REG - Velocys PLC - Business Update and Notice of Results

VelocysAnnouncement

04/04/2022 07:00

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RNS Number : 0598H  Velocys PLC  04 April 2022

4 April 2022

Velocys plc

("Velocys" or the "Company")

Velocys Business Update

Notice of results

 

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 CO(2) 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 CO(2) 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:

 Velocys                                               +44 1865 800821

 Henrik Wareborn, CEO

 Andrew Morris, CFO

 Lak Siriwardene, Director of Communications

 Panmure Gordon (UK) Limited (Nomad and Joint Broker)  +44 20 7886 2500

 Hugh Rich (Corporate Broking)

 Emma Earl (Corporate Finance)

 John Prior (Corporate Finance)

 Shore Capital Stockbrokers Limited (Joint Broker)     +44 20 7408 4090

 Henry Willcocks (Corporate Broking)

 Toby Gibbs (Corporate Advisory)

 James Thomas (Corporate Advisory)

 Radnor Capital (Investor Relations)                   +44 20 3897 1830

 Joshua Cryer

 Iain Daly

 Buchanan (Financial PR)                               +44 20 7466 5000

 Helen Tarbet

 Simon Compton

 

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.

www.velocys.com (http://www.velocys.com)

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