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Renewable
Jet Fuels
Carbon War Room
September 2014
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Contents
2
I. Introduction to Renewable Jet Fuel and
Leading Companies
II. Overview of the RJF Forward Access Model
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Carbon War Room
5
The Market
Policy
Technology
CWR: Dismantling Market Barriers
Capital
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Renewable Jet Fuels and the Valley of Death
How do Scale Proven Technologies?
Renewable Jet Fuels and the Valley of Death
How To Scale Proven Technologies?
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Renewable Jet Fuel Pathways
7
Natural Oils
Jatropha
and Other
Perennial
Oilseeds
Camelina Waste
oil/tallow
Aquatic
Micro-
Organisms
Hydrolysis of
Biomass to
Produce Sugars
Biomass
Hydrotreating
Thermochemical Conversion of
Biomass
Pyrolysis
Oil
Gasification
to Fischer-
Tröpsch
Fermentation of
Sugars through
GMOs to Produce
Alcohols, Oils or
Hydrocarbons
Further Refining to Produce Finished Fuels
Liquid-
Phase
Catalytic
Processing
• Food-based
starch crops (corn,
sugarcane)
• Dedicated Energy
Crops
• Residues/Waste
streams
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Certain Demonstrated
Technologies Exist
8
$60.00 $77.50 $95.00 $112.50 $130.00 Base Value
Base Value = $80.81 cost per barrel in 2018 Dollars
Variable
Seed Yield at Maturity Scenario High Low Base
Non-Labor Irrigation ($/HA) 0.00 600.00 100.00
Average Labor Per Harvesting Man Day 5.00 30.00 10.00
Hectares Harvested Per Man Day 2.00 0.15 0.40
Crop Maintenance Labor ($/HA) 40.00 400.00 100.00
3rd Party Crushing ($/Tonne) 11.00 55.00 35.00
Seed Oil Content Scenario High Low Base
Number of Harvests Per Year 1 10 6
Cost of Crude Oil Scenario Low High Base
Years to Production 2 0 1
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Renewable Jet Fuel Deal Model
9
Airline Challenge: Airlines are subject to escalating, unpredictable fuel (&
carbon) costs that are currently the largest single portion of operating costs.
Supplier Challenge: Low carbon, renewable jet fuels are not yet at
commercial scale. Certain demonstrated technologies exist, but suppliers
are facing the “Valley of Death”
Solution: Connect fuel consumers and fuel producers through a
transaction that solves for both challenges.
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What Do Airlines Need?
10
Fuel
• Certified (technical, sustainability)
• At or below market price (at volume)
Complete solutions
• Able to be integrated into existing business model without additional infrastructure or human capital
investment
Airlines’ constraints:
• Cannot purchase more than small volumes of fuel at price premium
• Generally do not make direct investments in external companies/assets
• Creditworthiness insufficient to support project loan with offtake agreement
• Limited control over physical fuel delivery infrastructure
• Challenges in sustainability credentials/messaging
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Financial Structure
11
Airlines RJF
Supplier(s)
• Airlines buy long-dated contracts for sustainable renewable jet fuels
specifying future volumes at a predetermined price structure.
• Fuel delivery will begin 1-5 years from date of contract signing and will
continue for a specified multi-year period.
• The offering will be syndicated among a select number of airlines,
limiting the expense and individual exposure of any one airline. The
money raised through the sales of the RJF contracts creates a pool of
non-dilutive capital that can be infused into selected renewable fuel
producer(s).
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Financial Structure
12
The opportunity is to access the rights to future output of competitively priced renewable fuels
for physical delivery and carbon credits
Fossil Jet Fuel – Cost of Physical
Delivery + Regulatory Credits
Renewable Jet fuel
production cost
Upper price collar
Lower price collar
Time
$/bbl
Where the price of fossil Jet-A and
the cost of production of renewable
Jet fuel meet
While fossil Jet A is the main supply, the market price of renewable will
follow the red line – even though the production cost will likely diminish
Financial benefit to
the airline
• Net Present Value of Contract = Total Fuel Savings Adjusted By Discount Rate
• Discount Rate = Airline’s WACC + Fuel Project Risk
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Mutual Benefit
13
Benefits for Airlines
• The right/ability to purchase lower cost RJF over a long-term time
horizon
• Reduced fuel prices and price volatility over the medium-long term
• An innovative vehicle to meet carbon emission reduction targets
• Airlines need not make direct investment in upstream companies or
assets. No need to pay premiums for fuel today.
• Public relations benefits: taking concrete climate action, setting a
precedent for the airline industry.
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Mutual Benefit
14
Benefits for RJF Producers
• The fuel producer receives a much-needed short-term, non-dilutive cash
infusion and a long-term off-take contract for fuel;
• Improved ability to attract the growth capital it needs to produce
commercial volumes of fuel.
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Thank You
Dan Fuller, Senior Advisor
Mobile: +1 202 256 6013
Suzanne Hunt, Senior Advisor
Mobile: +1 202 256 6013
Aaron Tyrell Mitchell, Associate
Office: +1 202 717 8446