FirstGroup PLC (LSE:FGP) has signed a partnership with Japanese engineer Hitachi to supply it and other bus operators with batteries to power their fleets.
A new 50/50 owned joint venture, NextGen AssetCo, is being set up by the two companies.
Initially, NextGen will buy up to 1,000 electric bus batteries worth around £100 million and lease them to FirstGroup.
However, around 75% of the residual value of the batteries will also stay with FirstGroup after their expected eight-year life, which the bus group expects to be substantial given the capacity and lifespan.
FirstGroup predicts the joint venture will contribute £3 million annually to adjusted earnings after 2026 but cut capital expenditure by £20 million in 2024 and in the following years until 2027 by £40 million.
By the end of 2024, the group should have an adjusted net cash position of £40-50 million, the bus operator added.
Hitachi has also given it a small minority interest, in future deals using electric power with other commercial fleet operators worldwide.
Graham Sutherland, FirstGroup's chief executive, said it was a pioneering alliance that would allow it to continue the electrification of its fleet and depot.
“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."