$38.8bn financing & blockchain deal to electrify China’s bus fleet

A three-year US$38.8 billion deal to support large-scale electrification of China’s buses and to shift electric bus asset management into a blockchain-based ecosystem is coming to fruition as the first tranches in China’s National Transportation Capacity Co (NTS) Electric Bus initiative are announced.

Ideanomics, a global fintech and asset digitisation firm, has entered into an agreement with NTS with a specific financing mandate under an original framework first announced in August 2018. The agreement is for the initial tranche of asset-backed financing and comes as a result of NTS itself finalising a deal with the city of Tianjin, China’s fourth-largest city, to re-finance over RMB57 billion (US$8.25 billion) of existing asset-backed financing for electric bus conversion. This initial mandate from NTS is the first of several anticipated in the coming months under the RMB260 billion framework agreement between NTS and Ideanomics.

RMB1 trillion market for electric bus replacements

Market for China’s electric bus estimated at RMB1 trillion. Photo By 写意人生 – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=18318429

The market size for the mandatory replacements and upgrades to achieve fully-electric bus operations in China is estimated at RMB 1 trillion (US$145 billion), with the Chinese government requiring the conversion of public transport vehicles to electric power by 2021. NTS is the largest national full-service provider for electric bus operators with sales, lease financing, a charging station network, and real-time data services including media, payments, maps, and facial recognition.

The re-financing program Ideanomics has developed is designed to save cities and municipalities 2% or more against traditional annual interest rates for this type of asset-backed financing. Ideanomics intends to launch a blockchain-based asset registration platform, subject to the city operators’ endorsement and systems support, in conjunction with the re-financing program. This registration platform is intended to deliver the highest-level of transparency for the underlying assets provided as the foundation for underwriting the offering and, as a result, elevate asset registration beyond traditional asset monitoring methods. The platform would enable asset owners to fractionalise, tokenise, securitise and trade their digitalised assets.

Alfred Poor, President and COO of Ideanomics, said, “We are very grateful to our colleagues in China for their hard work and effort since securing the original agreement with NTS, which has resulted in securing the first mandate under that deal. We are now focused on working with our institutional banking partners in the region to secure the required re-financing for the city of Tianjin’s electric bus conversion project. This deal enables us to demonstrate Ideanomics’ core strengths of deal origination and enablement, along with the application of new technologies which we believe will form part of the evolution of the financial services industry.”

Ideanomics’ former Chairman and CEO Bruno Wu, who stepped down in November 2018 to lead the US National Committee for China-US Relations, said in August 2018 the deal with NTS represented a paradigm shift in the way we view asset-based financial products. “It will serve as a window to the world on how asset value and liquidity can be unlocked by traditional industries as we take fixed income products into the digital era. By combining regulated financial infrastructure, and the market confidence in asset-based products, with AI-enhanced risk management and the dynamics of blockchain-enabled fractionalisation, securitisation, tokenisation, and global trading of token-based offerings, we are delivering the next-generation of financial products which will be compelling for both asset-rich industries and investors alike. It’s an exciting time for SSC, and we’re extremely pleased and honoured to partner with NTS on this offering,” he said.

Jihong Huang, President of NTS, stated in August 2018 that each of the leading 10 bus manufacturers in China strongly back NTS in this initiative. “A combination of [Ideanomics] Blockchain and AI technologies, combined with our shared mission for unlocking both liquidity and enterprise value through asset digitisation, will result in a significant transformation of the entire lease financing-based fixed income market.and the success of this transaction with [Ideanomics] will place asset-backed digital offerings firmly on the map.”

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