Vinson & Elkins Report Outlines the Challenges and Opportunities to Financing the Future of Electric Vehicle Charging Infrastructure
According to the latest report from Vinson & Elkins, Power Play: The State of Electric Vehicle Charging Station Finance, the continued adoption of electric vehicles (EVs) is creating new financing models to support necessary charging infrastructure.
The report draws on the market insights of experienced Vinson & Elkins lawyers with extensive knowledge of electric vehicles and the required infrastructure to support the high demand. Vinson & Elkins lawyers from across its Project Finance, Capital Markets, Mergers & Acquisitions, Information Technology and Real Estate teams contributed to the report.
Highlights and key considerations include the following:
- While individual EV charging station projects are not capital-intensive to build and have low overhead to operate, EV charging companies have not demonstrated a steady, year-over-year stream of contracted revenues. Investors will need to make valid assumptions around use cases, government incentive availability and return on investment over a short timeframe.
- A successful, promising model for EV charging stations is fleet-charging finance, which relies on a subscription-based contract in association with a creditworthy customer with a large fleet of EVs. Municipal transport deals also present a form of fleet charging, but with a municipal counterparty.
- While capital markets have played a critical role in advancing the EV charging infrastructure industry, there is a need to tap into third-party asset-based financing to increase growth and facilitate large-scale charging station build-outs.
- An emerging source of financing for EV charging stations may run through the favorable tax treatment offered to real estate investment trusts (REITs). Properties owned by REITs—retail, office and multifamily—are ideal sites for the installation of EV charging stations. [Read more here: Can REITs Charge for Charging Electric Vehicles?]
“The EV industry is quickly evolving and growing as demand and accessibility increase,” said Michael Joyce, Energy Transactions and Project Finance partner, Vinson & Elkins. “No single business model or financing approach is better than the last, which is why clients must understand the risks from numerous critical factors—state and federal regulatory rules, supply chain and manufacturing obstacles, commodity pricing, grid transmission scale—and finance with a view for both the short- and long-term market.”
“We saw a flurry of new companies created in the clean energy space go public via either a traditional IPO or SPAC since 2020,” said Ramey Layne, Capital Markets partner, Vinson & Elkins. “Even though the SPAC market has encountered some headwinds, the capital markets are going to play a vital role in financing clean energy, and we expect that SPAC mergers will continue to be a choice for companies to go public, including those hoping to play a role in the energy transition.”
“As the availability of electric vehicles continues to rise and charging infrastructure becomes a greater priority, we are going to see new innovations and technologies brought to market,” said Michael Kurzer, Technology Transactions and Intellectual Property partner, Vinson & Elkins. “Technology is playing an ever increasing role in the expansion of our EV infrastructure — from improvements in battery performance to new charging stations to ultra-fast charging technologies. All of these advancements are going to play a key role to ensuring our clients and the industry can meet the growing demands from consumers.”
For more insights and to read the full report go to: Power Play: The State of Electric Vehicle Charging Station Finance.
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