WFW writes the playbook on eSAF deals

opinion

by Fayaz Hussain

December 22, 2025

Dr. Dirk Janssen

When law firm Watson Farley & Williams (WFW) was asked to advise on Europe’s first large-scale eSAF investment – Project Endor in Vradenburg, Denmark – it had no playbook to follow. No market standards or precedent for structuring a deal in a sector where technology is still finding its feet.

“It was challenging because it was a first-of-its-kind production site,” says Dr. Dirk Janssen, WFW partner who was representing investment and asset manager KGAL in the transaction and specialises in mergers and acquisitions and private equity. “There is no market standard. We had to spend a lot of thought on what can happen in the future and how we can de-risk these challenges for our clients.”

For WFW, the deal, which saw KGAL invest in Arcadia’s eSAF project, required unique structures to the ensure interests of both parties were accommodated. This included the technology risks and final investment decision contingencies. Every element had to be carefully negotiated and documented, Dirk tells us.

Now with the European Commission’s newly announced Sustainable Transport Investment Plan (STIP), Dirk believes the eSAF project developers are finally getting the framework they need to achieve the scale and reach financial investment decision. For eSAF, the struggle in securing investment to scale lies in the mismatch between how producers and off-takers view the future – especially pricing.

“When you produce eSAF, you need price certainty for a long period of time,” Janssen tells us. “You need long-term off-take agreements to make projects bankable.” Producers need decade-long contracts with a clear view on pricing to attract capital investments – which can run into billions.

On the flip side, off-takers see things differently. They are confident that as more projects come online and eSAF achieves scale, prices will eventually decrease. For them, entering into short-term agreements with flexible pricing is the best way forward. “Both these interests are so controversial that in the past, the market could not really be unlocked,” Janssen says.

By the EU’s STIP, most of these concerns have been addressed. The plan allocates €3bn for sustainable fuels across aviation and maritime projects. A dedicated €1bn has been allocated for eSAF. While the eSAF industry will need more than €50bn by 2035 to reach the scale it needs to meet the mandates, Janssen says much will depend on how accurate the STIP mechanisms are implemented.

“A strategic part of this plan is the implementation of a two-sided auction system,” Janssen explains. “This is a game changer.”

The auction Dirk is referring to will work as a mechanism backed by the EU. The producers will quote minimum prices for their product whilst the offtakers will quote maximum prices they are prepared to pay. The price differential between what the producers need to receive and what off-takers are willing to pay will be paid for by the EU. This auction system starts as a model for which €500m is earmarked.

The result is designed to solve the problem for both sides. The impact of this announcement is already visible. Janssen says the STIP has been well received by investors. In a recent discussion he had with one of the largest infrastructure investors, he recounted: “They said, ‘We looked at eSAF in the past, but it was too risky.’ I explained the plan [STIP] and they were really surprised. They said, ‘If this will be properly implemented, there is a new basis for us looking into it.’

Janssen says that eventually capital will follow bankable projects. And the double-sided auction delivers on that. It doesn’t just provide price support, it also strengthens the regulatory framework. This gives a signal to investors that the EU is seriously committed to eSAF production and subsequently the mandates. “If these projects become bankable, then investors will follow,” Janssen says.

And it is important for aviation decarbonisation that eSAF scales. “In the short run: long-haul flights with battery? No chance. With hydrogen? No chance,” Janssen states plainly. “eSAF is a drop-in fuel. There is no technical change required. Therefore, there is no alternative. We need to unlock this.”

Janssen says WFW is doing its part to scale this transition. WFW is participating in Project SkyPower’s working groups – a coalition of leading industry CEOs working on eSAF’s potential. The work of Project Skypower led, for example, to the structural proposals for the double-sided auction.

Last week, Austria, Finland, France, Germany, Luxembourg, Netherlands, Portugal and Spain announced the launch of the Early Movers’ Coalition for SAF. The first contracts under the double-sided auction mechanism are targeted for mid-2026. But Janssen says a lot needs to be done to reach the goals of the STIP.

“We need to combine speed with accuracy,” he says. “Be precise, be innovative, be pragmatic. These are the three pillars which we need to observe.” The risk? Getting lost in legal complexity. “Lawyers can be very, very technical,” Janssen acknowledges with a smile.

“For the EU, it’s a really big step what they have done here,” he adds. The next step belongs to the market – and the race to FID is on.