Zouk Capital expects to close the UK’s first electric vehicle charging infrastructure fund this quarter after it completed its third closing, raising £380 million ($516 million; €424 million).
The UK-based manager is now just £20 million away from reaching its target for the Charging Infrastructure Investment Fund. The vehicle was launched in 2019 and is being matched for up to £200 million by the UK Treasury for private capital raised.
The latest round of fundraising saw Zouk receive commitments from Willis Towers Watson’s clients and investment funds, and Morgan Stanley Investment Management’s Climate Impact Fund. The two new investors “genuinely have ESG at their core” and are “patient capital” investors, Zouk Capital partner George Ridd told Infrastructure Investor.
The firm is also in talks with other investors who were unable to make the third close in time, he said.
Ridd added that about 40 percent of the fund has been deployed or committed, including in charging station developer and owner InstaVolt, which Zouk had previously invested in through other funds. The firm has also backed Liberty Charge, which focuses on residential charging for the 40 percent of households that do not have access to private driveways.
Ridd said that while construction of charging points suffered a little during the outset of covid-19, over the period “the macro case for EV charging infrastructure has increased quite considerably [since launch]”, with the UK government bringing forward plans to ban the sale of fossil fuel vehicles from 2040 to 2030 in November.
The profitability of investing in EV charging infrastructure has been called into question in the past, although Ridd warned investors not to think of the sub-sector as a “vanilla” infrastructure asset.
“Nobody should be thinking you put a charger into the ground and it’s profitable from day one,” he maintained. “That being said, InstaVolt has profitable chargers and so it’s about learning from those characteristics and deploying into areas which are profitable in the short and long-term. People get fixated about this needing to be an infrastructure asset class like solar or wind from day one. It’s not there yet because you need the mass of electric vehicles, a user base behind you and a charging network with sufficient scale to make it work.”
“We look at this as akin to building a large waste-to-energy plant where you have a four-year construction period, during which your asset is not generating cash as you’re building. At the moment, we’re in that building phase. But is a case of when, not if these assets become very valuable.”