Climate Change Crisis Real Impact I Acquisition Corporation (CLII) announced this morning that it had entered into a definitive business combination agreement with EVgo, an LS Power Company. EVgo is a leader in U.S. electric vehicle fast charging and LS Power is an investment firm focused on power, energy infrastructure and energy innovation.
Founded in 2010, EVgo is a Los Angeles-based fast charging network for electric with over 800 fast charging locations in 67 major metropolitan areas across 64 states. EVgo is 100% powered by renewable energy and serves more than 220,000 customers.
LS Power has developed, constructed, managed or acquired more than 45,000 MW of power generation, including utility scale solar, wind, hydro, natural gas and battery energy storage projects, and has developed more than 660 miles of high voltage electric transmission.
The deal values EVgo at $2.056 billion enterprise value and $2.631 billion equity value, implying a 6.2x EV / 2026E EBITDA multiple.
- Total TWh demand expected to grow 30x by 2030 and 100x by 2040 for electrification of vehicles
- Compelling unit economics generates long term cash flow for each site
- Leading partnerships with GM, Nissan, Whole Foods, Kroger, Tesla, Uber and Lyft
- Largest portfolio of charging sites in the U.S.
Key Transaction Terms and Conditions
Assuming no redemptions by CLII’s existing public stockholders, the existing equity holders of EVgo will hold approximately 74% of EVgo immediately following the closing of the business combination. The founders and senior managers of Evgo will be rolling 100% of their equity in the transaction. Net cash proceeds to the balance sheet are estimated to be approximately $575 million.
The deal will be funded through a combination of CLII’s $230 million cash in trust and a $400 million fully committed PIPE at $10.00 per share. The PIPE is anchored by institutional investors including private funds affiliated with Pacific Investment Management Company LLC (PIMCO), funds and accounts managed by BlackRock, Wellington Management, Neuberger Berman Funds and Van Eck Associates Corporation.
Out of the 5.75 million founder shares for CLII, 4.3125 million are subject to a 1 year lock-up with an early release clause if certain stock price thresholds are met. The remaining 1.4375 million founder shares are subject to potential forfeiture if certain price thresholds are not met within 5 years following the closing of the business combination.
Alongside the 74.4% ownership from existing EVgo shareholders, the PIPE investors will own 15.2%, CLII shareholders will own 8.7%, and CLII founders will own 1.6% at closing.
The transaction is expected to be completed in the second quarter of 2021.
This marks another high flying entry into the red-hot SPAC/EV space. Even better, EVgo is focused on EV infrastructure, which has seen some of the best deals even within the broader SPAC/EV environment.
The EV market is still showing no signs of slowing down. Underpinned by $300 billion in industry-wide automaker and battery manufacturer commitments. Trends like mobility as a service and additional considerations for environmental factors push industry expectations for the EV market to increase by over 100x between 2019 and 2040. Consumer and commercial applications of EV technology will drive this growth. Most OEM’s are currently offering electric vehicle choices or are heavily investing in the technology. There have been over 20 SPACs that have chosen EV targets in recent memory all throughout the electric vehicle food chain. There are vehicle manufacturers (Nikola, Fisker), Tech/Lidar (Luminar, Velodyne), Batteries (Quantumscape, Romeo), and Infrastructure (Chargepoint, EVgo) as the main groups. Virtually all of these deals have traded well, with some currently valued at multiples of their IPO share price. Non-SPAC investment in the space is strong as well considering the recent $2.65 billion capital raise by Rivian as it makes progress in producing its electric pickup truck. Rivian is now valued at $27.6 billion.
Fast charging infrastructure, where EVgo is focused, is also seeing stellar growth. For background, time to charge is one of the most prominent challenges with EV widescale adoption. Usually issues like “unavailability of charging”, and “charge time” are near the top of any list of consumer concerns about owning electric vehicles. There are 3 levels of charging currently in the EV space. Level 1 can provide a 100 mile charge for smaller vehicles within 17-35 hours. Level 2 is much faster and can provide the same 100 mile charge for larger vehicles in 3.3 to 6.5 hours. Direct Current fast charging, or level 3, can provide this same charge in anywhere from 5 to 60 minutes depending on the size of the battery. Increasing charge rates, usage per mile, and battery sizes point to an increase in DC fast charging infrastructure. With fast charging widely deployed, the charge time problem for passenger vehicles is more or less solved, and throughput time is drastically reduced, allowing for large scale usage of heavy duty vehicles like semis to be incorporated in the grid.
EVgo has made strategic partnerships with many of the largest and most active players in the EV space, which bodes well for their growth projections. From the OEM side, EVgo has agreements in place with Tesla, GM, and Nissan. Their Tesla agreement currently has 770 connectors on EVgo chargers for Tesla vehicles, allowing for a higher average charge acceptance rate. The Model 3 on a 50kW DC fast charger has a ~45% higher throughput than a non-Tesla. Tesla represents 78% of all the EVs sold in the U.S. in 2019, with similar numbers for 2020. EVgo’s contract with GM provides for the development of 2,750 EVgo chargers that will be available to customers starting 2021. These will be located in highly visible areas and will be able to charge at least 4 vehicles simultaneously. For Nissan, EVgo entered into their “Nissan 2.0” contract in 2019 to continue expanding charging services, customer base, and network size. Fast charging will also be a major component in the rideshare business. A recent pilot program with Lyft doubled the utilization of EVgo’s charge locations within the pilot program area. As electric vehicles become more widely adopted by ridesharing companies and drivers, fast charging infrastructure will see additional demand.
EVgo is estimating that with this capital raise, industry tailwinds, and strategic direction, that they will see massive top line revenue growth in future years. Starting from a slightly depressed base due to COVID-19 of $14 million for 2020, EVgo estimates that they will see $1.289 billion in revenue by 2027. This is a near 100x increase in revenue. During this same time period, the company estimates that it will grow from 2,211 chargers to 16,212 chargers, for a total infrastructure site growth of close to 8x. The charger growth is critical to the trajectory of the company, but the main driver is the network throughput. The company expects the GWh sold to increase from 15 in 2020 to 2,478 by 2027, for an increase of close to 200x. This would imply a wide scale adoption of EV powered vehicles. From this top line growth, the company expects to be EBITDA positive by end of 2023 with a strong EBITDA margin of greater than 30% from 2025 onward.
From a valuation standpoint, the presentation gets creative to approximate what EVgo is worth today. Projected 2026 EBITDA of $331 million is used to get to a EV / 2026E EBITDA multiple of 6.2x. Compared to a recent SPAC/EV comp like Chargepoint, that also focuses on EV infrastructure, EVgo looks cheaper considering Chargepoint’s EV / 2026E EBITDA multiple is 41.8x. These multiples are shown along with EV/ 2021 EBITDA multiples of Tesla, Clean Infrastructure, Clean tech, and High-growth infrastructure. This comparison is informative but must be considered with the caveat that different time periods are being measured against each other. 2026 is a long time from now, and the $331 million in EBITDA requires a ~100x increase in EVgo top line revenue along with a ~30% EBITDA margin, a very lofty projection.
That being said, EVgo will benefit from the massive increase in EV adoption throughout the U.S, and they have the partnerships in place with leading companies to hit their goals. The market tailwinds and strong management direction could very well deliver the results they expect.
See here for CLII’s full investor presentation
- Credit Suisse is serving as lead financial advisor and capital markets advisor to EVgo and also acted as joint lead placement agent on the PIPE
- Evercore is also serving as financial advisor and capital markets advisor to EVgo and placement agent on the PIPE
- Vinson & Elkins L.L.P. is serving as legal advisor to EVgo
- BofA Securities is serving as exclusive financial advisor to CLII, and also acted as joint lead placement agent on the PIPE
- Mayer Brown LLP is serving as legal advisor to CLII
- Latham & Watkins L.L.P. is serving as counsel to the placement agents on the PIPE