It was no coincidence that Shai Agassi's electric car venture Better Place announced a major $350 million investment deal, led, by HSBC, just before the World Economic Forum in Davos, which begins tomorrow. The deal gives Better Place a company value of $1.2 billion.
Better Place founder and CEO Shai Agassi likes to remind us that his electric car project was conceived at Davos in 2005 when he was president of the product and technology group at SAP (NYSE: SAP; XETRA: SAPG). As one of the world's brightest young high-tech executives, Agassi was chosen to present a paper on the future of energy, transport and the environment. He called his paper "Running a country without oil" and Better Place was born when President Shimon Peres asked him to develop the idea of a recharging network for electric cars.
Since then Agassi uses the annual meeting in Switzerland to make declarations that garner headlines in the world's media.
Except now we are only 16 months away from the company's declared date for the start of commercial activities and in Davos people will want to see how Agassi's plans will be turned into deeds.
Until yesterday's announcement Better Place had hardly given away any information about financial activities and sources of funding. The only clear information so far was the raising of $100 million from Israel Corp. (TASE:ILCO), several dozen million dollars from an Australian investment company, and a commitment by the Danish energy company DONG Energy to invest €103 million.
This latest investment of $350 million in the present economic climate is an impressive achievement for a young start-up that is not yet generating revenue. However, in terms of an infrastructure company with an ambitious agenda of making the vehicle fleets of entire countries "electric," this investment is small change. Better Place will be hoping that the HSBC led investment will lead to more investment interest in Davos.
According to some estimates, even in the first stage of deploying its national network over the next two to three years, Better Place needs to raise over $500 million in cash and credit lines.
The math is as follows: setting up hundreds of battery exchange stations in Israel and Denmark will cost an estimated $500,000 per station; hundreds of thousands of battery recharging points will cost $1,000 per unit; buying or renting land for the battery exchange stations, most of which will be in high demand areas; financing the purchase of tens of thousands of vehicles from Renault, and the separate purchase of batteries for the electric vehicles will cost $11,000 per vehicle and battery.
All this before marketing costs to expand the project worldwide and launching experimental projects in Japan, Hawaii, California and Australia as well as funding R&D, and paying salaries to a rapidly growing staff worldwide.
Energetic added value
Yet HSBC is no greenhorn when it comes to investment and nor are the other names in the latest round of investment. Therefore, it is safe to assume that Better Place offers private investors (and in the future perhaps public investors too) attractive added value, and something which creates more enthusiasm than more routine investments.
A hint of this added value can be found in recent research published by the Technological University of Munich, which was commissioned by Better Place, and which found that Agassi's model was far more efficient than competitive electric vehicle systems, and was also a source of generating renewable energy from the wind and the sun.
The financial message contained in this is clear. If Better Place can convince investors that its battery exchange stations are not just a technical and marketing part of its electric vehicle infrastructure but also a renewable energy source, then the company will be part of another new arena, which is attracting vast amounts of money. This cleantech angle also fits in with the business plan of Israel Corp. which seeks to produce electricity from renewable sources in Israel and worldwide.
Published by Globes [online], Israel business news - www.globes-online.com - on January 26, 2010
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