Can anyone say what percentage Neste has of the current and planned and under construction global SAF (Sustainable Aviation Fuel) production capacity?
I have considered Neste too expensive for a long time, but now the share price is at such a lower level that it’s starting to be appealing. I believe that within a five-year timeframe, SAF demand will grow sharply, which should also raise its price. Is SAF such a significant part of Neste’s production that the rise in SAF demand and price has the potential to significantly increase the company’s operating profit?
So with Martinez fully online, as we stated earlier, we continue to expect EBITDA contribution going forward. As you saw in the release, we were positive $28 million in fourth quarter.
As a small clarification, the company in question is Marathon Petroleum Corporation (not Martinez Petroleum).
But yes, it was mentioned in that conference call.
The companies will jointly assess how Neste’s renewable solutions could help DHL Group make its entire logistics chain as sustainable as possible.
The aim of the cooperation is to utilize renewable diesel and sustainable aviation fuel to reduce emissions from DHL’s transportation.
To strengthen their cooperation focused on reducing logistics emissions, DHL Group and Neste have agreed to jointly assess how Neste’s renewable solutions, such as renewable diesel and sustainable aviation fuel, can support DHL’s goals for reducing emissions from air and road transport.
DHL Group aims to achieve net-zero emissions in its logistics by 2050. The company’s 2030 interim targets include electrifying two-thirds of last-mile delivery vehicles and increasing the share of more sustainable fuels to over 30 percent in all transportation, including the use of sustainable aviation fuel. Neste, the world’s leading producer of renewable diesel and sustainable aviation fuel, can support DHL Group in achieving these goals.
To enable DHL Group to achieve its air transport targets, the parties are developing a commercial model under which DHL Group would gradually increase its purchases of unblended sustainable aviation fuel from Neste to a total of approximately 300,000 tons per year by 2030, and which would also enable additional sales and purchases of sustainable aviation fuel. At the same time, DHL Group and Neste are exploring the use of renewable diesel to achieve DHL’s emission reduction targets in road transport.
Marathon also for the first time separated and reported renewable diesel as its own segment. In addition to the Neste and Marathon joint plant located in Martinez, the segment includes a much smaller 164 million gallon RD plant located in North Dakota and other miscellaneous items. However, the joint venture with Neste likely accounts for ~70% of the segment’s operations, so the results of the Martinez plant can be quite clearly read from the figures. Overall, the segment has been EBITDA-negative for a couple of years now and only in this latest quarter did it squeeze into EBITDA-positive territory, when full capacity was achieved in Martinez:
Furthermore, they even reported the gross margin of renewables in the segment. Although they did not disclose actual sales volumes, it was reported that the plants are now operating at maximum capacity, so one can “guestimate” that the Martinez plant’s RD gross margin per ton in Q4 was probably something like $200-300/t, adjusted for inventory write-downs. Of course, it matters whether Martinez reached its maximum capacity at the beginning or end of the quarter, or somewhere in between.
Otherwise, Marathon’s management spoke quite favorably about Neste and the future of the joint venture, but they were not very enthusiastic about additional investments in their renewables segment and budgeted almost zero euros in capex for the segment this year. Management commented that they are now focusing solely on the stable operation and running of the joint venture plant. Therefore, it is unlikely that any expansion plans are coming.
Neste’s own laboratory tests have confirmed today that the white granules found on the Hanko coast last week are very likely from the wash water of a Neste marine transport vessel, which contained used frying fat, animal fat, and vegetable oils. Authorities’ investigations are still ongoing.
The cleaning of Hanko’s beaches is led by the Western Uusimaa Rescue Department. Neste is working in close cooperation with the authorities, the City of Hanko, and WWF, which coordinates the activities of volunteers. Neste has acquired efficient mechanical cleaning equipment from Lassila & Tikanoja for Hanko. Neste also orders cleaning personnel from L&T for areas inaccessible to machines, such as rocky beaches.
Neste has also decided to support the protection of the Baltic Sea with donations.
The City of Hanko is organizing an information session this evening, which Neste will attend. Neste takes its responsibility and is committed to compensating for damages caused by the company’s operations.
China removed the foreign trade tax rebate for UCO in December, which increased the price of exported UCO by about $100/t, and now that 10% tariff would probably raise them by another $100/t for US operators. These naturally narrow the profitability of the planned operation, but it will probably still leave plenty of profit in the hands of Diamon Green Diesel, at least in Excel. All those US companies always talk about a mythical $300-900/t premium for SAF compared to renewable diesel. In that context, slightly more expensive UCO would not be a problem. But does such a premium really exist? Perhaps Neste will reveal it to us soon.
Neste should, however, overcome its ramp-up problems, and in that case, we believe that 2025 could be a catalyst in terms of SAF sales and margins. We reiterate our Buy recommendation with a lower DCF-based target price of EUR 22 (26).
Neste
The company should overcome its ramp-up problems, however, and we believe 2025 could be a catalyst in terms of SAF sales and margins. We reiterate our Buy recommendation with a lower DCF-based target price of EUR 22 (26).
An illustrative story about eSAF and SAF on Yle, perhaps even in today’s TV news; usually, this type of interview-based story is produced that way. One of the interviewees is a representative from Neste.
Looking at the future growth of renewable and synthetic fuels, I don’t see Neste’s future as bad at all. In the coming years, as demand grows significantly, surely it can only be reflected positively in the results?
Many are looking at Neste with a 12-month horizon… This brings to mind investment legend Warren Buffett’s saying: the stock market is a mechanism by which money is transferred from the impatient to the patient.
Avfuel Corp.—the leading independent supplier of aviation fuel and services—is taking sustainable aviation fuel to new horizons as it facilitates the fuel’s geographic expansion.
“We have high expectations for SAF volumes in 2025,” said C.R. Sincock, II, Avfuel’s executive vice president. “These new supply points are integral to meeting or exceeding those expectations. No longer is SAF landlocked in the West. With the addition of these terminals—particularly those in New Jersey and Florida—we’ve vastly expanded our supply chain infrastructure to significantly enhance SAF’s accessibility.”
Avfuel’s expanded SAF network this January resulted from its commercial supply arrangements with Valero Marketing and Supply Company. At the same time, Avfuel was thrilled to ink an extended supply agreement with long-time partner and SAF-producer, Neste, which includes significant SAF volumes out of its Selby and Vopak terminals in Northern and Southern California, respectively.
Together, Avfuel’s production partnerships will help land SAF in the fuel tanks of more operators at more locations across the United States, helping to realize business aviation’s goal of net-zero emissions by 2050.
Avfuel’s SAF out of Linden, Port Everglades and Pasadena is made using the HEFA SPK process, meaning it uses lipids—like used cooking oil—to produce the fuel, and can lower lifecycle GHG emissions by up to 80% when compared to conventional jet fuel. With target percentages of 30% neat SAF and 70% conventional jet fuel, this SAF can lower lifecycle GHG emissions by up to 24% when compared to conventional jet fuel.
Hopefully, SAF deliveries will develop positively in 2025.
Neste will publish its results on Thursday, and here are Petri’s preliminary comments regarding it.
The last quarter’s result is expected to have decreased significantly from the comparison period due to the narrowing of product margins. We do not expect the company to pay a dividend for the financially weak year 2024. In addition to the results and outlook, our interest on Thursday will be focused on the observations and conclusions of the full potential analysis being worked on by the management.
Fortum showed today that the main owner is greedy for dividends. I wouldn’t be surprised if, despite everything, Neste kept some kind of dividend payment going. They probably shouldn’t, but they might still pay. But be that as it may, on Thursday we will probably look primarily to the future to see if there is light visible at the end of the tunnel.
Unlike usual, there won’t be a live earnings report for Neste this earnings season, because five of the companies I follow are reporting on Thursday, and that requires maximizing efficiency and saving time wherever possible. It’s also not realistic to do five reports on the same day, and since Neste is also expected to provide more to chew on in the form of that situation update, it looks like Neste’s update will only come on Monday.
