UAE biofuel firm in talks with global investors

• Neutral Fuels supplies Ikea and McDonald’s delivery vans
• Founder says oil and gas giants keen to invest 

A Dubai-based company which converts waste cooking oil into biofuel is in investment talks with major energy firms, as demand grows among climate-conscious global companies.

The sector is expected to be worth over $200 billion by 2030.

“I moved to Dubai in 2009. I’d been working for three years by then on sustainability, so it’s amusing when I see the world has caught up 15 years later,” Karl W. Feilder, founder of Neutral Fuels Holdings Ltd, told AGBI.

• UK firms look to power the UAE’s energy transition

Neutral Fuels started as a two-person operation and built the first licensed biorefinery in the UAE in 2010, working with fast food chain McDonald’s to convert its waste vegetable cooking oil into the biodiesel used in its vehicles.

The company achieved profitability in 2012 and it now has operations in eight locations including Dubai, Abu Dhabi, Bahrain and Delhi.

“We have a closed loop system operating in Abu Dhabi, where all the waste oil comes to us and is recycled into fuel, which is then used within the emirate,” Feilder said.

“We’ve extended the model from a one company implementation to a one emirate implementation. We want to extend it to a countrywide scheme.

“Today, we’re recycling about 10 percent of the waste cooking oil of the UAE – we’ve got quite a way to go.”

Neutral Fuels

The majority of the company’s funding has come from the bond market and private investors, but Feilder said they have attracted interest from some heavyweight global names.

“We’re fighting off offers from most of the oil and gas companies. We’ve had four of them try to buy us out completely,” he said.

“We’ve got some interesting offers from oil and gas companies who have said, ‘well, if we can’t buy you, can we at least invest in you?’ And a number of those conversations are going on as well.”

The global biofuels market was valued by Canadian company Precedence Research at around $120.60 billion in 2020 and is forecast to be worth $201.21 billion by 2030.

While annual growth between 2021 and 2030 is expected to reach 5.2 percent per annum in North America, four percent in Europe and 5.5 percent in Asia Pacific, the report found that the Middle East and Africa was the standout market, with annual growth of 9.6 percent per annum until the end of the decade.

As more global conglomerates look to become carbon neutral, Neutral Fuels is working with brands such as Del Monte, IKEA, Emirates, and GEMS to power their road vehicles, while its biodiesel is also used in marine vessels owned by Abu Dhabi National Oil Company (ADNOC).

“Many companies that have international businesses have now specified that some, or all, of their supply chain must use biodiesel, no matter where they are in the world, because of global warming,” Feilder said.

“It’s the simplest and easiest way of reducing your carbon footprint because it takes one day. Yesterday your trucks were running on petrol diesel and tomorrow they’re running on biodiesel. There’s no modification, no change required.”

Saudi demand

At the same time as demand is rising, global supply chain issues as a result of the coronavirus and the Ukraine war has led to a shortage of supply, meaning the price of biodiesel continues to rise. 

During the height of coronavirus biodiesel was three times the price of regular diesel. It has now settled back to about two and a half times, resulting in a surge in revenue for the Dubai company.

“By the end of June this year we had done the same turnover as we did in the whole of 2021. We’re expecting more than double this year,” Feilder said.

Saudi Arabia’s ACWA Power in June last year signed an agreement with Neutral Fuels for it to supply biofuel for the Red Sea Project, a tourist attraction which will consist of around 50 hotels across 22 islands when complete in 2030.

The company also supplies biofuel for the Diriyah ePrix, the single-seater, electrically powered Formula E championship held in Saudi Arabia since 2018, and the kingdom has proven to be a big market.

“It’s a bit challenging in many ways. First of all, the speed of change in Saudi is taking everybody by surprise. We’ve actually been supplying biodiesel into Saudi for four years now,” Feilder said.

“You’ve got to be pretty committed to buy biodiesel from Dubai and ship it all the way to Saudi, and the price you’re paying is many times the multiple of the street price of diesel. And yet, they did it.”

UAE listing

Neutral Fuels in 2019 announced it was planning an initial public offering (IPO) in 2024 in London. Feilder said this had been put on hold during the pandemic. While it is still on the cards, it may happen closer to home.

“The local stock exchanges have got a lot more interesting after the DEWA IPO and some of the other stuff that’s going on in Abu Dhabi,” Feilder said.

“We got two viable options to go on a local market. At this stage, it’s still too early to tell where we’re going to go, but it’s definitely a possibility.”

Coronavirus also saw the company freeze plans to expand into Africa, but Feilder has ambitions to expand on a global scale.

“We’re certainly in conversations about putting Neutral Fuels plants into a lot of locations,” he said.

“The way that we do it – which is relatively small scale, what you might call a city scale programme – the raw materials are present in every city of the world.

“And the demand for biofuel is in every city of the world. To be perfectly honest, why wouldn’t you build one in every city of the world?”