Target Information

Foresight Group LLP has announced an £80 million investment through its funds into a portfolio of five biomethane Compressed Natural Gas (Bio-CNG) refuelling stations for heavy goods vehicles (HGVs). This strategic investment aims to facilitate the transition of fleets from diesel to carbon-neutral fuel, aligning with broader environmental goals.

The funding, provided by the Foresight Inheritance Tax Fund and JLEN Environmental Assets Group, supports a joint venture with CNG Fuels Limited, a prominent developer of CNG refuelling infrastructure in the UK. The capital injection will acquire existing refuelling stations and finance the construction of an additional 14 locations along major trucking routes in the UK, further supporting the nation's commitment to achieving net-zero emissions by 2050.

Industry Overview

The transport sector represents the largest source of carbon dioxide emissions in the UK, accounting for 34% of total greenhouse gases, with HGV operations contributing 4.5% of this total in 2019. Given the urgency of climate change, there is significant pressure on the transportation industry to adopt more sustainable practices.

CNG Fuels currently operates a network of five Bio-CNG refuelling stations that provide a low-cost, low-carbon alternative for HGV operators transitioning away from diesel. The anticipated expansion includes 14 new stations projected to meet escalating demand for renewable fuel from major companies, while facilitating an over 80% reduction in carbon emissions from operational fleets.

The partnership aligns with the UK Government's Ten Point Plan, which advocates phasing out new diesel HGVs. This initiative positions the UK as a leader in zero-emission freight solutions. Notably, all Bio-CNG provided by CNG Fuels is certified under the Department for Transport's Renewable Transport Fuel Obligation (RTFO) scheme and is expected to become fully carbon neutral by 2021.

Financially, the government is maintaining favorable conditions for gas-powered vehicles until 2032, making Bio-CNG a more attractive option compared to diesel, with a price difference of 35% to 40%. This incentivizes fleet operators to make the switch, contributing to an environmentally sustainable transportation future.

Rationale Behind the Deal

This investment by Foresight Group is a strategic move to capture growth opportunities in the sustainable transport sector while supporting the UK's decarbonization objectives. The funding enhances CNG Fuels’ ability to scale operations and improve service delivery for fleet operators, responding to the increasing demand for sustainable fuel options.

The deal is not only financially sound but also reflects a commitment to addressing environmental challenges within the transport industry. It allows Foresight to diversify its portfolio further into sustainable infrastructure, re-enforcing its alignment with national climate goals.

Information about the Investor

Foresight Group is an established investment adviser committed to facilitating strategies that contribute to sustainable developments. With a focus on renewable energy and infrastructure, Foresight aims to drive investments that support decarbonization efforts, aligning with the growing trend towards environmentally responsible funding.

The firm’s diverse portfolio includes investments in several sustainable sectors, indicating a strong belief in impact investing. This investment into CNG Fuels marks Foresight’s first foray into sustainable transportation and demonstrates their dedication to promoting impactful solutions within this critical sector.

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This investment presents a compelling opportunity for Foresight Group, tapping into the rapidly evolving renewable fuel market, which is critical for achieving government emission reduction targets. The strategic alignment with CNG Fuels allows Foresight to play a significant role in decarbonizing the transport sector.

From an investment perspective, the favorable economic conditions for Bio-CNG over diesel, combined with escalating demand from fleet operators, suggest a promising growth trajectory. The ongoing government support and rising environmental consciousness amongst businesses position CNG Fuels and its operations favorably within the market.

Moreover, the anticipated doubling of CNG trucks on UK roads reflects a broader industry pivot towards sustainability, supporting Foresight's investment thesis. The projected increase in biomethane sourced from agriculture adds an additional layer of sustainability, enhancing the long-term viability of the investment.

Overall, this investment is viewed as a strong move for Foresight, solidifying its commitment to sustainability while also presenting potential for attractive returns in a market poised for expansion.

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