The Invisible Hand Helps Lion Electric Company on EV Bus Order
Posted on 10/25/2021
Caisse de dépôt et placement du Québec (CDPQ) is the controlling shareholder of Student Transportation of America, a North American company involved in student transportation, safety and fleet management services. Student Transportation of America’s subsidiary Student Transportation of Canada signed a conditional purchase order for 1,000 all-electric LionC school buses. These buses are being built by listed company The Lion Electric Company (NYSE: LEV) (TSX: LEV), a company that merged with SPAC Northern Genesis Acquisition Corp.
The purchase order is conditional upon the satisfactory grant of non-repayable contributions to STC under Infrastructure Canada’s Zero-Emission Transit Fund (ZETF), for which STC has filed a formal application. Under the ZETF program, the Government of Canada aims to invest $2.75 billion over five years to support public transit and school bus operators in the transition to electrification.
If confirmed, this purchase order would allow STC to become the largest operator of zero-emission school buses in North America. This investment would also contribute to CDPQ’s portfolio decarbonation objectives. Deliveries would begin in 2022 and occur through the first half of 2026. These electric buses would replace existing diesel vehicles within STC’s Canadian fleet. Lion’s primary manufacturing facility is located in Saint-Jérôme, Quebec, which is approximately 25 miles north of Montreal, Quebec. The facility is approximately 200,000 sq. ft and currently has an annual production capacity of 2,500 vehicles. In addition to manufacturing, the facility includes an in-house R&D and testing center. As publicly announced on March 15, 2021, Lion expects to benefit from support by the Canadian federal and Quebec governments of up to approximately C$100 million – amounting to approximately C$50 million each – in connection with the planned construction of its battery manufacturing plant and innovation center in Quebec, of which up to 30% is expected to be forgiven subject to certain criteria tied to Lion and to the operations of the facility.
According to recent SEC ownership data, D. E. Shaw & Co. LP, Point72 Asset Management LP, and Alberta Investment Management Corporation are major institutional shareholders in Lion Electric Company.
For the second quarter of 2021, Lion Electric had initial truck orders from notable new clients such as: Green Mountain Power, Day & Ross, Zūm, and Casella Waste Systems. At that period, the company claims to have 400+ vehicles on the road. There was a net Loss of $178.5 million in Q2 2021 as compared to a net loss of $1.3 million in Q2 2020.
Convertible Instruments with Investissement Quebec
In March 2020, Lion completed a financing through the issuance of the Convertible Loan to Investissement Quebec in the principal amount of $3,741,675 (C$5,000,000). The Convertible Loan had an initial maturity date of March 3, 2025, and bore interest at an annual rate of 7.5% with the interest payable at the maturity date. In connection with the closing of the Business Combination, the Convertible Loan was repaid in full.
In September 2020, Lion completed a financing through the issuance of the Convertible Debenture to Investissement Quebec in the principal amount of $15,340,000 (C$20,000,000). The Convertible Debenture had an initial maturity date of September 1, 2023 and bore interest at a rate of 15% per annum for the first year, and 18% thereafter, subject to the terms and conditions set out therein. In connection with the closing of the Business Combination, the Convertible Debenture was repaid in full.
Keywords: Caisse de depot et placement du Quebec.
