Australian-based global investment group Macquarie Asset Management (MAM) has announced a €175 million ($190m) investment in Amsterdam-based SkyNRG, an established global provider of sustainable aviation fuel. SkyNRG sources, blends and distributes SAF, and is developing production plants in the Netherlands and the US Pacific Northwest to help meet demand for the fuel. The company has secured partnerships with key aviation companies including KLM Royal Dutch Airlines and Boeing, and has “envisaged long-term commitments” in SAF deals valued at up to €4 billion. While SkyNRG has secured significant backing from a major investor, two major start-up waste-to-SAF producers, Fulcrum BioEnergy and Velocys, are said to be facing financial challenges as they develop their respective projects. Reports in the US say Fulcrum, which started operations at its Sierra commercial-scale facility in Nevada in May last year, has failed to make bond repayments, while Velocys said an expected $15 million US investment has fallen through.

Managing nearly $600 billion in assets globally, MAM’s investment in SkyNRG marks its first in sustainable aviation fuels. “We have a track record for backing businesses working at the forefront of energy transition,” said Mark Dooley, Global Head of MAM Green Investments. “This is an exciting milestone for us. SkyNRG has been a pioneer in SAF, with an entrepreneurial spirit and a strong commercial focus. We look forward to collaborating with the SkyNRG team as they grow their business and advance solutions to decarbonise the aviation industry.”

Since its establishment 14 years ago, SkyNRG has been a leading supplier of SAF and a prominent advocate of global government support to provide incentives or mandates for production and use of the low-carbon fuels. In 2011, the world’s first commercial flight using SAF was supplied by SkyNRG, which has since expanded into research and development, SAF sales, and advisory services.

Announcing the initial stake from Macquarie’s GIG (Green Investment Group) Energy Transition Solutions (MGETS) Fund, the two companies said the SAF sector was benefiting from “significant tailwinds” including voluntary corporate offtake commitments in support of their net zero emission targets, as well as increasing political and regulatory support, including Europe’s ReFuelEU mandate that requires escalating use of SAF, and the Biden Administration’s SAF Grand Challenge and Inflation Reduction Act, which respectively set steep targets and offer strong incentives for the use of SAF.

SkyNRG estimates that by 2050, the airline sector’s target year for net zero carbon emissions, incentives to use SAF will create demand for up to €650 billion ($700bn) of investment in the sector.

“It is critical that SAF production capacity is developed now to enable the aviation industry to meet its net zero goals,” said SkyNRG CEO Philippe Lacamp. “We are very proud that Macquarie has made this strategic investment in our business, and we are confident that they, with the ongoing support of our existing shareholders, will provide us with the resources and expertise we need to accelerate our growth journey towards becoming a major player in the SAF industry.”

Initially, SkyNRG is planning to establish three production plants – Europe’s first dedicated SAF facility in Delfzijl, Netherlands, in partnership with Shell, KLM and SHV Energy, the SynKero synthetic fuel plant in the Port of Amsterdam, and a facility in the Pacific Northwest of the USA, with partners including Boeing.

The Delfzijl and Amsterdam facilities are each targeting annual production of 100,000 tonnes of SAF, while the US plant is aiming for 90,000 tonnes per year. Delfzijl will also produce over 35,000 tonnes of sustainable by-products per year, including LPG and naphtha, while the Pacific Northwest plant will specifically service key US west coast markets supported by Low Carbon Fuel Standard policies. The SynKero facility will produce eFuels from captured CO2 and green hydrogen, and have the added benefit of access to an existing fuel pipeline to Amsterdam’s Schiphol Airport.

Macquarie Asset Management has set a target of net zero emissions by 2040 and manages its investments in line with that commitment. In its recently released 2023 Sustainability Report, Macquarie highlights the switch of global investment managers to more sustainable portfolios and warned that carbon-intensive businesses would struggle to progress. “From our experience,” said Macquarie, “carbon-intensive assets are becoming more expensive to insure, harder to finance, more challenging to recruit top talent to and ultimately have a more limited set of future buyers.”

Ben Way, Group Head of Macquarie Asset Management, added: “In most cases, the energy transition is creating significant opportunities for businesses to preserve and create value. Those who aren’t adapting or evolving risk being left behind.

“Global investment in the energy transition exceeded US$1 trillion for the first time in 2022 and investment in new renewable energy supply now surpasses investment in fossil fuels. We are seeing a significant acceleration in change across all sectors and geographies.

“Supported by the economics of green technologies and bolstered by transformative policy initiatives, we believe the energy transition will lead to even greater investment opportunities for our clients.”

Meanwhile, in a market statement, Velocys said a planned $15 million investment from New York-based Carbon Direct Capital would not go ahead after it failed to secure $40 million from other backers by a target date of the end of October. The company’s proposed Altalto Immingham SAF facility in north-east England received £27 million ($33m) from the UK government’s Advanced Fuels Fund late last year.

Last month, Velocys launched its new technology facility in Plain City, Ohio, which will house the reactor core assembly and catalysis operations that form a critical part of the company’s SAF production process. It is expected the facility will have sufficient production capacity to meet projected orders until 2028, including those from Altalto Immingham and its other biorefinery project, Bayou Fuels in Mississippi.

“The completion of this state-of-the-art facility is a real milestone both for Velocys and for the move to decarbonise the aviation industry,” said CEO Henrik Wareborn. “To move from planning permission to completion in two years is a testament to all those involved and takes us a big step closer to enable our clients to produce SAF with ultra-low carbon intensity at commercial scale.”

Another pioneer of converting municipal solid waste to jet fuel at commercial scale, California-based Fulcrum BioEnergy, is said to have missed repayments on bond financing tied to its Sierra BioFuels Plant & Feedstock Processing Facility in Nevada. According to documents, the company must work with trustee UMB Bank to come up with an alternative financing agreement. Plans for a new SAF facility in Gary, Indiana are reported to be on hold. The company has so far made no comment.

Equity partners in Fulcrum include BP, Japan Airlines, Cathay Pacific Airways and United Airlines. Like Velocys, Fulcrum BioEnergy’s UK subsidiary received a grant of £16.8 million ($20 million) from the Advanced Fuels Fund to support the development of the Fulcrum NorthPoint facility in north-west England.

Photo: Shell/SkyNRG/KLM

Tony Harrington

Correspondent

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Additional reporting by Christopher Surgenor