This week Mihir Dange from XCF Global Capital and Wray Thorn from Focus Impact Partners join Oscar on The SAF Podcast to discuss their recent merger and expecting public offering later this year.
Mihir's storied past, shaping programmes for yellow taxi medallion drivers to his latest venture into sustainable aviation fuel with XCF, intersects with Wray's fervent support for socially progressive companies through Focus Impact Partners.
The discussion meanders from how Mihir and Wray first connected to what their daily working relationship look like now as they work towards listing later in the year. We also delve into XCF's business model and how they can be so confident of their aggressive growth plan with their modular approach and four facilities being developed. We look at the importance of long term supply certainty and the other factors that are critical for receiving investment.
Make sure you stay tuned to the end to find out what advice they would both give to investors looking to invest in the SAF industry and producers looking for investment.
This is a fantastic opportunity to hear from both a producer and an investor about the fulcra on which production and investment decisions hinge.
If you enjoyed this episode, check out our recent discussion with the Renewable Transport Fuel Association looking at the policy landscape in the UK and the role Revenue Certainty Mechanisms have to play: https://www.buzzsprout.com/2202964/14826429-the-saf-podcast-supporting-production-through-revenue-certainty-mechanisms.mp3?download=true
Host & Producer: Oscar Henderson, SAF Investor
This week Mihir Dange from XCF Global Capital and Wray Thorn from Focus Impact Partners join Oscar on The SAF Podcast to discuss their recent merger and expecting public offering later this year.
Mihir's storied past, shaping programmes for yellow taxi medallion drivers to his latest venture into sustainable aviation fuel with XCF, intersects with Wray's fervent support for socially progressive companies through Focus Impact Partners.
The discussion meanders from how Mihir and Wray first connected to what their daily working relationship look like now as they work towards listing later in the year. We also delve into XCF's business model and how they can be so confident of their aggressive growth plan with their modular approach and four facilities being developed. We look at the importance of long term supply certainty and the other factors that are critical for receiving investment.
Make sure you stay tuned to the end to find out what advice they would both give to investors looking to invest in the SAF industry and producers looking for investment.
This is a fantastic opportunity to hear from both a producer and an investor about the fulcra on which production and investment decisions hinge.
If you enjoyed this episode, check out our recent discussion with the Renewable Transport Fuel Association looking at the policy landscape in the UK and the role Revenue Certainty Mechanisms have to play: https://www.buzzsprout.com/2202964/14826429-the-saf-podcast-supporting-production-through-revenue-certainty-mechanisms.mp3?download=true
Host & Producer: Oscar Henderson, SAF Investor
Hello and welcome to the latest episode of the SAF podcast. This week, we are delighted to be joined by Mihir Dunger from XCF Global Capital and Ray Thorne from Focus Impact Partners. How are you both?
Speaker 3:Very good, Thank you for having us.
Speaker 1:No, absolute pleasure. So we are recording this. In early April and in March you guys had some exciting news about your merger and listing, so we'll come on to that later. But before we get on to that, mihir, do you just want to take us through XCF and your background first, to give everyone a bit of context?
Speaker 3:Absolutely, so I appreciate you having us on the podcast. We're super excited. We're super excited about the transaction that we've consummated here. Just a little bit about myself.
Speaker 3:I have about 20 plus years on Wall Street. I used to be a commodities market making derivatives trader. I started at a boutique firm and then subsequently had my own market making firm and we traded all various different types of products down on the NYMEX COMEX, which was really interesting, really interesting times. We started where there was paper trading and then eventually moved it to this algorithmic type of market making business. So we got to kind of really see the evolution of the financial markets.
Speaker 3:And then after that I was working in New York City to help implement a government program for yellow taxi medallion drivers and we were able to create a program that was eventually effectuated by the government to level set the debt and create a government backstop, which was a huge win for the taxi industry. What is super interesting here at XCF is I get to meld both of those experiences with commodities, government regulation and really putting XCF as a pioneer in the future of sustainable aviation fuel, which is right at that cross section. Xcf was created is about only 12 months old, but the facilities that we have have been around for, call it, the last six or seven years. So we created a hold co with basically a pipeline of projects at the Devco level and now are in a transaction with.
Speaker 1:Focus.
Speaker 3:Impact Group, Ray here and Carl Stanton in order to take it public. So it's a super exciting time considering what's happening in the industry, and so I'll pass it over to Cass back to you.
Speaker 1:Thanks, thanks, matt and Ray. What about you? Well, what were you doing before Focus Impact Partners and what's Focus Impact Partners?
Speaker 2:Yeah, thanks, oscar, it's great to see you again, great to be on the podcast today with me here. Focus Impact Partners is a private investment firm on a mission to amplify social impact and generate impactful profits by bringing capital and expertise to what we call socially forward companies. We endeavor to invest in and partner with great companies that are great in part because of the positive impact they're having in the world, both for people and for the planet. And then we try to help those companies grow and do more of the good they're doing. And, by the same token, we look for companies where the more good they're doing, the more they'll win in their markets and the more financial success they'll have. So we like to say we are looking for opportunities where impact can be an alpha generator to financial returns.
Speaker 2:So I've been personally I've been involved in private investing for more than 30 years, including most recently building and leading the private investment efforts for Two Sigma for almost 10 years, before deciding to be an entrepreneur at the ripe age of 50 and co-founding Focus Impact with Carl Stanton, who Mahir referenced. We have significant expertise in both the aviation industry and the energy industry, having been part of building successful aviation leasing businesses as well as several E&P companies, and we've been pursuing a decarbonization thesis and announced a transaction with a company that develops and manages carbon offsets on behalf of businesses that have decarbonization activities. So it's a long-winded way of saying that renewable fuels generally and sustainable aviation fuels specifically, are a strong fit for us, given the nexus with our experience and the double bottom you know, the ability to have a double bottom line impact. So we're excited to be partnering with me here and XCF Global and being part of building a leader in the staff sector.
Speaker 1:I mean your announcement last week was not last week, last month was really exciting and I think probably took a few people by surprise just considering where it came from. But we like meet cute stories here, so how did you guys get connected? Where did that connection come about?
Speaker 2:You know well that's a good question. You know, as I mentioned a moment ago, we've had a thesis around renewable fuels and SAF specifically, and, as they are a great area, given our experience and impact thesis and so the part of these investment activities, we've had an active search over the last several years for a company that we could bring to the public capital markets through a merger with one of our SPAC vehicles. And in the course of those efforts, which are a lot about blocking and tackling and meeting everybody you can meet in a particular industry sector, we met hundreds of companies, not only in SAF, of course, but in other areas as well, and we were connected with me here in xcf global um at at the time they were thinking about, you know, pursuing a transaction on the lines of, along the lines of what we, you know, we're pursuing together and we're immediately attracted to a number of um of uh facets, about the opportunity to work together.
Speaker 1:Mahir. How is it being tackled by Ray?
Speaker 3:If you see Ray in person compared to me, I don't want to actually be tackled by him.
Speaker 2:He needs a lot of he'll be. He needs to be wearing a lot of equipment.
Speaker 1:He's got to have big pads on.
Speaker 3:Yeah, it's been, it's been, it's been amazing, right? I think when you go through this process, it's about finding the right partnership, right. We're kind of doing something a little bit different by taking this through the public markets.
Speaker 3:Typically, I think you'll find a lot of companies are staying private and privately held and privately funded are staying private and privately held and privately funded.
Speaker 3:And we took a very particular view to be a potential thought leader in the space and have a first mover advantage. And in doing so, it's really important to make sure that there's an ecosystem around you that supports that cause. And similarly, they looked at a hundred hundreds of targets. We looked at, you know, many different sponsors and in looking for those sponsors, we were looking for people in particular that could push the growth element through a nascent industry, which means that you know a, we're going to be joined by, joined to the hip at some point, which is now right, and we both have to have this ability, this mindset that we're going to navigate through a nascent space. We have to be nimble, we have to be willing to pivot right, but we have to both have the commonality that growth will. You know, growth and emergence of growth in this space will be paramount, right, and I think we found that in in Focus Impact and and that's why you know we have, we have a great relationship here.
Speaker 2:And Oscar, if I could just add one kind of a funny anecdote in that regard. And we, as as as you, as you do in today's Zoom world, I think we first met over a Zoom when Meher and team were out in Reno Nevada, and then we met in New York, if I recall correctly. And then, you know, my wife sometimes likes to joke that I'm the Jerry Maguire of private equity guys and so my partner, carl, and I, you know, immediately thought, you know, we've got to get out to Reno Nevada, and so we, we, so we got on a plane and, you know, flew out and spent the day, you know, with me here and team and and a number of the other key management professionals, and you know, we were on the. We were on.
Speaker 2:What did Jerry McGuire say? We were, we went, we went to he's the king of the living room. So we were in the, we were in the company's living room and got to know each other very well, and I think there's something to be. While it's a little old school, there's something to be said for building a personal relationship. When you're going to be partnered together for a long time. It is like a marriage in many ways, and you've got to build not only a relationship but also trust in working together, and we're off to a great start in that regard.
Speaker 1:Is that just a long-winded way of saying you're like tom cruise, and are you calling me here, cuba, gooding jr? I'll leave that up to your uh, to your listeners judgment so mihi you mentioned it earlier about your projects that you've got, do you just want to take us through? You know where they are, what stage of development they are, so your expected timelines for those going forward?
Speaker 3:absolutely um, so XCF, uh uh. Xcf is a holdco right and at the holdco level, as as I mentioned, we have people with experience in commodities, energy, public policy operations. And at the Devco level we have four, basically four plants or factories, sustainable aviation fuel factories that will come online at different times. The first is New Rise Renewables, which we are in the process of consummating our transaction with them that is expected to start SAF production in under six months, so call it summer to fall of 2024. Six months, so call it summer to fall of 2024, it will be productional at a 38 million gallon run rate per annum. Adjacent to that site we have New Rise Renewables call it SAF production facility.
Speaker 3:Number two, which leverages a lot of the existing infrastructure that's there, everything from rail to hydro-treater to preprocessing facility. So our cost there is dramatically less because we get to leverage some existing infrastructure that is in development and projected to come online in 2026. And then we have two other facilities strategically located around the country, one in Wilson, north Carolina, and the other in Fort Myers, florida. Those are construction imminent and projected to come online in 2028. So at XCF, what we're super excited about is that we have this pipeline of projects that gradually come on, but with production coming on early, considering what's happening in the sustainable aviation fuel space is, you know, I think, the first mover advantage that we're looking for, but also being able to replicate that exact footprint. We have a design patent. Pending on that, we'll be able to basically take that modular design and replicate that around the country.
Speaker 1:You mentioned it there at the end the modular approach that you're taking. What is the benefit of that? And sort of conversion from pre-existing infrastructure. How does that help you going forward um?
Speaker 3:great question. Um, you know we are. We are using existing technology right, hefa based technology. It's been around, it's a very proven pathway. Um, we understand that there are going to be many pathways that come on in the future. Um, that is expanded to grow, you know, almost to double in terms of like. Why we use this technology and the modular design of that is it provides a tremendous amount of flexibility. We have already created renewable diesel out of this facility, right, and have opportunistically moving into sustainable aviation fuel, as the timing is couldn't be clearer that the demand is outpacing supply right. So being able to use a, you know, a reliable, proven technology is clear and achievable kind of path to commercialization, a commercialization right and scalability. So, you know, I think the the idea here is we need to hit the ground running, we need to show production and then we have the ability to leverage into multiple pathways as we have a proven revenue stream.
Speaker 1:And Ray, when you hear all that from Mihir, what about that attracts you from to make that connection and that partnership with them from an investment point?
Speaker 2:of view. Yeah well, there are a number of things that we believe are attractive about XCF as a company and in the sector generally, you know. The first really are there are the significant macro tailwinds behind the adoption of SAF and I know, oscar, you've talked a lot about this with others on your on your podcast, but the need and challenge of decarbonization for the aviation industry is significant, given the contribution of carbon emissions from the aviation industry relative to other transportation sectors and also the growth of CO2 emissions, you know, with the growth and proliferation of air travel and the global connectivity it affords, both for people and goods and services, not only in the US and Europe but also, more significantly, in Africa and Asia excuse me in other parts of the world. This is an industry that's growing. It's going to continue to grow, it's a very valuable industry for the world and SAF is really the key to unlocking the aviation industry's carbon footprint problem.
Speaker 2:So in the near to intermediate term and maybe even the short part of the long term, there's really no alternative propulsion technology for large scale aviation to jets burning fuel, so that, coupled with this shift in regulatory and government policy and consumer sentiment and industry participant leadership, it provides really massive tailwinds for SAF demand, driving the need for additional suppliers and SAF production. I mean, I think you've seen this, you've quoted the stat, but the world burns approximately 100 billion gallons of jet fuel in a year, and 2023, only a little more than 150 million of this was SAF. So in order to meet even a 5% objective, let alone a 10% objective, we need to see production increase quite significantly from current levels. And that's so. We see a market really where demand is going to far outstrip supply for many years to come, and so XCF is seeking to address that industry's growing demand. And, more specifically to your question, the company brings a combination of near-term cash flow visibility from a proven technology at its existing operation it's expected to be in production later this year, as Mihir referenced as well as the significant growth potential from its pipeline of additional facility sites, a number of which are, you know, are identified and under the company's control.
Speaker 2:So I think that is that you know those two elements from a financial and operational standpoint you know are significant from, you know, an investor's perspective. Yeah, of course, every great company, every great company has a great management team, and we've been really impressed with not only the experience but also the depth of the management team that Mihir has assembled, and his tireless leadership is outstanding as well, and I guess I'd just say the last thing I would say is that you know and this is really important to us, you know is that XCF is a company that's focused on doing well not only doing well, but also doing good, you know, while doing well, and which is a great fit for our impact investment strategy. So we want to help entrepreneurs and executives of companies like XCF succeed and scale both their impact and their shareholder value.
Speaker 1:The first half of your answer. That was really interesting regarding the tailwinds for SAF and how little production we got now. How much aviation fuel is being used currently, how the fact it's only going to go up more and more air travel is going to happen. You're an impact investor, so you're looking at much more than just SAF and aviation. There are other renewables industries you can look at offshore wind, nuclear, other things that are going on. What, what made you go for SAF this time around and not look at other things or what has one of the others not got that SAF's got? I think you've covered what SAF's got and it's got really strong tailwinds. What are the others missing in your eyes?
Speaker 2:Yeah, yeah. Well, you know, I mean, if you're honest, you know, renewables is a sector that's actually been difficult for both public and private markets, investors, the just as one example, the, you know the S&P Global Clean Energy Index is down, I believe, more than 30% over the last 12 months. That's in a market that's actually been going, you know, going up. So even on a, on a relative basis, that's even, you know that's even worse performance. So it's not a sector that. It's a sector that's experienced quite a bit of of of hype and positive sentiment but hasn't really delivered in many ways from a performance standpoint. So we think staff stands out relative to other renewable areas of investment, given the significant supply-demand imbalance we discussed a moment ago.
Speaker 2:Um, it's not an area where a new technology is being pushed on a market. You know quite the opposite. You know alternative technologies for in aviation industry really don't exist, um, in the intermediate term, and and so sap is required to achieve both government and industry and, you know, consumer objectives in this space. So that's the first thing. And second thing I think is that SAF is a drop-in technology, which means that it utilizes existing industry infrastructure and works with existing aviation technology. It doesn't require significant changes in infrastructure to deliver the fuel or aviation engine design to consume the fuel. So it actually is. It's a really a near-term, viable alternative that you know, that you know works inside of the you know existing industry operations and so therefore, as a much more efficient, you know it makes more much for efficient and cost-effective transition. You know it makes more much for efficient and cost-effective transition.
Speaker 2:You know, if you compare that, for example, to EVs, you know just as a. You know as a foil, you know if you think about that, you have to redesign the entire propulsion system of the car. You have to redesign, you know, many aspects of the car to accommodate the battery and the additional weight that that affords, not to mention the infrastructure for charging. You have to completely abandon really the existing infrastructure related to, you know, providing fuel to a vehicle. So that you know EVs, you know require, have significant hurdles to adoption.
Speaker 2:That you know something like SAF really doesn't you know. Doesn't. You know require, and then I guess I'd say you know there are. You know there are current technology paths. You know doesn't. You know require, and then I guess I'd say you know there are. You know there are current technology paths, you know that are available to produce SAF. You know, and in XCF's case you know, the HEPA production process that we hear described. It's proven, you know it is. It's utilized. It doesn't require investing in this area, it doesn't require a significant technology bet, you know. Bet today. I mean that's not to say that new technologies aren't being developed that will have a greater reduction in carbon footprint, quite to the contrary, that's happening and will certainly be the case.
Speaker 1:But the drop in nature of SAF and the existing technology paths make this an evolutionary opportunity, you know, rather than a revolutionary one so the reason we're here is because you guys have obviously signed this partnership and you're um going to xcf is going to be um, hopefully publicly listed later on this year. Um, mehir, why go public? Why now? Because I mean there are very few SAF producers that are actually listed publicly. I mean Jeevo is one of them and might be. I mean I can't think of any others off the top of my head and they're producing. So why now, when you haven't reached that production stage yet?
Speaker 1:Yeah that's, that's a.
Speaker 3:You know that's a great question right, and I think we need to just take a little bit of a step back, which is what is the importance of energy transition right and a successful kind of energy transition has the goal of reducing call it net carbon emissions by mid-century right to zero. I mean, that's the goal. 2050 is kind of the focus point of hitting a net neutral carbon emission standard. Standard. Now what it does is it obviously provides significant types of benefits to the environment, to the economy, to the quality of life of people around the globe and be impactful for generations to come. Right Now, what that means is you're going to find private financing that will always fund that and you'll find public financing that will have interest in it.
Speaker 3:We think opportunistically, with what's happening in the market right now is many of the sustainable aviation fuel a position more of a pure play renewable and sustainable aviation fuel producer that distinguishes itself from its peers. We've seen this time and time again. Where you take a Tesla right, a thought leader can have alpha right, bitcoin, to call it Ethereum right. That's where alpha is generated by being in the market. We believe that there will be beta right Because the overall market will over. There's going to be margin. There's going to be expansion Right, and we know that between now and 2030, there is a requirement for three billion gallons of SAF right domestically and then eventually we need to hit kind of between 30 and 40 billion gallons by 2050. And again, that comes to that carbon neutral number.
Speaker 3:But by accessing public markets Right, we actually get the opportunity to fund expansion and scale right. And that's really where we want to hit is that if we want to be, if we really want to have the focus of success in energy transition, we want to be able to tap into private markets, we want to be able to tap into public markets and we want to be able to tap into government markets. And by tapping into all those markets simultaneously, we get to be able to tap into government markets and by tapping into all those markets simultaneously we get to reduce our cost of capital and expand and grow and and the whole point of around expansion and growth is to meet the needs of the globe. So I think, opportunistically, we think that there there is this first mover, an opportunity to be a thought leader to reduce carbon emissions, to reduce CI scores consistently. We think that the public markets will respect that and potentially reward us for that at some point in the future.
Speaker 2:Yeah, and, if I could just add, we believe that XCF has a very strong public company story, not only in an industry that's growing around which there's a lot of investor interest, but also the company affords the combination of relative cash flow, visibility and significant growth potential which we believe public markets investors appreciate and desire. So being public will hopefully bring not only the additional transparency but also enhance the company's credentials and market presence with both the capital markets and industry participants and, of course, afford a currency for future organic and potentially acquisition related growth down the road it's come up a couple of times the market leader, first mover advantage, the.
Speaker 1:The cynic of me would say you know, you guys aren't producing very few pure play producers, whatever the pathway, are actually getting past FID stage. Isn't that quite bold and quite a brash position to take, seeing as you know, you were formed 12 months ago. Now you're listing, you're moving very quickly and very differently from everyone else.
Speaker 3:Yes, I mean bold is where alpha is right. But you know, I don't think we're trying to be bold for the sake of being bold. I think we're actually poised for success and let me kind of explain what that means is we're in the in the process of converting our facility from a productional facility so we know that it works a proven pathway, so we know that it works into into sustainable aviation fuel in under six months, right? So we have a pipeline of projects that allow us to get operational with the first one in under six months and then have a pipeline behind it. And then have a pipeline behind it. So you know, pending our acquisition of NewRise, it'll start producing 38 million gallons on a run rate basis in the call it in the summer or early fall and because of the actual structure on a 10acre facility using the technological pathway, we can replicate that over and over again.
Speaker 3:So, normally I would say you know, the reason you get stuck in FID is the size of the projects are massive. Right, I think you'll find that the size of our project is a lot smaller and more subscale to like domestically, while it's much bigger than some of the European counterparts. But because we have already kind of had this proven technology, proven pathway, we know that. We know that it works. We know that it works. We have a license agreement in place with Axis North America, which is one of the industry leaders in catalyst development, and we get to use their hydro treating technology. It's versatile hydro treatment. It boosts yields. We know that it is productional. We also are in the process of getting a production policy guarantee so that enables a more cost-effective transfer of commercial and technological risks in the insurance markets, which helps de-risk the projects for investors and it also allows us to effectively finance and scale right. So once you start compounding kind of these multiple effects, you start realizing okay, well, it's less of a bold thing but more of making sure that we get operational.
Speaker 3:We also have a versatile feedstock base right. So our pretreatment facility, one that you know costs an extra, you know, $100 to $150 million allows us the flexibility to use non-food feedstocks, right. So we get to pull in use cooking oil, soybean oil, distillers, corn oil or animal fats or plant oils, and we get to mitigate, you know, our supply costs. We get to mitigate cost of goods sold, supply volatility and, you know, have a smooth supply chain. So, I think, on a one off basis. If you look at this, you know it's, maybe at first glance it seems bold, but I think when you start taking into all the pieces into place, which is proven technology, experience of already running a renewable diesel facility, having a production guarantee, having a versatile feedstock base, and then tapping into existing government financings, private financing and potentially public financing, it becomes a very compelling story.
Speaker 1:You mentioned. I mean it's very convincing and I'm almost convinced. You said you've got four plants and there's two in. There's two in Reno, one in North Virginia, one in Florida. Why are they there? Why are they in those specific locations? Is it because they've got all those individual components that make them feasible for you to do production? Is it sort of a you know? How do they end up where they are? I suppose is my question.
Speaker 3:Yeah, I think you'll find that those are strategically located right. The. The ones in reno, nevada, are strategically located around uh obtaining uh permitting right. It's in one of the largest industrial parks in the world, uh in the country. So permitting is uh because we're on 10 acre facilities. They're easier. We get to leverage the idea of having a call it like a mother daughter plant side by side. We get to opportunistically tap into the LCFS credits. Right around Fort Myers and in North Carolina are near major, you know, major rail, major, major airports right, and those are strategically there for, you know, purposely.
Speaker 1:So I mean, we started off by talking about how you guys met and how this sort of relationship started. How does what does it and how this sort of relationship started? How does what does it look like in sort of the? Day to day now. I can imagine you're very busy with everything running up with all this stuff that's going on later in the year. What does sort of the day to day relationship partnership look like sort of on the ground?
Speaker 2:That's a funny question. I'm sure there's probably a little bit more engagement than Meher would want every day. I'm only kidding. Actually, we are really tied at the hip with Meher and his team. We work closely together every day.
Speaker 2:We are endeavoring to not only execute this transaction but really build a great business, and my partners and I at Focus Impact have been involved with more than the boards and advisory boards of 50 companies and investment funds, and so we work closely as partners and consular areas with executives and ceos, um you know, bringing a combination of advice and our in our, you know our experience, you know, with the network and connections that we you know that we have that can help the company succeed, um and, of course, access to capital. Um, the xcf is a symbol to you know, really a world-class management team with decades of experience, and our, you know our job is to try to help, you know them um succeed uh and achieve their you know milestone, their, their business objectives and, you know, build a great company. And it's not just a transaction for us, you know, uh, we, you know we, um, you know, are approaching this as a long-standing partnership, um to uh to build a great company and be a leader in this important and growing industry.
Speaker 1:Mahir, do you feel the same? I suppose you can't really say no at this point Otherwise.
Speaker 3:Only a bit late now, other than when I'm getting tackled on a daily basis. On a more serious note, right, we had the opportunity to evaluate, you know, many sponsors, right, and the whole idea around public. I think we, you know, making this public market transition is one that we spoke of, but having the commitment with people who've had the experience before is one that was very important to us, and you'll find that Carl and Ray have very impressive backgrounds and have a pattern of success of doing this repeatedly, and we are pioneering a new frontier in sustainable aviation fuel. Anybody who's in this space is pioneering this, the kind of what the what this space is going to look like, and we needed to be with people that and thought leaders. You know we're trying to be thought leaders.
Speaker 3:So, collectively, what that does is, you know, we wanted to work with a team that had significant experience in aviation, in energy decarbonization, that had deep M&A experience, right but also that wanted to focus on this 2050 plan, right, the 2050 plan is the plan of getting carbon neutral around the globe, and our impact is in sustainable aviation fuel, and our impact is in sustainable aviation fuel. So who are the people that allow us to execute on that growth plan and facilitate the industry adoption of sustainable aviation fuel. And we strongly felt that it was Focus Impact Group and that you know when you start taking that you know hand in hand approach. It's not, there's no longer you know a them and an us. It's now, it's a concerted effort, right? So as far as we're concerned, our team is now broadened and we get you know two, two great players to push on this focus.
Speaker 1:Ray, when you look at XCF, the one of the things that lots of people talk about is longevity in feedstock certainty, supply and in the demand in terms of offtakes, in terms of that being a long term down the line, not just for sort of two, three years, one year in the future. How important is that for you when you're looking at it, because I know there's a very strong feedstock supply in play here in terms of the sort of risk mitigation, the sort of cost effectiveness of that, in terms of actually looking at SAF when it's produced, the price of that, is that really something you look at closely?
Speaker 2:Yeah, absolutely. I mean we talked about this a lot, oscar, in London there was quite a bit of talk at your conference in London a few weeks ago about this is that in order to achieve relatively large scale and low cost capital financing and to be able to build these you know, build facilities that can produce SAF at commercial scale that's a cornerstone, you know, really. And to have visibility and certainty around revenue, and visibility and certainty not only around costs but also around the availability of feedstock to be able to consistently run a plant at its volumes that it can achieve. So not only is it costly to, for example, take up and bring down a plant, but it's also operationally quite problematic and can be damaging. So having that long-term relationship around offtake as well as supply, I think is really important, not just to XCF but to really any company that's building, that's endeavoring to build production in this sector.
Speaker 1:May I'm guessing that was something you were deliberately cognizant of was that you need this long-term feedstock supply security in order to make this sort of model that you've got work.
Speaker 3:Absolutely. I mean, I think if you think about right like, if we think about why companies are successful, right, like we need to just look at like first principles, uh, obviously there has to be processes in place. Right, there has to be a clear vision of, of pursuing a mission. Right, I think you know the mission here is clear, right, is that we want to be?
Speaker 3:in the sustainable aviation fuel space and we want to be leaders and we want to be thought leaders. Right, we want to be thoughtful about this, our relationship with the planet and relationship in the space. But the core, like kind of the cornerstone that Ray mentioned to, to the business model, is the business model has to work right and if the business model works, it's one where your cost of goods sold is well, well maintained and one where profitability is being maximized, you know, with with some type of margin and margin metrics that make sense. And in order to do that you have to, in sustainable aviation fuel space, you need to be able to balance feedstock, which is your cost of goods sold, with your output and the creditworthiness of that output right and the credit worthiness of that output right.
Speaker 1:So, Mihir, coming back to you, what advice would you give to other producers looking for finance, Because there are so many around the world who are struggling to get various stages of financing, whether it's feed studies, FID, project finance what's your sort of pithy bit of advice that you give to them, as pithy as you can.
Speaker 3:I think, you know, I think, energy transition if you're in the energy transition space, it's an interesting space right now.
Speaker 3:Right, you're finding the evolution in this space, in particular in sustainable aviation fuel, is going to evolve and evolve over the next, you know, three years, definitively evolve over the next decade. So it requires patience, right, a, it requires patience in where it is today, but it also requires a business model that has the ability to shift as customer sentiment shifts, as regulatory policy shifts, and figuring out where there are tailwinds in the industry. Ultimately, there has to be a sound business model, right, a sound business model is one that has, um, you know, it is one that is compelling in order to be a thought leader, in order to have create this kind of platform for green energy of reducing the, the, the carbon footprint for the globe and and for Aviation, right? So I think, when you, when you start thinking about where companies want to live, right, you know, do they want to be like, for example, a sole, pure play, sustainable aviation fuel model? Right, do they want to, you know, branch away from legacy crude refiners? Right, I think, because the space is evolving, so does the model.
Speaker 3:The model has to evolve but it has to be sound from the get-go right. The numbers have to make sense, the relationships have to make sense and you know, I don't mean to bring this back to XCF but by having long-term agreements, by having proven technology, by having a leadership team that has experience in engineering and operations and energy and public policy Right, and one that is at the cusp of growth, which aligns itself with you know, towards sustainability, is what companies are looking for, is what investors are looking for. So if you can create that investable type of product within your company that has a pipeline to do it, I think you'll find that there's a lot of interest. But you also have to have the patience because the space is new. The investors are also feeling out the space as well.
Speaker 1:And Ray, what about from your side? Have you got anything you'd say, from an investor point of view, to producers?
Speaker 2:Yeah, you know. I would add that it takes to be resilient. You know to demonstrate tenacity. You know to you're going to have to. As the old saying is, you have to kiss a lot of frogs to find your, you know your partner, and there are a lot of gates that you have to go through really to get off the ground.
Speaker 2:No pun intended, one of the things I like to advise entrepreneurs or companies on in looking for capital is really trying to match your project and your opportunity with investors requirements and objectives. In other words, if it's a new technology and it's early days, then you really should be talking to a group of investors that are comfortable with venture risk and that might invest smaller amounts of capital. If you're talking about now commercialization of a first of its kind type of project, then you have to identify investors that are comfortable with that type of risk profile and meet their return objectives. And if you're talking about project financing, then where you've got a proven process and long, you know, long term offtake and supply, for example, so visibility around revenue certainty and cost certainty, then you that then you're probably targeting more infrastructure or project finance type of investors and they might be both debt and equity, for example, in those instances. So I think the key to capital formation in this sector, but also really across sectors, is matching the opportunity and your business with the right set of investors and understanding their objectives and requirements to be able to make an investment.
Speaker 2:The other thing I would say is that I do think that this is a, as this is a nascent opportunity in industry, that there will be a lot of innovation. You know, I believe in financing markets and structures that you see in more mature commodity markets around financial and physical delivery. We talked quite a bit about book and claim as another innovation that you see in other segments of energy production electricity, for example that I think will develop more broadly in SAF. And then you'll see innovation around risk mitigation, for example. So the insurance markets there's a nascent but developing insurance market for production risk that I think will evolve and help that you see in other markets that will evolve and help develop the growth and production of SAP. So that's something I'm anticipating and I believe will happen and will also be valuable for the growth of production in the industry.
Speaker 1:I can't believe you didn't say get big shoulder pads. After all that, you didn't even mention the shoulder pads.
Speaker 2:Right, well, that too, that too.
Speaker 3:You know that's a really good point, ray. Like I think you know, just like, a mental note here is that we need you. You want a management team that's also going to innovate, as all these things innovate as well.
Speaker 1:I think that's really well said well, on that note, I think that's a great place to to end. Ray mahir, thank you so much for joining us. That was a really interesting conversation and we thank you so much for giving up your time, because I know you're extremely busy.
Speaker 2:Yeah, well, thank you oscar, it's been, it's been. Uh, it's great, um, you know, being here today and being able to chat with you and me here and to talk about, uh, saf and xcf yeah, oscar really appreciate it.
Speaker 3:Um, this was, this was a great experience, and we're we are super excited to tell our story, but we really appreciate the time here that you've carved out for us.
Speaker 2:Yeah, I just close by saying a thank you to you and SAF Investor for bringing such positive and in-depth attention to this important industry. It really is meaningful and, I think, will help contribute to the growth and development of the space.
Speaker 1:Well, that means a lot and shame that won't make it into the final edit.
Speaker 2:But nonetheless it's true.
Speaker 3:It is true, we really appreciate this.
Speaker 1:Yeah Well, no, we really appreciate you guys giving up your time.