Legal and General sees two-way gains with Pod Point deal

Legal & General’s recent investment in Pod Point has mutual benefits, the company tells inspiratia. Not only will it enable the EV charging developer to embark on its next stage of growth, but it gives the UK-based investor access to market-leading expertise, as it develops a charging strategy across its large property portfolio 

Legal & General became the latest financial player to make its mark in the electric vehicle charging infrastructure space this month [March 2019] when it bought into Pod Point, a London-based developer that specialises in home and destination charging.

In acquiring a 13% stake in the business, the investment arm of financial services group Legal & General joined a growing and varied roster of investment funds with an interest in the global EV charging space – a list that already includes the likes of UK private equity house Zouk Capital, French infrastructure investor Meridiam, Canadian pension fund CPPIB and Singapore’s sovereign wealth investor GIC.

The deal is the result of a year-long EV charging fact-finding mission for Legal & General, which has been looking at opportunities across the EV landscape since early 2018. It was advised on the deal by law firm CMS.

John Bromley, head of clean energy for the Legal & General’s Future Cities business, says the investment crosses over into several other sectors in which it is involved.

“It was at a similar time that I was looking at EV charging and its impact on the grid that my colleagues across our business – which manages substantial real estate portfolios of retail locations and workplaces – were looking at a multitude of ways to future-proof our assets,” he tells inspiratia.

The installation of EV charge points represents one element of this future-proofing. Through the relationship with Pod Point, there are clear synergies with the many homes and retail, leisure or workplace destinations that Legal & General owns.

Indeed, the tie-up gives Legal & General’s wider business access to a market expert, as it attempts to work out what it might need to do with its charging strategy.

“They have built good relationships with the OEMs, and as such have a good understanding of behaviour, patterns of use and where EVs are selling,” Bromley says.

“Pod Point’s unique insight and experience, alongside the opportunities that the Legal & General real estate portfolio presents, is a powerful combination.”

Investment strategy

The investment in Pod Point is being made by Legal & General Capital (LGC), the group’s early-stage investment arm that channels funds from its £9 billion principal balance sheet into – among other areas – urban regeneration, clean energy and infrastructure.

Previous investments include European wind business NTR, demand-side response provider Upside Energy and high-efficiency, next-generation solar manufacturer Oxford PV. More recently, it acquired a stake in a £230 million data centre development in Essex.

LGC’s 13% stake in the Pod Point (no longer majority-owned by its founder Erik Fairbairn) may point to there being room for other investors later down the line. For now though, the new funding will allow the business to execute the next part of its strategy.  

“Our relationship with the companies we invest in will mean we have influence, often by having a seat at the board, but we are not coming in here to take control and show it what to do. That’s not how we invest,” Bromley says.

“We look for talented teams, and it’s about what we can bring as much as what they can. It’s a partnership; how we can work together going forward.”

Infra appetite

LGC is the latest new entrant to an EV charging market that is attracting players from across the board. As well as financial investors, many strategics are also making a serious assault on the sector – including oil majors (BP, Shell, Total), utilities (Vattenfall, innogy, E.ON) and many of the major car manufacturers.

For infrastructure funds, a business model selling and installing chargers to residential homes may not have sufficient infrastructure characteristics. More likely, they will be drawn to asset-heavy charging solutions at destinations, service stations or along motorway networks.

For its part, Pod Point straddles a number of different business models, including home, destination and rapid charging.

“Some of those will look much more fundable in the future as an asset-backed finance or infrastructure-type model, whereas other things they’re doing will never quite fit that bucket,” says Bromley.

“We have a lot of optionality here, and we see a very capable team at Pod Point with a lot of experience that we think can help us unlock some of those opportunities.”

Growth story

The deal with LGC caps off a busy 12 months for Pod Point, in which it brought to market a new 150kW rapid charger and sealed several high-profile tie-ups with car manufacturers and destinations.

Chief among those was the signing of a partnership with Tesco and Volkswagen to install 2,400 chargers – both 7kW and 50kW units – at 600 Tesco sites in the UK over the next three years. Other clients include Sainsbury’s, National Trust, Kia, Southern Rail and Heathrow and Gatwick airports.

The company was founded in 2009 and has been built so far with funds from individuals and growth investors. It ran its first equity crowdfunding on the Seedrs platform in 2014, raising £1.47 million, and followed that up with a £1.81 million fundraising on Crowdcube.

In early 2017, it brought in a further £9 million. This included £5 million from the venture capital firm Draper Esprit – one of Tesla’s early backers – and £2.5 million from Barclays Capital, with the remainder from Crowdcube investors.

 

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