White & Case and Clifford Chance set precedent for SAF projects in Asia Pacific

opinion

by Fayaz Hussain

February 24, 2025

In a landmark development for sustainable aviation fuel (SAF) projects in Asia Pacific, international law firm White & Case has successfully structured and closed a groundbreaking deal in Pakistan, marking several significant firsts for the region and the industry.

Lead partner Kamran Ahmad and senior associate Ryan Gawrych put the deal into context for SAF Investor. “It’s the first SAF project financing in Asia Pacific region, Central Asia, the Middle East … to our knowledge, it’s the first limited recourse project financing involving a private sector company in Pakistan ever.”

SAFCO Venture Holdings announced its plans to build a private sector-led SAF project in Pakistan and broader Asia Pacific region in December last year with funding from the Asian Development Bank (ADB) and the International Finance Corporation (IFC). The facility will have the capacity to produce 145,000 tons of SAF and 18,000 tons of bio-naphtha per annum.

Law firm Clifford Chance has advised the ADB and the IFC on the financing.

“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,” said lead partner Nicholas Wong.

“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,”

For White & Case, the two-year journey to close this deal required innovative approaches to address multiple challenges, from structuring the financing to securing international partnerships. The legal team’s involvement was comprehensive, with Ahmad noting: “We were advising on every aspect of the project, so construction, procurement, feedstock supply offtake, and the financing, the technology license, the intellectual property.”

One of the main legal challenges was structuring the project finance mechanism in a jurisdiction that had never seen such an arrangement before. While simpler financing alternatives were available, the team opted for a more sophisticated approach involving international financial institutions.

“The project could have been financed using different structures, but the idea was to have these international organisations because they have a policy objective to aid sustainable development in places like Pakistan,” Ahmad explains.

The involvement of the IFC and ADB brought significant advantages in risk mitigation.

“Both of these lenders have relationships at the highest levels … Politically, they are familiar with the country and the risks and understand how to navigate … IFC is one of the largest lenders to the country,” says Ahmad. This institutional involvement provided crucial comfort to other stakeholders and enhanced the project’s credibility.

A significant breakthrough in the deal was securing Shell as the offtaker, marking what Gawrych describes as “one of the largest SAF offtake arrangements entered into between a producer and third-party aggregator”.

This meant that the White & Case team had to ensure the legal framework included careful balancing of various stakeholders’ interests, particularly in addressing political risk concerns and some of the inherent risks associated with development market for low-carbon fuels.

“There was quite a lot of negotiation around termination rights and in what circumstances they could be triggered … The whole idea was that you needed to provide a degree of comfort for lenders that the offtake was committed and yet recognise some of the underlying commercial and operational flexibility required by the market,” explains Gawrych.

White & Case also worked with SAFCO and Shell to set up a pricing mechanism in place that was acceptable to both parties, given the evolving nature of the SAF market.

Gawrych describes it as “a hybrid pricing mechanism that has both fixed and variable components. Some of those variable components [are] index linked.” This structure was designed to provide Shell with necessary flexibility while ensuring project viability and debt service capability.

In terms of investment, the ADB has committed a total of $86.2m for the project with the IFC providing another $35m in equity and debt financing.

The financing structure incorporated innovative elements, including the first deployment of private infrastructure debt through ADB’s Term Loan B funding in Pakistan, with NinetyOne and ILX providing funding under the ADB facility. Ahmad explained why this was needed: “It could have been a lot easier to raise capital for this project using other structures and other sources of funds, but the sponsor [SAFCO Venture] actually wanted to take an approach which was more complicated but in the longer run provides more certainty to the project.”

The project’s feedstock supply arrangements presented another unique challenge given the SAF facility will use waste-based feedstock including used cooking oil. SAFCO structured a community collection programme for used cooking oil, working with local entities to establish a sustainable supply chain.

“It’s part of their social licence to operate. They set up a community collection service to provide a pathway for waste disposal. There’s 200 plus sites around Lahore that they have vetted and entered into arrangements with,” adds Gawrych.

White & Case’s work on this project has established important precedents for future SAF projects in developing markets. The legal structures developed address critical challenges including political risk mitigation, sustainable feedstock sourcing, technology licensing and pricing mechanisms in emerging markets.

These innovations provide a template for similar projects in other jurisdictions, particularly in regions where traditional project financing structures may not have been previously implemented.

Clifford Chance also recently advised the US Department of Energy LPO on its $1.46bn conditional commitment to help finance a SAF facility.