Nest egg + Renewables help protect Neste in 2020 – Even with COVID-19 uncertainty, Neste hits renewables production record

May 24, 2020 |

Especially during difficult times, it’s important to have a nest egg and companies that had cash and smart plans in place are definitely having an easier time with the latest challenges.

Last week in Finland, Neste reported their Q1 financials and Neste President and CEO Peter Vanacker answered questions about the company’s first quarter 2020 and shared his vision of the post-corona world, noting their Renewable Products’s sales volumes were high and their renewable facilities reached a new quarterly production record. And with the aviation industry working on recovering from ‘Rona Cyclona, sustainable aviation fuel is still promising.

In today’s Digest, Vanacker answers how the COVID-19 pandemic is affecting Neste’s operations at the moment, his outlook for renewable fuels, whether fighting climate change is still on Neste’s agenda, an exclusive Digest interview with Jason Blake from Neste’s Aviation Feedstock Business Unit, and more.

Neste’s CEO says solid Q1/2020 results behind but the future brings unprecedented uncertainty

In Finland, Neste’s President and CEO Peter Vanacker answers questions about the company’s first quarter 2020 and shares his vision of the post-corona world. Find out how COVID-19 is impacting Neste’s operations at the moment and Vanacker’s outlook for renewable fuels.

How do you see Neste’s financial performance in Q1/2020?

“I am very proud of the hard work done by our people during this crisis. We had a solid start to the year considering the negative market impacts caused by the global coronavirus pandemic in the latter part of the quarter. Our comparable operating profit totaled EUR 408 million, which is more than in the corresponding period last year. In addition, our Renewable Products’ sales volumes were high, and our renewables facilities reached a new quarterly production record. This is an excellent example of the passion our people put into their work, something which continuously keeps astonishing me.”

“That said, we take the risks relating to COVID-19 very seriously and acknowledge that visibility into the future is now extremely low. Our primary objective is to ensure the health and safety of our people, customers, contractors and other external partners. At the same time, we want to make sure our customers can get the services and products they need.”

How is the coronavirus pandemic affecting Neste’s operations at the moment?

“I have been overwhelmed by the readiness to cooperate, in the society at large and at Neste. For the time being, there are no effects on the delivery of our products or services. Refineries, harbours and terminals are operating normally. But due to the developing situation, we are intensively monitoring and evaluating the pandemic changes in order to ensure the safety and health of our people and to ensure our business continuity. Despite the corona situation, our company strategy has not changed and we continue to work for our purpose.

How do you see the outlook for renewable fuels?

“None of us has a crystal ball but we are likely to see unprecedented volatility in the fuel market. As a consequence, we anticipate a challenging market environment in the oil products business. We may also see a very tight renewable feedstock supply, but remain confident in the renewable fuels markets. We expect biofuel regulations and mandates to continue supporting renewable diesel demand. Many governments and companies are highly committed to reducing transportation-related emissions.”

“Our strategy for sustainable aviation fuels has not changed, either. We are committed to serving airlines in their emission reduction targets as soon as aviation recovers. We are well positioned to meet the increasing demand with our current 100 kta available capacity, and our Singapore renewables production capacity expansion. We are currently also investing in a feasibility study to enable the production of renewable aviation fuel in Rotterdam. We target to  have the full capacity to produce over 1 million tonnes of renewable jet fuel globally by the end of 2022.”

How do you see the future, is fighting climate change still on your agenda?

“While it is important to tackle the coronavirus, we also need to look for ways to help rebuild the world after the pandemic. The climate crisis is still happening and needs to be addressed.”

“We now have a golden opportunity to build a sustainable and resilient economy and society. Investments in climate-resilient infrastructure, green innovation and generally the transition to a low-emission future can drive short-term job creation and economic recovery. It should be stressed that this work requires global collaboration. To start with, we have joined an alliance of cross-party political decision-makers, businesses, NGOs and other stakeholders in a call for a Green Recovery after the coronavirus crisis in Europe. We believe that the efforts devoted to the economic recovery after this pandemic must pass the test of creating a healthier planet. The climate crisis will not disappear, as the COVID-19 crisis will, one day.”

What about Sustainable Aviation Fuels?

With the aviation industry reeling and recovering from ‘Rona Cyclona, sustainable aviation fuel is still promising, according to Jason Blake, Vice President of Innovation at Neste’s Aviation Feedstock Business Platform (you may know him formerly from Novozymes). In an exclusive Digest interview, Blake shared some details about Neste’s aviation fuels and aviation feedstock groups.

Neste’s aviation fuels group focuses on the commercial business, contracts with airlines and strategy on how to deploy current aviation fuels into the marketplace, but the aviation feedstock groups focuses on R&D for new feedstocks and improving current feedstocks, investigates new platforms for oils, looking for interesting new renewable jetfuel value chains and securing feedstocks for aviation fuel to have commercial volumes for airlines – to sum it up, the innovation side of things. This group looks at a 5-10 year down the road supply.

Blake told The Digest there are two feedstocks that look very promising right now globally – algae-based technologies and municipal solid waste. If you look at Vanacker’s Capital Markets Day presentation from last week, you’ll see that those two feedstocks are highlighted, so stay tuned for more news from Neste on those in the future.

Neste’s U.S. website notes that “In the US and Europe, Neste’s sustainable aviation fuel annual capacity is currently 100,000 tons. With the Singapore refinery expansion on the way, Neste will have the capacity to produce over 1 million tonnes of sustainable aviation fuel by 2022.”

The website also notes that “Neste MY Renewable Jet Fuel is already available and used in the market. We have for example, partnered with Air BP to deliver sustainable aviation fuel to customers in Sweden and France. In addition, Lufthansa and KLM use our renewable product, blended with fossil jet fuel, continuously on flights departing from Frankfurt and Schiphol Airport.”

Q1 Details

Check out “Changing with the Times: The Digest’s 2020 Multi-Slide Guide to Neste’s Renewable Products” to see how Neste had a solid start to the year and good results despite margin pressure and how their renewable products segment led the way with a record-high production volume. Sure, there was high volatility in feedstock prices, especially with vegetable oil and animal fat prices, and scary super high volatility due to the crude oil price drop and the Covid-19 crisis, but U.S. margins were supported by strong LCFS credit prices.

Bottom Line

Renewable fuels are the way of the future for many companies, including Neste. Sustainable Aviation Fuel is not going away, even with COVID-19 impacting the aviation industry like never before. In fact, this could be an opportunity to rethink how aviation is done completely and a way to integrate sustainable aviation fuel to levels higher than ever. And based on what CEO Vanacker said on the investor call last week and all the latest financials and reports, Neste is set up for success thanks to a hugely successful renewable sector so stay tuned for more from them.

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