Financing Sustainable Aviation Fuels 2025

1 Conceptualization and pre-feasibility SAF facilities present significant challenges due to a combination of high risk and long payback periods. For first-of-a-kind (FOAK) facilities, it can take up to eight years from a project’s inception to becoming operational, leading to delayed returns and increased uncertainty. Pension funds, asset managers and commercial banks each face this challenge differently. While long-term investors, such as pension funds and asset managers, may be more willing to accept extended payback periods, they are often hesitant to invest in high- risk projects such as early-stage SAF facilities. At the same time, banks, which typically seek quicker returns and lower risk, are even less inclined to participate, as these long timelines and heightened risks do not align with their investment models until projects are closer to commercialization and present a clearer path to revenue generation. 2 Feasibility and front-end engineering and design During the feasibility and FEED phase, SAF projects encounter steep financial and regulatory challenges. High-cost projections put pressure on the business case and can skyrocket depending on the technical viability of the project. The uncertainty surrounding regulatory frameworks exacerbates these financial pressures. Incentives and policies for SAF production can shift over time or vary significantly by regions. In addition, regulatory timelines do not necessarily align with lengthy project lifecycles. This regulatory fluidity makes long-term planning and financial forecasting difficult for financiers. Furthermore, SAF production facilities venturing into emerging markets face additional “first-in-market” risks. These markets may have unclear or evolving regulations concerning SAF, adding another layer of complexity to the already challenging task of navigating local policies and ensuring compliance. Scalability concerns, particularly related to feedstock availability and prices, also present significant challenges. The lack of alignment on certification standards across different regions and frameworks further complicates the ability to scale- up operations effectively. 3 Project financing and final investment decision In the final investment decision phase, the key challenge is securing substantial capital under high- risk conditions. As funding needs grow, attracting investment becomes tougher due to heightened risks, including uncertainties in demand and supply, cash generation capacity and operational success. Project financing is subject to demonstrating economic returns. With uncertain market prices and unclear willingness to pay for the SAF premium, this becomes highly challenging. Offtake agreements aim to overcome this challenge but are difficult to firm up as fuel represents one of the main operating costs for airlines and can affect competitiveness in a low- margin market. Airlines are not the only offtaker, however, as intermediaries such as commodity trading firms or infrastructure asset owners may also sign agreements and thus reduce the counterparty risk that an airline may bring. This intermediary role is especially pertinent in the tolling model, covered later in this report. These investments into SAF are often in competition with investments into other clean energy investments, requiring return on investments to be in line with those of other technologies for SAF to be attractive. Additionally, there are ongoing concerns about the availability and cost of feedstock, which represent a significant portion of the total operational expenditure. Uncertainty in feedstock supply can further complicate the financial planning and risk assessments necessary for securing the required capital. 4 Construction and implementation The construction and implementation phase presents a host of operational and financial risks that need to be meticulously managed. The process of building SAF production facilities is inherently complex, involving advanced technologies and significant logistical coordination. This phase is fraught with potential pitfalls, including construction delays, cost overruns and technical difficulties that could jeopardize the project timeline and budget. Additionally, the implementation phase requires the alignment of various stakeholders, including contractors, suppliers and regulatory bodies, each of which may present unique challenges. Regulatory hurdles can lead to delays if environmental approvals and permanent operation permits are not secured in a timely manner. Revenue risk will still apply, driven by uncertainty in policies and overall market developments; hence ensuring that the construction remains within budget is critical, as any overruns could strain the developer’s financial resources and affect investor confidence. The high-risk nature of this phase requires robust risk management strategies to safeguard against unforeseen complications that could derail the project. SAF facilities present significant challenges due to a combination of high risk and long payback periods. Pension funds, asset managers and commercial banks each face this challenge differently. Financing Sustainable Aviation Fuels 17