In February, Panoramic announced the sale of Fund 2 portfolio company Pod Point to French energy giant EDF. The exit marked one of the largest electric vehicle (EV) charging infrastructure transactions to date and generated an exceptional return for Fund 2. Here are our thoughts looking back on the investment.

Background

Panoramic invested £2.25m in Pod Point in June 2018, alongside investment from Draper Esprit and other existing individual shareholders. The investment was predominantly growth capital but there was also some secondary share purchase providing equity release. Erik Fairbairn founded the company in 2009 and by 2018 Pod point had built one of the largest EV charging networks in Europe. The company offers a full range of technology and services, from home charging through to commercial and workplace solutions.

Investment thesis

Pod Point was attractive because significant growth in charging infrastructure would be required to support the move to electric vehicles. Pod Point was one of only two UK companies with charging infrastructure scale and the market was experiencing high demand and restricted supply. The company had become the supplier of choice for major car manufacturers and commercial operators such as hotels and offices.

We believed that air pollution would become a major public health issue that governments would combat by penalising combustion engine vehicles and supporting electrification. From a consumer perspective we thought that technological advances, convenience, and fuel cost savings of electric cars would begin to disrupt the status quo and eventually claim widespread adoption. We were also backing a driven and visionary CEO and talented senior management team.

Distinctive investment process

Our Pod Point investment process had a few unique aspects that required a tailored approach. Existing and new investors were interested in the investment round. Funding amount and participants were changing regularly which affected growth forecasts. We ended up investing alongside Draper Esprit and other individuals who we met to understand their experience so far in Pod Point and discuss investment strategy for the next phase of the company’s development.

Our diligence programme investigated electric vehicle growth in the US, China and Norway (who are further ahead than the UK), government strategy towards clean energy and operational challenges of installing thousands of charging points across the country. We spent considerable time with management assessing cash flow forecasts in what is a capital-intensive business. We also engaged technology experts to advise on technology capacity and roadmap deliverability. We were required to move quickly and efficiently within the available time and resources, whilst co-ordinating with other investors to finalise the process.

Portfolio management

With Pod Point’s scale and incumbent institutional investors, the board was already fully formed along with experienced non-execs from the automotive industry. We managed the investment directly through regular meetings with the CEO and CFO. This gave us insight into day-to-day challenges and progress on the ground. We supported Pod Point during our 18-months as investor by introducing portfolio companies wanting workplace charging points, providing insight on relevant M&A and competitor activity, and we made introductions to businesses interested in supplying hardware to Pod Point.

Increasing scale and further investment

As Pod Point progressed, Legal and General Ventures invested in March 2019. This provided the backing of an investor with deep financial resources and a real estate portfolio needing charging infrastructure. The company began to grow dramatically in the second half of 2019, coinciding with mainstream car manufacturers finally overcoming production hurdles that had seen long delays in electric cars becoming available in the UK.

Exit and future of Pod Point

Following high profile acquisitions by energy companies such as Shell and BP and exponential growth in electric car sales, Pod Point began to receive direct approaches from energy companies. Drake Star Partners who had experience in EV transactions were appointed to advise on the sale process. The diverse investor base created some interesting challenges around communication and confidentiality as the sale neared completion.

Pod Point will be EDF Group’s biggest electric vehicle investment, and the acquisition forms part of its plan to become the leading energy company for electric mobility in the UK, France, Italy and Belgium.

Sector Experience

Pod Point was Panoramic’s second successful investment in clean energy following solar panel business Solfex, which sold to Travis Perkins Plc in 2013. We believe clean energy and air pollution will continue to provide exciting new investment opportunities. We were delighted to play a part in the success of Pod Point and believe our experience will provide grounding for further investment in the sector, supporting other companies to enjoy the success that Pod Point has achieved.