The Asian Development Bank (ADB) and SAFCO Venture Holdings (SAFCO) have inked a landmark US$86.2 million package to finance the construction and operation of a sustainable aviation fuel (SAF) facility in Sheikhupura, Pakistan, the first private sector-led SAF initiative in Asia and the Pacific.

SAFCO is a company established to own and operate biodiesel and SAF production facilities in Pakistan and owns and operates a 50,000 tonnes per annum biodiesel manufacturing facility in Sheikhupura through its subsidiary.

The financing agreement includes US$41.2 million from the ADB’s ordinary capital resources and US$45 million in syndicated loans, including B-loans from the Emerging Africa and Asia Infrastructure Fund, an emerging market infrastructure debt fund owned by PIDG and managed by NinetyOne and ILX, an Amsterdam-based emerging market asset manager focused on the UN’s Sustainable Development Goals and climate private debt strategies.

The International Finance Corporation is providing a syndicated parallel loan while the ADB serves as the lender of record for the B-loans and as the mandated lead arranger and bookrunner for the financing package.

“The aviation sector has limited decarbonization options, large aircraft are unlikely to depend on electric or fuel cell technology in the near future, and this new facility is a significant step towards decarbonizing this hard-to-abate sector,” says Suzanne Gaboury, the ADB’s director-general for private sector operations.

“The assistance will promote the development of the renewable fuels market in Pakistan, exemplifying the ADB’s commitment as the Asia and the Pacific’s climate bank to support innovative and sustainable solutions that fight climate change.”

Shell Eastern Trading has also signed a long-term offtake agreement with SAFCO for volumes of up to 145,000 tonnes a year of SAF from the facility in Pakistan, once the proposed plant is complete.

The 200 kilotonnes per annum SAF facility in Sheikhupura will use waste-based feedstock, including used cooking oil.

Aviation accounts for approximately 2.5% to 3.5% of global carbon dioxide emissions, and waste-based bio-SAF, a liquid fuel currently used in commercial aviation, reduces carbon dioxide emissions by up to 85%.