance the clean technology economy.

The Formation of Great British Energy (GBE)

Great British Energy is a publicly owned power company based in Scotland, launched with an initial £8.3 billion capitalisation through the Great British Energy Bill. This bill marks the first step towards a net zero electricity system by 2030, co-investing in clean power technologies. GBE will predominantly focus on low-carbon energy technologies, including floating offshore wind, tidal, nuclear power, and hydrogen, leveraging the UK's natural advantages—such as long coastlines, high winds, shallow waters, and a skilled workforce. The creation of GBE is a promising move, signalling the new Labour government’s commitment to energy transition and net zero policies, second only to economic growth. We at Zeti support this initiative, as it should lower the cost of capital for clean technologies like CCUS (Carbon capture, usage and storage), attracting investors and speeding up their large-scale deployment. GBE can lead the way in advancing energy projects in less mature markets, helping to draw private investment, thus accelerating the development and implementation of these critical technologies.

National Wealth Fund (NWF)

The Labour government has established the National Wealth Fund with £7.3 billion in public capital to mobilise private investment for a low-carbon economy. Managed by the UK Infrastructure Bank (UKIB) and chaired by the Green Finance Institute (GFI), the NWF aims to attract £3 of private investment for every £1 of public funding. Over the past three years, the UKIB has committed £3.3 billion, unlocking approximately £11 billion in private investment. The NWF will prioritize projects in five sectors: green steel, green hydrogen, industrial decarbonization, gigafactories, and ports. Zeti supports the NWF's focus on catalytic capital to scale up low-carbon technologies and suggests exploring investments in advanced battery technologies and energy storage solutions. Labour hopes these projects will also boost pension fund investments in UK infrastructure. Of the £7.3 billion, £1.5 billion is allocated for gigafactories, £1.8 billion for ports, £1 billion for carbon capture, and £500 million for green hydrogen. The NWF is set to drive economic transformation, with ESG principles at its core, and will become a permanent institution through government legislation.

Electric Vehicles (EVs)

The manifesto's two key pledges to bolster EV adoption focus on accelerating the rollout of public charge points and standardising critical EV information, such as battery state of health (SOH). The latter aligns with the EU's requirement for a unique battery passport by 2027. Addressing the uneven distribution of EV chargers across the UK, where London and Scotland lead with 234 and 103 chargers per 100,000 people (against a UK average of 96), the Labour government plans to release £950 million in charge-point funding to improve charging infrastructure nationwide. This move is expected to boost consumer confidence by reducing regional disparities in access to EV chargers. Recent data shows the West Midlands experienced the highest growth in chargers, while London added the most in absolute terms, and the North East saw a decline. With the government currently focusing on EV infrastructure and establishing the Great British Energy (GBE) and National Wealth Fund (NWF), we expect policies targeting EVs and private fleets to roll out next year. We are confident that the Labour government will follow through on many of its manifesto pledges. The establishment of Great British Energy and the National Wealth Fund underscores the government's commitment to a clean agenda. We await further clarity on policies from PM Sunak’s tenure, such as the £960 million Green Industries Growth Accelerator and the UK Battery Strategy. We are hopeful these initiatives will not only be retained but also potentially expanded or integrated into broader policies with larger pools of capital.

New York Schools Go Electric by 2035

New York State has announced a groundbreaking policy change that mandates all school districts to fully electrify their bus fleets by 2035, marking a significant step in the state’s commitment to environmental sustainability. This initiative is part of New York’s ambitious climate strategy to reduce greenhouse gas emissions by 85% by 2050. The New York State Energy Research and Development Authority (NYSERDA) is spearheading this transition, with critical milestones in place, including the requirement that all new school bus purchases or leases be electric by 2027, and a complete shift to electric buses by 2035. This move is essential for improving air quality, particularly in communities where children are most susceptible to the harmful effects of diesel exhaust. The transition involves more than just buying electric buses; it requires comprehensive planning and infrastructure development. School districts must install charging stations, modify their operations, and train staff to handle any operational changes. To facilitate this, New York State is providing financial incentives and technical support to help school districts navigate the associated costs and logistical challenges. NYSERDA plays a crucial role in offering detailed guidance on selecting appropriate vehicles, planning for charging infrastructure, and ensuring staff are adequately trained to operate and maintain these buses. Financial incentives, such as the New York Truck Voucher Incentive Program (NYTVIP) and Clean Transportation Prizes, are designed to offset the higher initial costs of electric buses. The NYTVIP program, for instance, can cover between $120,000 to $220,000 per bus, depending on the vehicle’s type and size, making the transition more financially feasible for districts. The state's overarching goal is to ensure that all school districts, regardless of their size or location, have the resources, knowledge, and support necessary to successfully transition to an all- electric bus fleet, contributing to a cleaner and healthier environment for future generations.

Article by Manjot Heer, Investment Manager, Zeti

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2024

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