Global law firm Clifford Chance has advised the Asian Development Bank (ADB) and the International Finance Corporation (IFC) on the financing of a landmark sustainable aviation fuel (SAF) facility in Sheikhupura, Pakistan, to be constructed and operated by SAFCO Venture Holdings Limited (SAFCO Ventures). The financing represents the first project financing of a SAF project in the region.
The facility will produce up to 200,000 tons per annum of SAF and Bionaphtha, from waste-based feedstock, including used cooking oil. The project is being developed by SAFCO Ventures, whose subsidiary already owns and operates a 50,000 tons per annum biodiesel facility in Pakistan. Shell Eastern Trading (Pte) Ltd has signed a long-term offtake agreement with SAFCO Ventures for volumes of up to 145,000 tons per annum of SAF from the facility.
ADB as the mandated lead arranger and booker runner has arranged a US$86.2 million debt financing package, which includes a US$41.2 million loan from ADB’s ordinary capital resources and US$45 million in syndicated loans, including B-loans from The Emerging Africa & Asia Infrastructure Fund (an emerging market infrastructure debt fund owned by the Private Infrastructure Development Group (PIDG) and managed by NinetyOne) and ILX (an Amsterdam-based emerging market asset manager focused on the United Nations’ Sustainable Development Goals and climate private debt strategies), and loans from IFC. A portion of ADB’s financing component is enabled by the Innovative Finance Facility for Climate in Asia and the Pacific (IF-CAP), a pioneering leveraged guarantee mechanism for climate finance adopted by a multilateral development bank. This is the first project to utilise the IF-CAP and the first private sector-led SAF initiative in the APAC region.
IFC’s US$35 million financing package is structured as a mixture of debt and equity. Of the total equity contribution, US$20 million comes from IFC’s own account, with an additional investment of up to $10 million from a climate-related blended finance program recently launched in partnership with the UK Foreign, Commonwealth & Development Office.
The aviation sector is traditionally seen as a hard-to-abate industry. The International Air Transport Association (IATA) estimates that SAF, a biofuel made from renewable biomass and waste resources, “could contribute around 65% of the reduction in emissions needed by aviation to reach net zero CO2 emissions by 2050”. It is hoped that this pioneering transaction helps to establish a bankable precedent in Asia Pacific, catalysing private sector participation in the renewable fuel sector in the region and helping to close the demand/supply gap.
Lead partner Nicholas Wong said, “The landmark investments made by our clients in this innovative project breaks new ground in the move to decarbonise the aviation sector and fuel the energy transition. Our work for ADB and IFC demonstrates our dedication to promoting sustainable development and supporting their mission to create positive impact in emerging economies. We are thrilled to support ADB and IFC in another first-of-its-kind transaction and help realise the vision of the SAFCO Ventures team.”
ADB Director General for Private Sector Operations Suzanne Gaboury said, “The Asian Development Bank’s financing for the construction and operation of SAF facility in Sheikhupura will promote the development of the renewable fuels market in Pakistan. It underscores ADB’s steadfast commitment as Asia and the Pacific’s climate bank to promote innovative and sustainable solutions to address climate change. Our collaboration with Clifford Chance on this landmark transaction was instrumental in the timely closing of the deal.”
“Successfully securing the development of the SAF project marks a significant milestone for SAFCO’s commitment to ‘net zero by 2050’, Pakistan’s economic development, and environmental stewardship”, said Taimur Shaikh, Founder and Executive Chairman of SAFCO Ventures. “This remarkable achievement was made possible through the dedicated collaboration with our partners: Asian Development Bank, International Finance Corporation, Rothschild and Co, Axens, White & Case and Clifford Chance. Together, we look forward to continuing our journey towards a sustainable future.”
Nicholas and counsel Tom Capel led the Clifford Chance team, with support from a Singapore-based team, including associate Jonathan Lin, senior associate William Holmden and trainee solicitor Caiying Seah. Partner Jessica Springsteen and associates Alejandro Leon and Douglas Mulliken in Washington, DC provided additional advice to IFC. Partner Matthew Buchanan and senior associate James Thornton in Singapore advised on construction and procurement aspects. Partner Bruce Kahl, senior associate Struan Murray and trainee solicitor Liam Woodward in London provided advice to the offshore agent, security agent and account bank. Mohsin Tayebaly & Co. advised on local law in Pakistan, with Walkers advising on matters of British Virgin Islands law.
These transactions build on Clifford Chance’s extensive track record in sustainable financing globally, having recently advised the Asian Development Bank on financing a carbon offset project in India and IFC on two sustainable finance projects worth a combined US$175 million. In the field of SAF, the firm also recently advised the US Department of Energy LPO on its US$1.46 billion conditional commitment to help finance a sustainable aviation fuel facility.
