Chamath Palihapitiya-backed Arclight Clean Transition Corp. jumps 12% after announcing Maryland school-bus deal

Proterra ZX5 40 Foot Bus
Proterra ZX5 40′ Bus.

  • Arclight Clean Transition Corp’s stock skyrocketed as much as 12% on Wednesday.
  • The move came after the company’s merger partner, Proterra, inked a deal with Montgomery County to provide its battery technology for school buses.
  • The 16-year deal is reportedly worth $169 million and involves the lease of 326 buses.
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Arclight Clean Transition Corp. stock jumped as much as 12% on Wednesday after the company announced its merger partner Proterra inked a deal with the Board of Education in Maryland’s Montgomery County.

According to a report from Bloomberg, Proterra will provide its electric battery technology for school buses as a part of a $169 million deal with the county.

Montgomery officials plan to replace their entire 1,422 diesel bus fleet with EVs over the next two decades.

Wednesday’s contract is the first step toward that goal. The deal involves the lease of 326 buses to the county over the next 16 years. The vehicles will be built by Thomas Built Buses, a division of Daimler AG, but will use battery technology from Proterra.

Proterra had already sold four electric buses to Montgomery county for use as public transport.

The Chamath Palihapitiya-backed SPAC Arclight Clean Transition Corp. merged with Proterra in a transaction the billionaire investor called his “biggest investment in climate change” on Jan. 12.

Palihapitiya tweeted about the recent school bus contract win, calling it a “huge deal” for Proterra and his SPAC.

The transportation director of Montgomery County Public Schools said the contract will also be the first electric school bus agreement in the nation that isn’t federally funded.

And it will make the county a leader in the electrification of school buses nationwide.

Montgomery officials also estimate the costs of the electric buses will be in line with what they would have spent on diesel school buses.

“It costs no more than what districts are spending on diesel,” Montgomery’s transportation director told Bloomberg. “We think there’s going to be savings initially on fuel and maintenance. The price of electric buses will fall and the price of diesel buses is going to rise to the point that they meet. And, eventually, you won’t be able to get a diesel bus.”

“We know exactly where they are going to be overnight and we know how far they’re going to go. It’s sort of the perfect vehicle to electrify,” the director added.

The deal represents another positive step for Proterra as the company looks to take advantage of a potential green energy investment wave from the Biden Administration.

Recently, Proterra has been involved in several key deals including:

  • A collaboration with Komatsu on battery systems for electric construction equipment.
  • Harvard’s acquisition of four 35-foot electric buses to help curb emissions on its campus.
  • A deal with the Stockholm-based, UK electric bus operator Volta Trucks to supply battery technology.

Arclight Clean Transition Corp. stock was up 6.48% as of 12:30 p.m. ET on Wednesday.

Arclight chart.
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Chamath Palihapitiya’s ‘biggest investment in climate change’: ArcLight Clean Transition Corp. to merge with commercial EV maker Proterra

Electric bus.
Electric bus.

  • Chamath Palihapitiya said Tuesday that his “biggest investment in climate change” is in commercial EV manufacturer Proterra, which is set to merge with blank-check firm ArcLight Clean Transition Corp. 
  • Palihapitiya noted Proterra’s first-mover advantage, revenue growth, and a runway of orders and backlogs as part of his reasoning for the investment.
  • “This transaction enables Proterra to take the next step towards our mission of advancing EV technology to deliver the world’s best performing commercial vehicles,” said Jack Allen, Chairman and CEO of Proterra.
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“Blank-check” ArcLight Clean Transition Corp. is set to merge with commercial electric vehicle company Proterra in what Chamath Palihapitiya calls his “biggest investment in climate change.”

On Tuesday, Palihapitiya announced via Twitter that the special purpose acquisition company ArcLight Clean Transition Corp. will merge with Proterra, taking the clean-tech commercial EV leader public.

Palihapitiya lead a round of $415 million in private investment in public equity (PIPE) in Proterra, with the likes of Daimler Trucks, Franklin Templeton, Fidelity Management & Research Company LLC, as well as funds managed by BlackRock tagging along.

The SPAC will provide resources, including $825 million in cash, to take Proterra’s portfolio of commercial EV tech to new levels of growth on the open market. The transaction represents an enterprise value of $1.6 billion for Proterra.

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Jack Allen, Chairman and CEO of Proterra, said of the move: “This transaction enables Proterra to take the next step towards our mission of advancing EV technology to deliver the world’s best performing commercial vehicles. In addition, it introduces a partner in ArcLight that has a shared focus on sustainability and renewable energy.”

Proterra is North America’s number one EV bus original equipment manufacturer, boasting over a decade of experience in the industry. The Burlingame, California-based firm also develops world-class electric charging systems.

Palihapitiya gave a one-page investment thesis breakdown on Twitter that included some of his reasoning behind the Proterra move. However, based on the investor’s recent public comments, one of the main drivers of his investment may be putting his money where his mouth is in terms of backing clean tech initiatives.

Palihapitiya, an avid supporter of green policies, appeared on CNBC last week and argued the “world’s richest person should be somebody that’s fighting climate change.”  

However, the merger is also a good fit for ArcLight Clean Transition Corp’s main goal, according to Jake Erhard, President, CEO and Director of ArcLight.

“We launched ArcLight Clean Transition with a clear goal of identifying and partnering with mission-driven companies with differentiated technology, compelling growth opportunities and a proven ability to execute,” Erhard said.

“With a portfolio of leading-edge products, a substantial first-mover advantage over its competitors and a demonstrated ability to scale, Proterra perfectly fits these criteria. We look forward to working closely with the Proterra team to execute its strategic priorities and deliver shareholder value.”

Read more: Goldman Sachs says to buy these 29 stocks poised to deliver the strongest sales growth through year-end

Chamath Palihapitiya went even further, elaborating both qualitative and quantitative points about the validity of Proterra’s commercial EV business in his Tuesday Twitter post.

<blockquote class=”twitter-tweet”><p lang=”en” dir=”ltr”>I just made my biggest investment in climate change.<a href=”;src=ctag&amp;ref_src=twsrc%5Etfw”>$ACTC</a> is merging with <a href=””>@Proterra_Inc</a> to help take it public. I led the $415M PIPE.<a href=””>@Proterra_Inc</a> is NA’s #1 EV bus OEM. The company’s technology, their lead and their revenues made this a no brainer for me. 1-pager attached. <a href=””></a></p>&mdash; Chamath Palihapitiya (@chamath) <a href=””>January 12, 2021</a></blockquote> <script async src=”” charset=”utf-8″></script>

First, he argued Americans are increasingly using public transport, taking over 9.9 billion trips in 2019 alone.

Palihapitiya also noted Proterra’s first-mover advantage. The company has sold over 1,000 commercial electric vehicles in North America, representing over 50% market share for the burgeoning industry.

Finally, he mentioned the significant decline in EV battery costs since 2010 (over 85%), Proterra’s impressive compound annual growth rate of 68%, and the $750 million in current orders and backlogs at Proterra as drivers of his “biggest investment in climate change.”

Shares of ArcLight Clean Transition Corp. are up over 75% on the news, taking the SPAC to a market cap of close to $750 million.

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