VARO announces new strategy to invest $3.5 billion and help customers meet net zero ambitions



  • Twin-engine strategy: Engine 1 focused on Conventional Energies generating high levels of cash flow to reinvest into Engine 2, focused on Sustainable Energies
  • Engine 2 consists of five growth pillars targeting the most attractive low carbon growth markets in Europe: Biofuels; Biomethane & BioLNG; Hydrogen; E-mobility; Carbon Removals
  • VARO to invest around $3.5 billion over the 2022-26 period, with two-third committed to Sustainable Energies
  • Strategy builds on momentum VARO has created as a major biofuels marketing and distribution franchise in Europe, alongside investments in SilviCarbon and E-Flux
  • Twin engines will grow EBITDA 3x by 2026 to $1bn, up from $321 million in 2021. Sustainable Energies to account for over 50% of group EBITDA by 2026
  • VARO to be Net Zero for Scope 1, 2 and 3 emissions by 2040

Commenting on the announcement Dev Sanyal, VARO CEO, said: “Our customers’ needs are changing fast as they adapt to the Energy Transition while expecting reliability of supply. They want a partner that moves with them, one that can advise and provide a wide range of energy and decarbonisation solutions from a single company.  

That is why VARO plans to invest $3.5 billion in the next five years in our twin-engine strategy, with around two-thirds of that investment focused on Sustainable Energies. This will enable VARO to provide integrated energy solutions to a wide variety of sectors including food, wholesalers and retailers as well as hard to abate sectors like industrial heat and aviation. It will also reorient VARO into the higher growth low-carbon sector and generate significant EBITDA growth.”

Marcel van Poecke, VARO Chairman and Vice Chair of Carlyle International Energy Partners, said: “The need to take action to limit global warming is driving regulatory change and shifting consumer behaviour and it is clear that VARO has a key role to play in Europe’s energy transition and energy security. Dev has an unrivalled track record in building low carbon businesses and I know he and the leadership team are well placed to deliver on VARO’s ambitious new strategy.”
Russell Hardy, Vitol CEO, said: “When we established VARO 10 years ago, we wanted to create an agile business that could move quickly to capitalise on opportunities in the energy sector. The energy transition also offers huge opportunities. Our new strategy and VARO’s track record of growth and acquisitions means we are well placed to make the most of these opportunities and continue to scale the business.”
Twin engine strategy accelerates growth in Sustainable Energies 

The new strategy is built around two engines. Engine 1 is focused on VARO’s Conventional Energies business. Conventional Energies consists of manufacturing, storage, trading marketing and distribution. The priority for Engine 1 is to continue to operate safely and reliably, to reduce carbon intensity and to provide the energy security that is essential for our customers. Our track record of consistent performance is a driver of value and an enabler for our ambition for Engine 2.
VARO has introduced the “Fit For Growth” programme in Engine 1 to support these aims. “Fit For Growth” will improve efficiency through the optimisation of assets. It will also further reduce emissions to ensure assets operate with best-in-class carbon footprint and continue to repurpose assets for alternative uses, ultimately transitioning decarbonised assets into Engine 2.

Cash flows from Engine 1 will be reinvested into Engine 2, which is focused on VARO’s Sustainable Energies business. Sustainable Energies consists of five growth pillars that VARO has identified as offering the most attractive low carbon growth potential while playing to the company’s strengths. VARO’s five strategic growth pillars in Sustainable Energies are:

  1. Biofuels: an integrated producer of 2G advanced biofuels, including SAF. Leveraging existing biofuels optimization expertise, VARO will build new renewable manufacturing facilities and, in time, repurpose older assets. Target >250kt p.a. of net biofuels capacity by 2026 with long-term ambition to reach > 500kt p.a.
  2. Biomethane & LNG: leading producer of biomethane and bio-LNG. VARO will develop portfolio through both acquisition and greenfield development to strengthen offers to industrial and road transport sectors.
  3. Hydrogen: leverage position as H2 consumer to develop hydrogen production hubs. In the initial phase, VARO will invest in an electrolyser at Bayernoil Refinery, with offtake meeting part of the demand from the refinery. Additional green and biogenic production could lead to offtake opportunities for industry, heavy transport and synthetic fuels.
  4. E-mobility: turnkey charging solution for customers transitioning to E-mobility. Through its acquisition of stakes in E-Flux, VARO is already at the heart of the EV ecosystem. Our focus will be on further partnerships and acquisitions to create new businesses and enter new, less mature, markets.
  5. Carbon removal: a fully integrated carbon removal offer. Leveraging its existing expertise in carbon removal from majority stake in SilviCarbon, VARO will invest in forestry projects to generate high-quality nature-based carbon removal over next 5-10 years, optimised through advisory and trading.

Leveraging VARO’s strengths 

This twin-engine strategy reflects VARO’s momentum in renewables and decarbonisation and plays to the company’s five core strengths:

  • Ability to provide customers with a fully integrated portfolio of energy solutions that can be tailored to customer needs
  • Optimization and exposure management which supports value chain integration and benefits from VARO’s position as a leading biofuels trader in Europe
  • Entrepreneurial culture well suited to developing the next generation of energy solutions. VARO was the first company to introduce UERs in Germany and has stakes in a number of businesses like E-flux that support customer integration
  • Culture of operational excellence with safe operations and assets operating at 98% reliability
  • Strategic infrastructure which can be deployed for current needs for energy security but which have flexibility for repurposing to meet the needs of energy transition.

These strengths combined with the twin-engine strategy will change the role VARO plays for customers, shifting it from being a supplier to becoming the energy transition partner of choice. As well as continuing to serve existing customers the strategy will also enable VARO to better serve wholesalers and retailers, food retailers, as well as those in hard to abate sectors such as industrial heat and aviation by providing a wider range of energy solutions.

Strategy built on strong financial foundations 

Twin-engine strategy is underpinned by a robust financial framework, driven by high levels of cash generation, a strong balance sheet and a disciplined approach to capital allocation.

  • High cash generation and resilient margins in existing businesses: targeting Free Cash Flow generation ~$300 million a year to 2026
  • Investing $3.5 billion to 2026: approximately two-thirds focused in the Sustainable Energies business, with ~$140 million p.a. sustaining capex in Conventional Fuels
  • Grow EBITDA 3x by 2026: versus $320 million in 2021; Sustainable Energies contributes over 50% of EBITDA by 2026
  • Strong balance sheet with ample financing capabilities: growth to be accelerated by utilising existing balance sheet capacity targeting long-term level of 2.0x net debt/EBITDA ratio with a maximum of 2.5-3.0x at peak investment
  • Long-term shareholders: VARO is owned by Carlyle, a global investment firm with a long history of investing in the energy sector, and Vitol, one of the world’s leading energy traders.

Leading Net Zero targets 

Today VARO also sets out ambitious and sector-leading new targets for the reduction and elimination of CO2 emissions. 

  • Scope 1 & 2: interim target of 40% absolute reduction by 2030 and Net Zero by 2040
  • Scope 3: targeting a 15% reduction in carbon intensity by 2030 and Net Zero by 2040