Britishvolt seeks $3.6bn funding for UK's first gigafactory

Britain needs electric car batteries after banning sales of petrol and diesel vehicles by 2030

By 2040, electric vehicles will make up two thirds of total passenger car sales in Europe. Bloomberg

Britishvolt is considering a public listing as it seeks funding for the UK's first battery gigafactory.

The deal to finance the £2.6 billion ($3.6bn) project could be announced as soon as the end of this quarter, the start-up venture said on Thursday.

The UK has banned sales of new petrol and diesel cars by 2030 and needs a factory producing batteries for electric vehicles to avoid falling behind in the global race to lead manufacturing for the energy transition.

Global electric car sales rose by a record 38 per cent in 2020, taking the total number on the world's roads to 10.9 million.

Britishvolt has appointed Guggenheim Securities and Barclays as advisers to look into options, including listing in the US through a merger with a special purpose acquisition company, or SPAC, its founder and chief executive Orral Nadjari said in an interview.

It is the first time the company has talked in detail about its plans to finance the project that will play a central role in delivering on Prime Minister Boris Johnson’s green plan.

“The SPAC market is very interesting and is the result of the very mature capital markets in the US that have identified the industrial revolution that is happening now, when we go from the era of the internal combustion engine towards an era of electrification,” Mr Nadjari said. “There will be a lot of scale-ups that will need a lot of capital.”

The company has not identified any automotive customers yet, and it is unclear if any car maker will agree on a supply deal with a start-up that is still seeking funding.

Mr Nadjari, a former investment banker, says he’s not worried.

By 2040, electric vehicles will make up two thirds of total passenger car sales in Europe, with more 10 million units sold a year.

That will make the continent the second-largest electric vehicle market, behind China and before the US, according to BloombergNEF.

If Britishvolt does agree to a SPAC deal, the target to announce it will be the end of the second quarter or beginning of the third, Mr Nadjari said.

Based in Blyth in north-east England, Britishvolt is planning to launch its series B funding round next week to raise as much as £100 million, with Barclays as its financial adviser, Mr Nadjari said.

The round already has “a lot of interest” and series C will follow before summer with a cap of £250m.

The series A funding round, which closed in February, made William Harrison, chief executive of private equity firm Cathexis Holdings, the second-largest shareholder, after Mr Nadjari.

Cathexis is the family office of Mr Harrison, investing from a low of $3m in niche electric vehicle deals to more than $100m when buying established companies or financing infrastructure and real estate, according to its website.

Because of its exit from the European Union, the UK's automotive industry has little time to localise production of batteries.

The Brexit deal reached late in 2020 requires 30 per cent of the content of battery packs for UK-built cars to be sourced domestically; the regulation gets tougher in 2024.

“The new rules of origin should provide the conditions for the UK automotive industry to succeed,” said Stephen Gifford, chief economist at the Faraday Institution, which researches commercial battery developments.

"But to do so, it is now more important than ever that gigafactories are built in the UK, and quickly, and with well-developed local supply chains.”

Ministers are determined for the UK to stay in the mix of leading battery-makers in Europe.

Mr Johnson has committed £1bn to help build factories that can produce batteries at scale. Britishvolt has applied for some of the funding and is waiting to hear back.

“We have had very fruitful conversations with the government,” Mr Nadjari said. “Definitely government funding is critical for large industrial investment such as Britishvolt.”

The Automotive Transformation Fund will likely support one, if not two, giant battery factories, according to the Advanced Propulsion Centre UK, the non-profit acting as the delivery partner for the funding.

The aim is to see the UK punch above its weight for battery-making, compared with the scale of its automotive sector.

The Faraday Institution estimates the UK will need seven giant factories by 2040, each producing 20 gigawatt hours per year of batteries.

Britishvolt is looking at building multiple plants in the UK, Europe and elsewhere to produce 150 to 200 gigawatt hours by 2030, Mr Nadjari said.