Bain Capital Bets Big on Greener Jet Fuel

A big investment company called Bain Capital is betting that a cleaner type of jet fuel will become very popular in the coming years. The fuel is called sustainable aviation fuel, or SAF. It is made from waste materials like used cooking oil instead of regular oil pulled from the ground. Bain Capital has put more than $700 million into a company called EcoCeres, which makes SAF in China and Malaysia. The firm believes new government rules in several countries will soon force airlines to use more of this greener fuel.

James Tam, a partner at Bain Capital, says SAF is at the very beginning of a growth period that could last many decades. He also serves as co-chair of EcoCeres. Tam says rules requiring airlines to cut their carbon emissions are spreading from Europe to Asia, which will drive more demand for SAF. He added that hydrogen-powered or electric planes for long flights are still many years away.

EcoCeres is currently the world's second-largest producer of SAF by production capacity. The company supplies fuel to well-known airlines like Qantas, Air France, British Airways, and Cathay Pacific. It has two plants — one in eastern China and one in Malaysia — that together can produce about 770,000 metric tons of renewable fuel each year. The company is also planning to go public on the Hong Kong stock exchange, which means regular people could soon buy shares in it. Reports say the stock offering could raise around $1 billion.

Right now, the SAF industry has a big challenge. Airlines are not buying as much SAF as producers can make, partly because SAF costs more than regular jet fuel. A global aviation group estimates that only about 2.4 million metric tons of SAF will be produced in 2026, which is just 0.8% of all jet fuel used worldwide. At the same time, factories could produce more than 9 million tons if demand were higher. This gap between supply and demand is a real problem for the industry.

Despite these challenges, Tam sees good signs from governments in Asia. China's latest five-year plan, which covers 2026 to 2030, lists SAF as a fuel the country wants to develop. Hong Kong published its own five-year plan in September, setting a goal for SAF to make up 1% to 3% of fuel for flights leaving Hong Kong by the year 2030. Tam says these plans show that rules requiring SAF use in China are likely coming soon, even though exact targets have not been announced yet.

To help meet Hong Kong's goals, EcoCeres is building a new plant in Dongguan, a city in Guangdong province near Hong Kong. The plant is expected to open by 2030 and will be able to produce 450,000 tons of SAF per year. It will help supply airports in Hong Kong, Shenzhen, and Guangzhou. Tam said the total cost of building and running the plant over ten years would be around HK$10 billion, which is about $1.27 billion U.S. dollars. If the plant produces more SAF than Hong Kong needs, the extra fuel can be sold to Europe, where the European Union requires airlines to use at least 6% SAF by 2030.

One thing that makes EcoCeres stand out from other SAF producers is where it gets its raw materials. The company collects used cooking oil from about 500,000 restaurants across China, and it can trace exactly which restaurant each batch of oil came from. This is important to airlines, which want to prove to customers that their fuel really does come from waste and not from crops that could be used for food. EcoCeres also owns all of its own technology instead of renting it from other companies, which helps keep its costs down. These advantages, Tam believes, put EcoCeres in a strong position as the world moves toward greener air travel.