Financing Sustainable Aviation Fuels 2025

What? The US Department of Energy (DoE)’s Loan Programs Office (LPO) is a federal initiative that provides financial support to accelerate the commercialization and deployment of innovative energy projects and technologies. By providing loans, loan guarantees and other forms of financial assistance to innovative, large-scale renewable energy, advanced transportation and energy efficiency projects, the LPO aims to accelerate closing the gap between early-stage innovation and market adoption. How? As of August 2024, 211 active applications across a wide range of industries were submitted with a total of $296 billion of loans requested.11 The application is a multi- step process:12 1 Pre-application: LPO meets with potential applicant to discuss project eligibility, application process and applicant questions. 2 Application and review: LPO establishes project eligibility and readiness to proceed, followed by programmatic, technical and financial evaluation. 3 Due diligence: LPO and applicant engage third-party advisors to cover technical, market, financial, credit, legal and regulatory reviews and negotiate term sheet. 4 Conditional commitment: LPO offers term sheet for loan or loan guarantee. The offer is contingent on the borrower satisfying certain conditions. 5 Financial close: LPO and borrower execute definitive financing documents, subject to additional conditions ahead of loan disbursement.6 Monitoring: LPO monitors project and acts as trusted party for the life of the loan. It is important to note that while the LPO can lend up to 80% of project cost by statute, it is more common to see a loan-to-value of 50-70%. As a result, project developers need to ensure enough equity investments have been secured to unlock the additional guarantees. Impact? By October 2024, the DoE LPO had supported 67 projects with a total of $65 billion awarded. Just over half (37 projects at $37 billion) had been through loan guarantees. In October 2024, the US DoE LPO also announced nearly $3 billion in loan guarantees for two SAF projects. In addition, many US producers are in the process of securing approvals. For example, World Energy has been invited to submit a Part II Application for a ~$2 billion loan guarantee for its planned Houston production facility through the Title 17 Clean Energy Financing Program. Securing an LPO loan guarantee has significant benefits. First, it will drive more interest from institutional lenders, as companies securing loan guarantees are considered reliable and future-proof, having successfully completed a thorough due diligence process. Second, it results in lower interest rates driven by the de-risking nature of the loan guarantee. At the date of publication of this report (February 2025), after the new US administration took office, it is unclear whether the US DoE Loan Programs Office and wider federal funding programmes, including for SAF, will be taken forward in their current form, and the implications for SAF projects awaiting support are not yet known. CASE STUDY 4 US Department of Energy loan guarantee program Financing Sustainable Aviation Fuels 24