The University of Michigan President Commission for Carbon Neutrality (PCCN) reports a goal of fully electrifying the transit bus system called Magic Blue Bus by 2035 as part of the wider goal of achieving carbon neutrality from scope 1 and scope 2 emissions by 2025. This will require the purchase of new battery electric buses (BEB) and the expansion of the current transit infrastructure to include charging facilities, all of which provide large upfront costs. The current method of financing

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... Magic Blue Buses includes grants and awards from Michigan Medicine. However, to attain a successful transition, more sustainable financing models must be set up. A Project Finance Model is proposed where the University becomes an off-taker of electric bus services through a lease agreement with a Special Purpose Vehicle (SPV) set up by Proterra. The University refinances the lease through proceeds from bond issuance in the capital market, revenues from the sale of carbon credits and the resale of excess electricity stored in the electric battery. A financial model is set up to calculate the Cost-Benefit analysis, Net Present Value (NPV), the Payback Period, and the Internal Rate of Return for the Project Finance Model. A sensitivity test is also carried out to determine the optimal interest rates that investors can charge on their capital. The work provides a model for assessing the cost feasibility of a transition to a BEB fleet at the University of Michigan, Ann Arbor campus by 2035.