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E-Bus Uptake Adds to Global Metal Demand Momentum

Increasing news flow from municipalities across the globe is highlighting important changes occurring in public transport systems. The growing public discourse on clean air initiatives has resulted in many municipal budgets focusing on battery-powered public transit.

Europe is leading this new wave of investment in the West. Most recently, the Paris transport authority, the RATP, announced a framework agreement for up to 800 electric buses to be delivered by 2024. The 12-meter buses will be supplied by Heuliez, Bollorè and Alstom, following a call for tender worth up to €400 million.

Paris set the goal of a clean bus fleet by 2025, by which time about two-third of the buses are expected to be electrically powered and a third by biogas.

As another example, ATM Milano (Italy) is investing heavily in e-bus infrastructure, with a recent tender for 250 e-busses. ATM Milano is targeting full electrification by 2030. The plan also includes the renewal of its fleet of 80 trolleybuses, with added in-motion charging systems on the way.

Meanwhile on the other side of the globe, Melbourne has recently taken delivery of the first units of the largest hybrid bus order to date in Australia. The contract covers the supply of 50 hybrid buses based on Volvo hybrid driveline with Volgren bodywork.

The increased demand is creating new markets that add an interesting new layer such as battery leasing. Proterra and Japanese investment and trading company, Mitsui, recently announced an agreement to create a US$200 million credit facility in support of a battery lease programme.

The battery leasing credit facility is unprecedented in North America. It is expected to help lower the upfront costs of zero-emission buses and put Proterra electric buses at roughly the same price as a diesel bus.

By decoupling the batteries from the sale of its buses, Proterra enables transit customers to buy the electric bus and lease the batteries over the 12-year lifetime of the bus. This results in a lower initial capital outlay for the electric bus and sets the stage for prices to drop to a similar level of a diesel or compressed natural gas bus. As an added benefit, customers can use the operating funds previously earmarked for fuel to pay for the battery lease. All in all, this will help to further reduce the initially high upfront price of an electric bus and helps to further lower the barrier to wide-scale zero emission bus adoption.

Battery-electric bus market share, followed by fuel cell electric buses, is growing and is expected to be significant by 2025. In fact, the falling total cost of ownership curve of electric buses compared to diesel buses, coupled with the push for developing the charging infrastructure, will make electric buses a profitable option by 2025.

Bloomberg estimates the global electric bus market size was about 81,968 units in 2017. This number is expected to grow to about 148,080 units in 2025 with a compound annual growth rate (CAGR) of 7.7%. China alone sold about 80,615 units in 2017, with India and Latin America expected to be the fastest growing markets between 2017 and 2025 with a CAGR of 132% and 139.4%, respectively.

Higher adoption of electric powertrains is becoming apparent in the transit bus segment where charging stations are easier to establish due to the fixed routes. However, with advanced batteries and high-power charging technologies reducing charging time, coaches will also have a significant share of electric powertrains in the long-term post 2020.

I invite shareholders to get in touch with any questions or comments.

Anthony Milewski, CEO of Cobalt 27

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