Securing the Future: TotalEnergies' Quatra Deal and the Path to Aviation Decarbonization

The global push to decarbonize aviation is creating unprecedented opportunities for companies positioned to deliver sustainable aviation fuel (SAF). Among them, TotalEnergies stands out as a leader, having secured a pivotal feedstock supply partnership with Quatra—a European leader in used cooking oil (UCO) collection. This 15-year agreement, set to begin in 2026, ensures a stable supply of 60,000 tons of UCO annually, directly fueling TotalEnergies' biorefineries and reducing production risks. By anchoring its SAF and HVO biodiesel ambitions in a sustainable, scalable supply chain, TotalEnergies is de-risking growth in renewable fuels while capitalizing on regulatory tailwinds. Here's why this deal positions TTE as a standout play in the energy transition.

The Quatra Deal: A Foundation for Supply Chain Resilience

The Quatra partnership is a masterstroke in supply chain management. UCO, a high-quality feedstock for SAF and HVO biodiesel, is in increasingly short supply due to rising global demand. By locking in a 15-year supply agreement, TotalEnergies mitigates two critical risks: feedstock volatility and carbon intensity.

• Reduced Cost Volatility: UCO prices can swing wildly due to supply shortages and geopolitical factors. The fixed-term contract stabilizes input costs, allowing TotalEnergies to project margins with greater certainty.
• Lower Carbon Footprint: UCO-based fuels boast a 70–80% reduction in lifecycle emissions compared to fossil fuels. This aligns with TotalEnergies' net-zero goals and the EU's sustainability criteria under the Renewable Energy Directive (RED III).

By 2026, when the deal kicks in, TotalEnergies will already be producing SAF at its La Mède biorefinery (500,000 tons/year capacity) and preparing its Grandpuits facility (230,000 tons/year of SAF by 2026). The Quatra supply ensures these facilities can ramp up production without chasing spot market UCO—a critical edge in a sector where feedstock shortages are a persistent threat.

Regulatory Tailwinds: ReFuelEU and the SAF Boom

The EU's ReFuelEU mandate is the single largest driver of SAF demand. By 2025, airlines must blend 2% SAF into jet fuel, rising to 35% synthetic SAF by 2050. This creates a guaranteed market for TotalEnergies' output.

Key benefits for TTE under ReFuelEU:
1. Penalties for Non-Compliance: Airlines and airports face fines if they fail to meet SAF targets. This incentivizes partnerships with producers like TotalEnergies.
2. Book-and-Claim System: By 2024, the EU will enable virtual tracking of SAF credits, ensuring TotalEnergies can sell credits even if physical fuel distribution is uneven.
3. Cost Support: The EU's Innovation Fund and Horizon Europe grants will subsidize feedstock logistics and biorefinery upgrades, lowering TTE's capital expenditure burden.

Scalability and Leadership in Renewable Fuels

TotalEnergies is not just a participant in the SAF race—it's a pacesetter. By 2028, the company aims to produce nearly 500,000 tons/year of SAF across its European facilities. The Quatra deal is the linchpin for this growth:

• La Mède (France): Already producing SAF for southern French airports, this facility serves as a template for future expansions.
• Grandpuits (France): A €500M investment will convert this refinery into a zero-crude complex, relying on UCO and organic waste feedstocks.
• Strategic Partnerships: Deals with airlines like Air France-KLM (up to 1.5M tons of SAF over 10 years) lock in long-term demand, reducing market exposure to price swings.

Investment Thesis: TTE as a Climate-Resilient Growth Story

The Quatra deal and ReFuelEU combine to create a high-margin, low-risk growth profile for TotalEnergies:

• Margin Stability: Fixed feedstock costs and long-term offtake agreements (e.g., with airlines) insulate earnings from commodity price fluctuations.
• Regulatory Safety Net: The EU's mandates ensure demand growth, even during economic downturns.
• First-Mover Advantage: TotalEnergies' early production at La Mède and Grandpuits positions it to capture a disproportionate share of SAF's projected $50B market by 2030.

Risks and Considerations

While the Quatra deal is transformative, risks remain:
- Feedstock Competition: Global UCO demand could outstrip supply, raising prices despite the fixed-term contract.
- Technology Costs: Scaling synthetic SAF (required under ReFuelEU's 2030+ targets) will require heavy R&D spending.

However, TotalEnergies' diversified portfolio—spanning renewables, hydrogen, and biorefining—buffers against these risks. Its $6.5B annual capex allocation to renewables (2023) signals a commitment to staying ahead of the curve.

Conclusion: TTE is a Long-Term Winner in Aviation Decarbonization

The Quatra deal is more than a supply chain play—it's a blueprint for sustainable energy dominance. By securing feedstock, aligning with regulations, and leveraging economies of scale, TotalEnergies is uniquely positioned to capitalize on the SAF boom. With its low carbon intensity, stable cash flows, and strategic partnerships, TTE offers investors a rare blend of growth and resilience in the energy transition. For those betting on aviation's green future, this is a stock to watch—and hold.

Investment recommendation: Consider a long position in TTE for its SAF leadership and regulatory tailwinds, with a 3–5 year horizon.