Hey Folks, Jeff Bishop here.
An interesting trade idea has come on my radar that you should have on yours ASAP.
Have you heard of synthetic aviation fuel (SAF)?
Don’t worry if you answered “no,” I hadn’t either until I came across this exciting company.
SAF is a low-carbon alternative to conventional jet fuel, designed to reduce the aviation industry’s environmental impact with an average CO2 reduction of 70%.
SAF is a drop-in fuel that can be made from things like used cooking oil, distillers corn oil, and animal fats that can then be blended with conventional jet fuel for use in commercial flights.
Beginning this year, the European Union is requiring fuel uplift at EU airports to contain at least 2% SAF, with requirements reaching 6% by 2030, 20% by 2035, and eventually 70% by 2050.
This applies to all flights from the EU, regardless of destination.
Likewise, Japan has a mandate for SAF to account for 10% of domestic airlines’ jet fuel consumption by 2030.
On the home front, the Inflation Reduction Act offers an SAF credit that “ranges from $1.25 to $1.75 for each gallon of sustainable aviation fuel in a qualified mixture.”
This is clearly a big trend, and it’s flying under most investors’ radars.
To date, there hasn’t been a pure-play public SAF company in the U.S. for investors to sink their teeth into.
The company went public via SPAC and began trading on the Nasdaq on June 9 — last Monday.
This is a ground-floor opportunity on a rapidly-growing trend, and I suggest putting it on your radar right away.
Here are some key things to know:
SAFX rang the bell on June 9 after finishing a SPAC merger with Focus Impact BH3, becoming the only stand-alone SAF producer you can buy on U.S. public markets. Think of it as the UFC debut for green jet fuel.
Unlike most pre-revenue green tech plays, SAFX’s New Rise plant in Reno, Nevada, is up and running, kicking out renewable fuels since February and shipping barrels of fuel to Phillips 66 under a long-term offtake deal.
The company’s first SAF deliveries rolled in March, yielding early cash flow. Ramp-up processes are underway to improve output. In the meantime, the facility is temporarily producing renewable diesel at nameplate capacity (~3,000 barrels per day!) and expects to bring SAF production back online in Q3.
The Reno site sits on just 10 acres, thanks to a modular, copy-and-paste design that SAFX has a utility patent pending on.
That blueprint will let them fast-track an add-on facility in Reno expected in 2027, and one site in North Carolina and another in Florida expected by 2028.
Within the next 5 years, SAFX expects to have the ability to produce 159 million gallons of neat SAF annually!
SAFX currently uses distillers corn oil — a waste byproduct — so it dodges the food-vs-fuel debate and taps a cheap feedstock.
Combine the Inflation Reduction Act’s SAF credits plus state Low Carbon Fuel Standard (LCFS) programs and you get margins most refiners would envy.
The formula here is flexible feedstock + guaranteed offtake = unit economics that work.
SAFX has a small float and is still finding its footing from its IPO. A float of this size plus the company’s ESG hype make every headline a potential moonshot.
Final Thoughts
If you want pure exposure to the SAF wave, SAFX is literally the only game in town — but it’s still in the early rounds.
I was very impressed by this Schwab Network interview with SAFX’s CEO, which I found very informative.
As he pointed out, we’re still “really, really early” in the SAF game, so this really is a ground-floor opportunity.
Be sure you also check out the company’s website.
As always, be sure to approach your trading in a responsible manner. Trading is very risky, and nothing is ever guaranteed, so never trade with more than you can afford to lose.
Please read the full disclaimer at the bottom of this email as well so you are aware of additional risks and considerations. Always have a well-thought-out game plan that takes your personal risk tolerance into consideration.
To Your Success,
Jeff Bishop
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