STRATEGIC decarbonisation PARTNERSHIP WITH Hitachi


FirstGroup plc (the `Group') is pleased to announce that it has agreed a strategic partnership with Hitachi as part of the Group's bus fleet and infrastructure decarbonisation programme. The partnership will provide the following:


  • a newly formed 50:50 joint venture, NextGen AssetCo Limited (`NextGen'), to purchase up to 1,000 electric bus batteries valued at c.£100m, as part of First Bus's expanding electric bus fleet;
  • an anticipated contribution to the Group's adjusted earnings of c.£3m per annum by FY 2026 before any potential operational benefits;
  • a c.£20m saving in the Group's FY 2024 capital expenditure, combined with future savings of c.£40m to FY 2027; the Group now anticipates an FY 2024 year end adjusted net cash position of £40-50m.

The key terms of the strategic partnership with Hitachi ZeroCarbon Limited (`Hitachi ZeroCarbon') include:

  • an option for the Group to participate, via a small minority interest, 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, at an underlying debt finance rate in line with the Group's borrowing rate, with the potential to extend the lease by a further two years at zero cost depending on battery capacity;
  • the Group will retain 75% of the residual value of the batteries at the end of its bus useful life, with material second life value opportunities given that the majority of the battery's capacity remains;
  • the provision of Battery and Charging Management Services (`BCMS') by Hitachi ZeroCarbon for 1,000 buses powered by the new batteries as well as a further commitment of 500 vehicles beyond FY 2026 as part of First Bus fleet decarbonisation; 
  • the BCMS services will ensure efficient energy utilisation, maximise battery health and residual value and potentially extend battery bus useful life for a further two years beyond the OEM warranty period.


Graham Sutherland, FirstGroup Chief Executive Officer 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."


Alistair Dormer, Executive Vice President and Executive Officer, General Manager of Green Energy & Mobility Strategy Planning Division, Hitachi Ltd. 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."


Notes to Editors

The strategic partnership with Hitachi for the electrification of the First Bus fleet builds on the existing strong relationship the Group has with Hitachi in its First Rail division where Hitachi supply and maintain the electric trains for Hull Trains, Lumo and some of the management fee-based train operating companies. Increasing modal shift from cars to public transport powered by sustainable energy is a key component of the Group's decarbonisation journey. It is estimated that taking 1,500 diesel buses off the road and replacing these with electric buses could save c.84,000 tCO2e a year1.


The newly formed 50:50 joint venture, NextGen, will purchase up to 1,000 electric bus batteries valued at c.£100m which will be installed on First Bus's expanding electric bus fleet. Both the Group and Hitachi have each committed a cash investment of £10m into NextGen, with the remaining investment to be funded by debt.

It is anticipated that the first c.400 of the 1,000 batteries to be purchased by NextGen will be deployed to First Bus in FY 2024, with the remaining c.600 batteries to be deployed over the following 24 months. The batteries will be leased from NextGen to First Bus (via another wholly-owned Group subsidiary, FirstGroup Energy Limited) over an initial eight-year period on an operating lease basis, at an underlying debt finance rate in line with the Group's borrowing rate, with the potential to extend by a further two years beyond the OEM warranty period at zero lease cost depending on battery capacity.


The Group anticipates a c.£20m capital expenditure saving in FY 2024, with further savings totalling c.£40m over the subsequent months, as the batteries are acquired as part of the electrification of the First Bus fleet, partially offset by the lease costs referenced above. The Group now anticipates an FY 2024 year end adjusted net cash position of £40-50m.


Once these batteries have been removed from the bus fleet, the Group will retain 75% of any residual value of the batteries providing significant upside exposure from material second life value opportunities, given that the majority of the battery's capacity remains at the end of its bus useful life. Opportunities include the redeployment of batteries for energy storage or alternative commercial use, and ultimately recycling to extract valuable metals for sale on secondary markets.


Under the BCMS agreement, Hitachi ZeroCarbon will provide a range of services including charger management services and battery health monitoring and reporting. This will allow the Group to optimise battery efficiency and cost, potentially resulting in materially lower future capital deployment by extending the batteries' useful bus life beyond their initial eight-year OEM warranty periods, at zero lease cost. This may also enhance the batteries' residual value due to the batteries being in better health. The Group also anticipates a reduction in electricity consumption through smart charging and dynamic energy management specific to the operating requirements of each individual bus.


The Group will also have an option to participate in future value creation via a small minority interest in Hitachi ZeroCarbon, through the development and provision of Hitachi ZeroCarbon's market leading decarbonisation solutions to transport operators worldwide, aided by its learnings from working with First Bus. These solutions include Charging Management Services, Battery Management Services and Telematics Services for operators of buses, commercial vehicles, HGVs and trains.


The Group's £10m investment in NextGen will be classified as "Joint Operations" per IFRS 11, with a requirement to proportionately (50%) consolidate NextGen financial statements. NextGen is a wholly-owned subsidiary of NextGen MidCo Limited, which in turn is owned by Hitachi and the Group on a 50/50 basis.


The investment in NextGen is expected to result in an anticipated contribution to Group's adjusted earnings of c.£3m per annum by FY 2026, before any potential operational benefits generated through battery efficiency, extended battery life and residual value. In addition, the Group expects a material benefit to cash flows through a reduction in capex, both from the joint venture as well as the potential extension of the battery useful life delaying the need for replacement. Any participation in Hitachi ZeroCarbon value creation will be reflected as a financial asset on the balance sheet, with any fair value movements recognised in the Profit and Loss Account.


1 Source: Hitachi research, based on First Bus annual bus mileage and vehicle type assumptions, Low Carbon Vehicle Partnership Euro VI diesel vehicle efficiency data ( and UK Government fuel emissions data (


Legal Entity Identifier (LEI): 549300DEJZCPWA4HKM93. Classification as per DTR 6 Annex 1R: 3.1.




Contacts at FirstGroup: Contacts at Brunswick Group:

Marianna Bowes, Head of Investor Relations Andrew Porter / Simone Selzer

Stuart Butchers, Head of Corporate Communications Tel: +44 (0) 20 7404 5959

Tel: +44 (0) 20 7725 3354  


Contacts at Liberum Capital Limited: Contacts at RBC Europe Limited:

Nicholas How / John Fishley James Agnew / Jack Wood

Tel: +44 (0) 20 3100 2000 Tel: +44 (0) 20 7653 4000






About FirstGroup

FirstGroup plc (LSE: FGP.L) is a leading private sector provider of public transport services. With £4.8 billion in revenue and around 30,000 employees, we transported more than 1.8m passengers a day in 2022/23. We create solutions that reduce complexity, making travel smoother and life easier. Our businesses are at the heart of our communities and the essential services we provide are critical to delivering wider economic, social and environmental goals. Each of our divisions is a leader in its field: First Bus is the second largest regional bus operator in the UK, serving two-thirds of the country's 15 largest conurbations with a fleet of more than 4,500 buses, and carrying more than a million passengers a day. First Rail is the UK's largest rail operator, with many years of experience running long-distance, commuter, regional and sleeper rail services. We operate a fleet of more than 3,500 locomotives and rail carriages through three management fee-based train operating companies (Avanti West Coast, GWR, SWR) and two open access routes (Hull Trains and Lumo). We are formally committed to operating a zero-emission First Bus fleet by 2035, and First Rail will help support the UK Government's goal to remove all diesel-only trains from service by 2040. In February 2023 FirstGroup was named as one of the world's cleanest 200 public companies for the fourth consecutive year by sustainable business media group Corporate Knights in partnership with US not-for-profit organisation, As You Sow. We provide easy and convenient mobility, improving quality of life by connecting people and communities. Visit our website at and follow us @firstgroupplc on X.


About Hitachi ZeroCarbon

Hitachi ZeroCarbon is a subsidiary of Hitachi Ltd. Its mission is to provide innovative end-to-end solutions to decarbonise commercial vehicle fleets globally, helping them to accelerate electrification and sustainability, reduce battery risk and total cost of ownership, and generate new revenues.


Through data analytics and digital optimisation technologies, Hitachi ZeroCarbon provides a platform to optimise battery performance and life, charge Electric Vehicle fleets and decarbonise sites and depots through a Battery Charging and Management-as-a-Service model. Hitachi ZeroCarbon's solutions are designed to meet the unique needs of commercial vehicle fleets, offering a range of charging options that maximises fleet efficiency and minimises costs. In addition, leveraging Hitachi's global reach and industry experience, Hitachi ZeroCarbon can provide battery financing solutions to help accelerate electric fleet transition, reduce capital expenditure, and maximise the residual value of assets. Further information can be accessed on the Hitachi ZeroCarbon website at


The contracting entity for Hitachi is Hitachi Rail Limited, a wholly owned subsidiary of Hitachi Group.

Copyright r 17 PR Newswire

Firstgroup (LSE:FGP)
Historical Stock Chart
From Jan 2024 to Feb 2024 Click Here for more Firstgroup Charts.
Firstgroup (LSE:FGP)
Historical Stock Chart
From Feb 2023 to Feb 2024 Click Here for more Firstgroup Charts.