Business update and notice of results
4 Apr 2022
Velocys plc (AIM: VLS), the sustainable fuels technology company, is pleased to provide the following update.
During 2021 we saw the achievement of a number of important objectives in our growth strategy culminating in two multi-year Sustainable Aviation Fuel (SAF) offtake agreements; the selection of our technology for an e-fuels project commissioned by the Government of Japan; and a significant capital raise to be used to increase the delivery capacity of Velocys’ technology to unlock client sales with a view to achieving our target of net positive cashflow during 2024.
Since the year end, we have completed the sale and purchase option agreement over the company owning the land for the Altalto project site; appointed Andy Bensley as Global Head of Business Development and Technology Delivery along with other key technical role appointments at our catalysis and reactor facility in Ohio. We are moving into 2022 with a clear focus on executing our agreed commercial strategy.
Project update – Bayou Fuels
Worley, our international engineering contractor, has completed the interim engineering (FEL-2) work during Q1 2022 and Koch Project Solutions continue to provide project development support to our SAF biorefinery project in Mississippi, ahead of finalisation of contract execution strategy and FEED award subject to financing.
The site landlord; the local development authority in Mississippi, is well under way to complete the construction of the final section of the levee protecting the biorefinery site by the Mississippi river. Completion is expected later this summer.
We are eagerly anticipating clarity on government policy support from both the US and UK Governments to provide sufficient long term revenue stability for biorefineries converting sustainable residues into renewable fuels. This is a condition for successful capital formation for both projects. We are currently anticipating the US Congress to pass favourable legislation including the provision of a SAF Producer Tax Credit, indexed to the carbon intensity of the fuel, in the summer which will allow for the launch of the Series A fundraise for Bayou Fuels in the second half of this year. We expect the UK Government to need some additional time to provide matching competitive incentives, which would therefore enable Altalto to go into a Series A fundraise in H1-23.
In anticipation of such policy support, we have launched an RFP process with a selection of US investment banks and advisers in relation to services including underwriting tax-exempt municipal bonds, mezzanine, and equity to finance the final development stage and subsequent construction of the Bayou Fuels biorefinery in Mississippi.
A full 15-year SAF and environmental credit offtake agreement with Southwest Airlines and a 10 year SAF and environmental credit offtake MOU with IAG were entered into in November 2021. As planned, IAG and Velocys are converting the MOU into a fully termed offtake agreement with a view to having that completed later in Q2. A further announcement will be made in due course.
Operations and business development update
We have recently secured a 15 year lease for a modern and sustainable facility in Columbus, Ohio where we will be consolidating our catalysis services, microchannel reactor core assembly and technology licensing under one roof. In line with our recent Placing Circular, this will involve a capital investment of up to £1.5 million in the building enhancements to fit our specific needs and £4.8 million in reactor core assembly automation enabling steady output of at least 12 complete FT reactors per year. This dovetails with the expiry next year of the 10 year lease of our current technology centre in Columbus, Ohio.
We are also pleased to announce the potential sale of the undeveloped Ashtabula site in Northern Ohio which was acquired as part of the Pinto Energy acquisition in 2014 and was intended to be used for a GTL plant at the time. The Ashtabula Port Authority has provisionally agreed to acquire the site for an undisclosed price subject to further due diligence by the purchaser.
We have deepened our collaboration with TOYO regarding biomass to SAF (BtL) and power to SAF (PtL) solutions for the energy transition in Japan. The commercial scale NEDO2 BtL project is currently in FEL2 stage and progressing to plan and the Power to Liquids demonstration project is advancing as planned. Meanwhile our Business Development pipeline continues to grow with a number of feasibility studies with biorefinery plant developers ongoing to accelerate these projects, which we expect to mature into commercial contracts in due course.
Project update – Altalto
Further to our announcement on 24 March 2022, we, together with our partner British Airways are delighted to welcome Foresight Group LLP into the Altalto Immingham municipal solid waste to jet fuel project in Immingham where Velocys is providing project development services, engineering and FTS technology.
Over the last few months, we have completed site engineering, geotechnical survey and integration of carbon sequestration of biogenic CO2 in preparation for the connection of the Altalto plant, when built, into the new East Coast Carbon Capture and Storage (CCS) cluster, which is being developed by a consortium of major corporations including Drax, BP and Equinor.
This leading CCS cluster, designed to sequester 40kt of CO2 per day, is scheduled to come on stream around the same time as the Altalto plant is expected to be commissioned, in 2027, subject to funding of both Altalto and the CCS cluster. Our application to BEIS to participate in the East Coast CCS cluster has met the eligibility criteria and passed through to Phase 2 of the evaluation process to identify and sequence CCS clusters suitable for deployment in the mid-2020s.
We have benefitted from the £1.9m Green Fuels Green Sky grant awarded by the DfT in August 2021, which has largely covered our costs for the essential site engineering and other site-related work through to Q2/22.
Notice of publication of Velocys plc Annual Report and Accounts 2021
The Company’s results for the year ended 31 December 2021 are expected to be announced during the week commencing 16 May 2022. A further announcement will be made nearer the time.
Henrik Wareborn, CEO of Velocys, said:
“The Velocys group is well positioned at the nexus of energy security and the net zero transition. Through the deployment of our patented demonstrated FT and catalyst technology, we provide decarbonisation solutions for hard-to-abate sectors such as commercial aviation, to supply negative carbon intensity fuels to airlines and others committed to net zero targets, while also reducing import dependency on fossil fuels.
“The improved air-quality impact of the synthetic fuels our customers produce using our patented technology is an additional driver of growth in demand for our technology. Synthetic Paraffinic Kerosene, SPK, produced using Velocys’ proprietary super-active catalyst and FT Synthesis, FTS, contains less than 15ppm sulphur compared to up to 3000ppm sulphur for conventional fossil jet fuel. This in turn sharply reduces the amount of PM2.5 (2.5 micron size Particulate Matter) generated by the combustion of the fuel.”
This announcement contains inside information for the purposes of article 7 of the Market Abuse Regulation (EU) 596/2014 as amended by regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310.
For further information, please contact:
Henrik Wareborn, CEO
Andrew Morris, CFO
Lak Siriwardene, Director of Communications
+44 1865 800821
Panmure Gordon (UK) Limited (Nomad and Joint Broker)
Hugh Rich (Corporate Broking)
Emma Earl (Corporate Finance)
John Prior (Corporate Finance)
+44 20 7886 2500
Shore Capital Stockbrokers Limited (Joint Broker)
Henry Willcocks (Corporate Broking)
Toby Gibbs (Corporate Advisory)
James Thomas (Corporate Advisory)
+44 20 7408 4090
Radnor Capital (Investor Relations)
+44 20 3897 1830
Buchanan (Financial PR)
+44 20 7466 5000
Notes to Editors
Velocys is an LSE-listed, international sustainable fuels technology company, traded on the AIM, providing clients with a technology solution to enable the production of negative Carbon Intensity synthetic, drop-in fuels from a variety of waste materials. SAF (‘Sustainable Aviation Fuel’) is the only commercially available, permanent alternative to fossil aviation fuels.
The technology is IP-protected in all major jurisdictions.
Two reference projects (Altalto, UK, and Bayou Fuels, US) are designed to accelerate the adoption and standardise the Velocys proprietary Fischer Tropsch (FT) technology with an integrated end to end solution, including renewable power and carbon sequestration. Velocys is enabling commercial scale SAF production in response to the clean energy transition.
Velocys technology pathway is enabling the next generation of low carbon sustainable fuels with significant additional positive air quality impacts.