EVgo, an owner-operator fast charging firm with around 2,700 operational charge points across 35 US states, has upgraded its earnings guidance after a strong third quarter, in particular on the back of rising utilisation rates. But management have voiced concerns about growing pains with federal grant funding.
“Revenues, throughput and utilisation are trending superbly,” outgoing EVgo CEO Catherine Zoi says. “It is clear that being a leading owner and operator of well-located charging infrastructure to service and increasingly hungry fleet of electric vehicles is a winning strategy.”
EVgo generated revenues of over $35mn in the third quarter, an increase of 234pc year-on-year. However, revenue is down from $50mn in the last quarter and the company is ultimately yet to turn a profit, reporting an Ebitda loss of $14mn.
More of this direct to your inbox?
Get our free weekly newsletter, plus premium data and content
No spam. Unsubscribe anytime.
“EVgo's exceptional throughput this quarter has translated to over 15pc utilisation across the entire network in September. In fact, 45pc, or nearly half, of our stalls were over 15pc utilisation, up from just 30pc in June. And in September, a full 30pc of stalls are over 20pc utilisation,” Zoi says.
“There is no denying that the market will continue to see exponential growth in the long term — with 300,000 DC fast chargers needed by 2030, up from over 30,000 today,” agrees incoming CEO Badar Kahn.
EVgo has raised its full year revenue guidance to $148-158mn. But it still expects to post a loss of between -$66mn and -$62mn.
Analysts seems relatively unconcerned about the continuing losses, given the future demand projections. “It looks like demand is perhaps even stronger than [EVgo’s] internal expectations,” suggests Christopher Dendrinos, associate vice-president at bank RBC.
EVgo is moving to provide equipment compatible with Tesla’s NACS charging protocol as makers of vehicles for the US market continue to migrate to the system. It confirms “a minimal cost to retrofit to existing stations” and that NACS provision will come “at a cost comparable to a CCS cable.”
Pending agreements with suppliers for components such as liquid cool cables, EVgo “expect[s] to be ready with NACS cables for our chargers well before the automakers that are transitioning to NACS have their NACS EVs on the road”, which is 2025 at the earliest.
Capex pressure
While the road ahead looks promising, EVgo is finding some bumps posed by the landscape of federal incentive legislation. The so-called ‘build American buy American’ (Baba) requirements for US-manufactured equipment to qualify for funding under the National Electric Vehicle Infrastructure (Nevi) programme are pushing EVgo’s capex spending into “the top end of our previously mentioned range”, Zoi cautions.
In 2023 to-date, EVgo has spent $124.1mn in total capex, including around $114mn in gross capex, according to CFO Olga Shevorenkova, compared to just over $110mn in revenue. “While EVgo fully supports building domestic manufacturing capabilities for the EV charging industry, the Baba compliance chargers cost more at present,” she says.
“Prevailing wage requirements for grant-funded projects under Nevi or 30c add about 30pc to the labour portion of capex,” Zoi says.
The costs of upgrading local grids to match electricity demand for charging pose another headwind. “Utilities are needing to upgrade local power distribution networks to accommodate more and more fast chargers, and they are passing on many of these costs to charging companies such as EVgo,” says Zoi.
Funding boost
But there is another side to the incentive coin, as Zoi admits that the legislative landscape is helping firms like hers roll out critical charging infrastructure.
“Tradable tax credits for charging infrastructure through [clause 30c] will be available at the start of 2024, and we believe are likely to cover up to 30pc of capex for a significant portion of EVgo's projects,” she says. In addition, the firm expects to welcome “significant amount of low-cost debt becoming available to EVgo sometime in the latter half of next year” from the US Department of Energy.
Moreover, Nevi has the potential to fund up to 80pc of project capex, Zoi notes. “And to-date, EVgo is at the top of the leaderboard amongst Nevi grantees, winning over an estimated 20pc of the funds announced.”
EVgo is set to receive $29mn in grants by 2024 — which management sees as contributing to ample liquidity to see it through to 2025 — even if “the deployment of the funds has been maybe slower than most of us would like”, in the view of Andres Shepherd, lead equity analyst at US financial services firm Cantor Fitzgerald.
“EVgo's ability to adjust the speed of our growth engine and invest capital to match the market circumstances is a great strength of our business model and our management team,” Zoi says of her firm’s ability to ride out any delays. And she also hails a new charging deployment model, which promises to reduce capital equipment costs by 15pc and installation times by 50pc.
Ciaran has written about finance, politics and culture. He is passionate about e-mobility and what it means for our way of life.
Ciaran has a Masters in Ancient Philosophy from Oxford University.
