A large German energy company was planning to add sustainable aviation fuels (SAF) to its portfolio as part of the energy transition. The interim manager was commissioned as an expert in trading with renewable energies to conduct negotiations for the energy company on the envisaged joint venture and to accompany it through to the operational business.
The company had launched several projects as part of its strategic expansion plan for the future business with sustainable aviation fuel. The interim manager acted as an external consultant on the largest project: a special biogas plant in northern Sweden, which is to supply up to 100 kilotons of SAF annually. As the German energy company had no expertise in this conversion (Fischer-Tropsch synthesis), a South African company specializing in this technology was approached and a letter of intent was signed to establish a 50/50 joint venture between the companies.
Contracts drawn up with the partner for the SAF joint venture
The interim manager was tasked with representing the interests of the German energy company in the negotiations. Together with the internal legal team, he initially drew up the term sheet and drafted the joint development agreement and the shareholders' agreement. The main challenge was to coordinate the interests of the parties involved and to take into account three different legal systems (Sweden, South Africa, Germany). Thanks to the very constructive cooperation, this work was completed ahead of schedule. All contracts were accepted by the management levels of the companies without any adjustments.
Framework for the business activities of the SAF company fixed
After the interim manager had clarified the legal aspects of the joint venture formation, he was intensively involved in the preparations for the operational business. In close contact with the client's electricity and biomass traders and the JV partner, he drew up letters of intent regarding the location of the joint venture and the expected quantities, quality and price structure of the sustainable aviation fuel. He also negotiated the supply of the raw materials. This involved long-term supply contracts for the biomass (more than 500 kt/a) and power purchase agreements (PPAs) for renewable electricity (more than 1.5 TWh/a) to the joint venture.
Client persuaded to realign SAF marketing
At the start of the mandate, the client did not yet fully understand the aviation fuel market. The company had therefore assumed that it would be able to market SAF directly to airlines. However, this is not possible: SAF has to be mixed with conventional kerosene and transported. In addition, the assets at the airport (storage tanks and refueling facilities) are under the control of the oil companies. Thanks to his expertise, the interim manager was able to persuade the client to reorient itself and find a cooperation partner in the kerosene sector. The interim manager contacted several companies and received competitive offers.
Advancing the commercial exploitation of by-products
The interim manager also opened up a second market for his client by facilitating the commercial exploitation of a by-product of SAF production (naphtha). Naphtha can be used as a raw material for the chemical industry or as a blending component for gasoline. The interim manager contacted several companies. This resulted in several competitive offers, letters of intent (LOIs) and term sheets.
Project profitability secured by a clear hedging strategy
In order to minimize the risk of the joint venture, a hedging strategy had to be formulated. The raw materials market (biomass, electricity) and the product market (kerosene, naphtha) do not correlate well. Significant price fluctuations could jeopardize the profitability of the project, making it too risky for investors and management. The interim manager developed a clear hedging strategy to ensure the security of returns from the trade while maintaining the upside potential to capitalize on market opportunities.
Support in meeting regulatory requirements
The interim manager's experience in sustainable biofuels and the kerosene market supported the engineering and sales teams in finding the appropriate approach to ensure physical quality and meet all regulatory requirements to gain support from governments and regulators.
Coordinated legal, technical, finance, commercial, tax and regulatory sub-groups
As a key member of the project team and holder of important information and knowledge, the interim manager was deeply involved in project management. He was responsible for keeping the entire team up to date with all information from the market and progress. He coordinated the legal, technical, financing, commercial, tax and regulatory subgroups and ensured that everyone was working in the same direction.
Companies continue to drive the realization of the project
Now that the project has cleared the first internal hurdles, the companies are continuing to drive SAF production forward. The final investment decision (FID) has not yet been made, but is very likely to be positive. Construction of the large-scale project could then begin.
