Shell and Volta deal could herald multiple EV charging consolidations (NYSE: VLTA)
Electric vehicle charging upstarts often position themselves as new defenders for energy companies battling against established fossil fuel companies. However, of Volta (NYSE:VLTA) recent deal to be taken over by Shell (NYSE:SHELF) could signal a wave of change as struggling operators seek to buy back from cash-rich oil and gas giants.
Volta CEO Vincent Cubbage explains: “While the electric vehicle infrastructure market opportunity has huge potential, Volta’s ability to capture it independently, given market conditions, is huge. challenging and with ongoing capital constraints, is very limited. “This transaction creates value for our shareholders and provides our exceptional employees and other stakeholders with a clear path forward.”
Below the terms of the latest deal, Shell provided bridge financing to keep the company afloat until the end of the agreement. As such, Shell paid a small premium to Volta (VLTA) at just $0.86 per share, a far cry from the stock’s late-2021 peak.
Immediately after the announcement, shares of Evgo (EVGO), Charging flashing (BLNK) and ChargePoint Holdings (CHPT) all of lower pigeon due to a slight takeover premium seems to be available. Besides, Significant layoffs at European operator Wallbox (WBX) has brought about the difficulties the sector continues to face in terms of achieving profitability.
adjacent profits
In terms of balance sheet and profitability dynamics, the struggles of the EV charging space have been placed adjacent to Oil and gas enterprises increase profits. Just like companies like Wallbox (WBX) austerity in an effort to navigate the more unfavorable macroeconomic environment and higher interest rates, oil and gas companies like Shell (SHELF), chevron (CVX), ExxonMobil (XOM) and BP (BP) recorded record profits.
As a result, cash deals for struggling EV infrastructure seem to make sense to many viewers. Indeed, the sub-$200 million price tag for companies like Volta (VLTA) offers incentives with little risk, especially with electric vehicle adoption rates.
According to the International Energy Agency, there were only 14,000 EV charging stations in the US in 2018. By the end of 2022, more than 50,000 charging stations providing hundreds of thousands of fast chargers are in operation, according to the World Economic Forum. . Meanwhile, National Petroleum News data shows that the number of gas stations across the United States has steadily declined over the same period.
PwC’s estimate that EV charging will be a $100 billion industry by 2040, as both hardware companies and station operators see increased demand.
“The rapid expansion of charging infrastructure will be necessary to serve the needs of a new generation of electric vehicle owners,” said Big 4 research. “We forecast that the number of electric vehicles in the United States will grow on a hockey-stick-sloping trajectory to 27 million by 2030 and 92 million by 2040. This compares to about 3 million electric vehicles in 2015. 2022.”
That growth trajectory has made it an attractive space for investment and M&A. According to PwC, more than 20 EV charging startups in the EU and US have been acquired since 2021, with major energy companies among the more active acquirers.
Buyers other than energy
That said, energy companies aren’t the only ones potentially interested in the space.
Indeed, many EV manufacturers operate charging networks to assuage concerns about the vehicle’s range and viability on longer trips. Also, major convenience stores like 7-Eleven have invested in fast charging.
“Given the ever-expanding regulatory obligations (across the UK, EU and elsewhere) for the provision of charging infrastructure beyond the transport industry to the property and construction sectors, it is near there will certainly be more arrangements to allow this to happen,” David Haverbeke, Energy and Infrastructure Partner at London-based law firm Fieldfisher LLP, told Seeking Alpha. “Policies/regulations are being reoriented from an automotive-first approach, putting grid resilience, charging networks and interoperability ahead of vehicle design and technology, which has already surpassed ahead of infrastructure adaptation. This trend is likely to spur more consolidation.”
He added that not only energy companies, but also utilities, real estate, as well as the built space and infrastructure, are taking advantage of the potential bargains for home owners. Mining is in trouble. Haverbeke also acknowledged that some operators could even face bankruptcy if losses persist.
Read more about Electric vehicle trends to watch in 2023.