Date post: | 21-Jan-2018 |
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DECIPHERING BUSINESS MODELS FOR
COMPLEX INVESTMENTS:
LOW- AND ZERO-EMISSION BUSES
Pawan Mulukutla – [email protected]
FOTO POR MARIO ROBERTO DURÁN ORTIZ
2
LOW- AND ZERO-EMISSION BUSES ARE A REALITY AROUND THE
WORLD. HOWEVER THERE ARE STILL BARRIERS FOR
IMPLEMENTATION, PARTICULARLY IN THE DEVELOPING WORLD
3
Financial products
Delivery mechanisms
Funding sources
SOME EXAMPLES FROM CLEAN BUS INVESTMENTS
173048
Revenues
Incentives
Own budgets
Contracts
Institutional frameworks
Ownership structures
Equity
Debt
De-risking
• Battery Leasing agreement• Bus operating Lease• Lease-Purchase Contract/Agreement • Purchase-Leaseback agreement • …
• CAPEX/OPEX/R&D grants• Corporate tax breaks• Import duty reductions• Preferential Electricity Prices• Value-Added Tax (VAT) reductions• …
• Green Bond • Commercial loan• Concessional loan • …
4
WHAT DID WE LEARN FROM STUDYING BUSINESS MODELS
FOR LOW AND ZERO EMISSION BUSES?
5
6
RESEARCH AND INTERVIEWS CARRIED OUT BY WRI
ALLOWED US TO IDENTIFY SOME OF THE MAIN
BARRIERS FOR IMPLEMENTATION
More expensivevehicles and
infrastructure
Fear of changeand lack of knowledge
Technologyreadiness (e.g.
range)
Outdatedprocurement
models
7
Seattle: Hybrid-electric, Opportunity charging
Foothill: Battery electric
Toronto: Hybrid-electric
Philadelphia: Hybrid-electric
Bogota: Hybrid-electric
Curitiba: Hybrid-electric
Auckland: Hybrid-electric, Battery electric
Tianjin: Battery Electric
Zhuhai: Battery Electric
Shenzhen: Battery Electric
Nanjing: Battery Electric
Gumi: Opportunity Charging
Berlin: Opportunity Charging
Turin: Opportunity Charging
Colombo: Hybrid electric, Battery electric
Singapore: Hybrid electric, Battery electric
London: Hybrid electric, Battery electric
Paris: Hybrid electric, Battery electric
Gothenburg: Hybrid electric, Battery electric Stockholm: Hybrid electric
Rome: Battery Electric
Americas Asia/Pacific Europe
N. America S. America Asia Oceania Europe
6 2 7 1 9
WE ALSO CONDUCTED RESEARCH TO UNDERSTAND WHAT 25
CITIES AROUND THE WORLD HAVE BEEN DOING TO ACHIEVE
IMPLEMENTATION
41%
15%
44%
Technology mix
Batteryelectric
Opportunitycharging
Hybrid-electric
8
WE FOCUSED ON UNDERSTANDING HOW THESE CITIES HAD BUILT
THEIR BUSINESS MODELS, AND HOW THESE ELEMENTS LED TO
IMPLEMENTATION
9
WE IDENTIFIED SEVERAL SUCESS FACTORS THAT SOME CITIES
HAVE BEEN DEPLOYING TO ACHIEVE IMPLEMENTATION
1.Technological innovations
2.Public funding
3.Reducing the cost of
financing
4.New stakeholders
10
WE IDENTIFIED SEVERAL SUCESS FACTORS THAT SOME CITIES
HAVE BEEN DEPLOYING TO ACHIEVE IMPLEMENTATION
1.Technological innovations
2.Public funding
3.Reducing the cost of
financing
4.New stakeholders
11
MANUFACTURERS, OPERATORS AND AUTHORITIES
DEVELOPING NEW WAYS OF OPERATING
• Smaller batteries and
opportunity charging
schemes – e.g. Tianjin
• Fast top-up stations –
e.g. Torino
• Battery swapping
schemes – e.g. Rome
12
WE IDENTIFIED SEVERAL SUCESS FACTORS THAT SOME CITIES
HAVE BEEN DEPLOYING TO ACHIEVE IMPLEMENTATION
1.Technological innovations
2.Public funding
3.Reducing the cost of
financing
4.New stakeholders
13
IN MOST REVIEWED CASES, THERE ARE GRANTS
PROVIDED BY NATIONAL OR SUB-NATIONAL
GOVERNMENTS
• Providing grants to pay for additional investment costs– One-time payments
– Throughout the life of the asset
e.g. USA, London
• Tax incentives– Corporation tax
– Import duties
– VAT
e.g. Bogotá
14
WE IDENTIFIED SEVERAL SUCESS FACTORS THAT SOME CITIES
HAVE BEEN DEPLOYING TO ACHIEVE IMPLEMENTATION
1.Technological innovations
2.Public funding
3.Reducing the cost of
financing
4.New stakeholders
15
FINANCIAL MECHANISMS THAT CAN HELP REDUCE
THE ADDITIONAL RISK
• Reducing the cost of financing by providing guarantees and concessional loans e.g. Bogotá
• Longer depreciationperiods to pay foradditional costs e.g. Brazil
• Providing other ways of paying for the most
expensive assets (e.g. buses, batteries,
charging infrastructure) such as by leasing
them e.g. Shenzen, USA
16
WE IDENTIFIED SEVERAL SUCESS FACTORS THAT SOME CITIES
HAVE BEEN DEPLOYING TO ACHIEVE IMPLEMENTATION
1.Technological innovations
2.Public funding
3.Reducing the cost of
financing
4.New stakeholders
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MANUFACTURERS BECOMING MORE INVOLVED AND
ELECTRICITY COMPANIES ENTERING THE
TRANSPORTATION BUSINESS
• Manufacturers assuming new
responsibilities
– Tranining for operators and
longer maintenance contracts.
– Providing financing
– Offering complete solution
packages that include charging
infrastructure.
Retrieved from Google Map
• Electricity companies providing:
• Long-term electricity price stability and lower prices
(i.e. bulk discounts) - Foothill
• Paying for charging infrastructure
18
WE IDENTIFIED SEVERAL SUCESS FACTORS THAT SOME CITIES
HAVE BEEN DEPLOYING TO ACHIEVE IMPLEMENTATION
1.Technological innovations
2.Public funding
3.Reducing the cost of
financing
4.New stakeholders
19
WHAT OTHER MECHANISMS CAN TRANSIT
AUTHORITIES IMPLEMENT TO MAKE THESE
INVESTMENTS A REALITY?
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DISCUSSION QUESTIONS
• Should your city introduce changes in the current contractual model (model
of acquisition, ownership, operations, etc.)?
• Is public funding (grants, tax breaks, etc.) a possibility in your city, to
support the incremental cost of low- and -zero emission buses?
• What should be the role of public authorities in supporting the public sector
operators in overcoming the technology risk and fear of change?
• Should public authorities introduce specific requirements for low-emission
fleets (e.g. 10% of fleets should be low-emission), or should they only
introduce incentives for the market to respond? What incentives could the
public sector introduce in its contracting?
• What responsibilities and risks should be taken by vehicle suppliers to make
these technologies take off more massively?
How can cities deliver complex investments such as low-and zero-emission buses?
22
AGENDA
WHAT IS A BUSINESS MODEL? BUSINESS MODEL METHODOLOGY.
1. A global look at bussines models.
2. Investment components.
3. Funding sources.
4. Financial Products.
5. Delivery mechanisms.
23
AGENDA
WHAT IS A BUSINESS MODEL? BUSINESS MODEL METHODOLOGY.
1. A global look at bussines models
2. Investment components.
3. Funding sources.
4. Financial Products.
5. Delivery mechanisms.
WHAT IS A BUSINESS MODEL?
The elements that make-up an investment in low emission buses
WHAT IS A BUSINESS MODEL?
The sources of funding availableto pay for theseinvestments
The elements that make-up an investment in low emission buses
WHAT IS A BUSINESS MODEL?
Financialproducts thatcan be used to mobilize third-party capital
The elements that make-up an investment in low emission buses
The sources of funding availableto pay for theseinvestments
WHAT IS A BUSINESS MODEL?
The distribution of risks and responsibilities amonginvovled parties
The elements that make-up an investment in low emission buses
The sources of funding availableto pay for theseinvestments
Financialproducts thatcan be used to mobilize third-party capital
WHAT CAN WE FIND INSIDE EACH ONE?
WHAT CAN WE FIND INSIDE EACH ONE?
WHAT CAN WE FIND INSIDE EACH ONE?
WHAT CAN WE FIND INSIDE EACH ONE?
WHAT CAN WE FIND INSIDE EACH ONE?
33
AGENDA
WHAT IS A BUSINESS MODEL? BUSINESS MODEL METHODOLOGY.
1. A global look at bussines models.
2. Investment components.
3. Funding sources.
4. Financial Products.
5. Delivery mechanisms.
WHAT CAN WE FIND INSIDE EACH ONE?
Land(Charging Zones)
(Foothill)
ChargingStations &
Infrastructure(Turin, Paris)
Buildings& Additional
Infrastructure (e.g. to Change Batteries)
(Rome)
Buses& Batteries
INVESTMENT COMPONENTS
Tangible Assets
Processes Intangible Assets
Land(Charging Zones)
(Foothill)
Planning& Preparation
(Gumi)
ChargingStations &
Infrastructure(Turin, Paris)
Building& Installing
(Sweden:Siemens-Volvo)
Buildings& Additional
Infrastructure (e.g. to Change Batteries)
(Rome)
Operating, and training
(Bogota)
Buses& Batteries
Maintenance(Shenzhen)
INVESTMENT COMPONENTS
Tangible Assets
Processes Intangible Assets
Land(Charging Zones)
(Foothill)
Planning& Preparation
(Gumi)
Safety & Health (Turin)
ChargingStations &
Infrastructure(Turin, Paris)
Building& Installing
(Sweden:Siemens-Volvo)
ResourceEfficiency
(Fuel / Foothill)
Buildings& Additional
Infrastructure (e.g. to Change Batteries)
(Rome)
Operating, and training
(Bogota)
Reputation& Brand
(Noise, Air Quality, Appropriation,
Driver’s Experiences)(Turin, Gotenburg)
Buses& Batteries
Maintenance(Shenzhen)
Affordability(Singapur)
INVESTMENT COMPONENTS
Tangible Assets
Processes Intangible Assets
38
KEY POINTS
• An investment can have different
combinations of investment components
depending on the objectives being
pursued.
• Intangibles can be used as long-term
sources of income.
39
AGENDA
WHAT IS A BUSINESS MODEL? BUSINESS MODEL METHODOLOGY.
1. A global look at bussines models.
2. Investment components.
3. Funding sources.
4. Financial Products.
5. Delivery mechanisms.
WHAT CAN WE FIND INSIDE EACH ONE?
FUNDING SOURCES
Investment Proceeds
Investment Incentives
Other Budgets
Fare-box Revenues
Land Value capture in depots
and stations(Singapur)
Advertisingin Stations andInfrastructure
OperationalSavings(London)
FUNDING SOURCES
Investment Proceeds
Investment Incentives
Other Budgets
Fare-box Revenues
Subsidies(NAMA Sri Lanka)
Land Valuecapture in depots
and stations(Singapur)
Taxes(Bogotá, Colombo)
Advertisingin Stations andInfrastructure
PreferentialPrices
(e.g. electricity tariffs)(China, Foothill,
Colombo)
OperationalSavings(London)
FUNDING SOURCES
Investment Proceeds
Investment Incentives
Other Budgets
Fare-box Revenues
Subsidies(USA)
IntergovernmentalTransfers
(Korea)
Land Valuecapture in depots
and stations(Singapur)
Taxes(Bogotá, Colombo)
Taxation& Fees
(Paris)
Advertisingin Stations andInfrastructure
PreferentialPrices
(e.g. electricity tariffs)(China, Foothill,
Colombo)
Sale of Assetsand Scrapping
OperationalSavings(London)
44
KEY POINTS
• The non-refundable resources used to pay
for the investment components.
• Needed to unlock third party capital.
45
AGENDA
WHAT IS A BUSINESS MODEL? BUSINESS MODEL METHODOLOGY.
1. A global look at bussines models.
2. Investment components.
3. Funding sources.
4. Financial Products.
5. Delivery mechanisms.
WHAT CAN WE FIND INSIDE EACH ONE?
FINANCIAL PRODUCTS
Equity Debt De-risking
Private Investors(Direct or Indirect)
(Bogota)
Public Funds(Italy)
FINANCIAL PRODUCTS
Private Investors(Direct or Indirect)
(Bogota)
Bank Loans(Public or Private)
(Bogota)
Public Funds(Italy)
InternationalLoans or
Climate finance(Bogota)
Green Bonds(Tianjin)
Concesionaldebt
(Curitiba)
Equity Debt De-risking
FINANCIAL PRODUCTS
Equity Debt De-risking
Private Investors(Direct or Indirect)
(Bogota)
Bank Loans(Public or Private)
(Bogota)
ContingencyFunds
(Bogota)
Public Funds(Italy)
InternationalLoans or
Climate finance(Bogota)
ProvisionContracts
Green Bonds(Tianjin)
Concesionaldebt
(Curitiba)
50
KEY POINTS
• Resources generally reimbursable and
with expectation of gain because of
inherent risk.
• They can be mechanisms to reduce the
cost (reduce risk associated with the
investment).
51
AGENDA
WHAT IS A BUSINESS MODEL? BUSINESS MODEL METHODOLOGY.
1. A global look at bussines models.
2. Investment components.
3. Funding sources.
4. Financial Products.
5. Delivery mechanisms.
WHAT CAN WE FIND INSIDE EACH ONE?
DELIVERY MECHANISM
Contracts Legal EntitiesInstitutional Frameworks
ProcurementContracts
(Public, private, leasing entity)
(Nanjing)
Leasing(Vehicle,
batteries, land)(Shenzhen)
Purchase leaseback
(Vehicle, batteries)(Shenzhen)
Concessions(e.g. Charging
Infrastructure)
ProcurementContracts
(Public, private, leasing entity)
(Nanjing)
Public(USA)
Leasing(Vehicle,
batteries, land)(Shenzhen)
Private(e.g. SPV)
Purchase leaseback
(Vehicle, batteries)(Shenzhen)
Public-PrivateMix
(China)
Concessions(e.g. Charging
Infrastructure)
DELIVERY MECHANISM
..
Contracts Legal EntitiesInstitutional Frameworks
ProcurementContracts
(Public, private, leasing entity)
(Nanjing)
Public(USA)
Plans & Goals (Paris, Shenzhen)
Leasing(Vehicle,
batteries, land)(Shenzhen)
Private(e.g. SPV)
Regulations& Requirements
Purchase leaseback
(Vehicle, batteries)(Shenzhen)
Public-PrivateMix
(China)
EnablingLegislation
(e.g. LEZ, green bonds)
Concessions(e.g. Charging
Infrastructure)
DELIVERY MECHANISM
..
Contracts Legal EntitiesInstitutional Frameworks
56
KEY POINTS
• The delivery mechanisms are the
contractual, legal and commercial
relationships through which the
investments can be carried out.
• They serve to distribute responsibility,
manage risks, and align the interests of
different actors.
Summary
58
Loans
(bank, international)
Bonds
Private Investors
Procurement Contracts
Rental
Public
Private
Public-Private Mix
Plans & Goals
Regulations & Requirements
Concessions Enabling Legislation
Contingency Funds
External Factors
Concesional Financing
Public Funds
Provision Contracts
Leasing for Purchase
Equity
Debt
De-risking
Tangible Assets Processes Intangible Assets
Investment Proceeds
Investment Incentives
Other Budgets
Contracts Legal Entities Institutional Frameworks
Intergovernmental Transfers
Taxation & Fees
Sale of Assets and Scrapping
Preferential Prices
Taxes
Subsidies
Operational Savings
Advertising in Stations and Infrastructure
Land Value Capture
Farebox Revenues
Safety & Health
Resource Efficiency
Reputation & Brand
Affordability
Planning & Preparation
Building & Installing
Operating, Maintaining & Upgrading
Maintenance
Land
Charging Stations &Infrastructure
Buildings & Additional Infrastructure
Buses & Batteries
Interactive exercise
60
NOW YOU
• What combination of elements do you think
will work for your city?
– What works/doesn’t work, why/not?
– What are the prerequisites for each?
• What would you take forward to put up for
dialogue with your mayor, and other key
stakeholders?
• What are the big questions that come up
when you are deciding on different options?
DECIPHERING BUSINESS MODELS FOR
COMPLEX INVESTMENTS:
LOW- AND ZERO-EMISSION BUSES
Sebastián Castellanos – [email protected]
FOTO POR MARIO ROBERTO DURÁN ORTIZ
62
Business model for hybrid busesBogotá case study
Anne Maassen – [email protected]
Sebastián Castellanos – [email protected] ROSS CENTER FOR SUSTAINABLE CITIES
63
Operations- 113 km of BRT
- Integrated Transport System (SITP) - 9 operators on 13 zonesand 24 year concessions
- 1.600 articulated and bi-articulated buses in theBRT + 10000 small and medium sized buses
BOGOTÁ
Hybrid buses- 282 hybrid 12m buses (80
pax)
- Mixed traffic + BRT (2 doors)
- 2 private operators
- US$250,000/bus withoutthe battery (leased by themanufacturer at US$0,15/km)
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HOW THE PAYMENT TO OPERATORS WORKS
Operators PassengersTransmilenio
Trust fund
Payment / km (90%)Payment / Passenger (10%)
Farecollection(through3rd party)
• Infrastructure• Planning• Supervision
Vehicles
Manufacturers
Sell buses
65
HOW THE PAYMENT TO OPERATORS WORKS
Operators PassengersTransmilenio
Trust fund
Payment / km (90%)Payment / Passenger (10%)
Farecollection(through3rd party)
• Infrastructure• Planning• Supervision
Vehicles
Manufacturers
Sell buses
Additionalpayment
66
PAYING FOR THE ADDITIONAL COSTS
Others- Reduction in import duties (38% to 5%)- No VAT (16%)- Tax credit of 100% of the cost of the vehicle (cap at 20% of
tax return)- Maintenance and training contracts with manufacturers- Battery leasing
Financing
CTF Operator Purchase to manufacturers
50%-$ $ $ $Bancoldex
Commercialbanks
68
Business model for hybrid busesBogotá case study
Anne Maassen – [email protected]
Sebastián castellanos – [email protected] ROSS CENTER FOR SUSTAINABLE CITIES