REG - Velocys PLC - SAF OFFTAKE WITH IAG

VelocysAnnouncement

10/11/2021 07:05

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20211110:nRSJ9169Ra&default-theme=true

RNS Number : 9169R  Velocys PLC  10 November 2021

10 November 2021

Velocys plc

 

("Velocys" or the "Company")

 

SAF OFFTAKE WITH IAG

 

10-year offtake MoU for 73 million US gallons of carbon negative SAF by IAG

Alongside offtake agreement with Southwest Airlines, offtake in place for 100%
of Bayou Fuels SAF

 

 

Velocys plc (VLS. L), the sustainable fuels technology company, is pleased to
announce that its wholly owned subsidiary, Velocys Renewables LLC, has entered
into a Memorandum of Understanding ("MoU") for the offtake of Sustainable
Aviation Fuel ("SAF") to be produced at the Bayou Fuels project in
Mississippi, USA ("Project"), with International Consolidated Airlines Group
S.A. ("IAG").

 

The MoU covers the purchase by IAG's constituent airlines, which includes
British Airways, Aer Lingus and Iberia amongst others, of an expected 73
million gallons of SAF, in aggregate, at a fixed price. After blending, this
will produce the equivalent, under US regulations, of 192 million gallons of
net zero SAF (blended basis) during the term of the purchase contract, which
will last for ten years from 2026, which is when the Project's biorefinery is
expected to begin delivering SAF. It represents one third of the facility's
planned annual output and complements the binding offtake agreement for the
remaining two thirds annual output announced today with Southwest Airlines.

 

The intention of the parties is to convert the non-binding MoU, which includes
all material terms for the offtake, into a definitive offtake agreement as
soon as possible within the next six months; the MOU also includes an option
for IAG to invest in the Project development phases.

 

The fixed price fuel purchase agreement includes a price support mechanism by
IAG for the greenhouse gas credits associated with the SAF production. As a
result, the agreement is expected to generate revenues of over $800M to the
Project and achieve, under US regulations, an estimated total of 2.2 million
tonnes of avoided CO(2) over the term of the offtake.

 

The Velocys carbon mitigation technology will enable the commercial-scale
production of a deeply negative SAF at the Bayou Fuels plant through the
combination of biogenic feedstock, renewable power and carbon capture and
storage.

 

Henrik Wareborn, CEO of Velocys, said:

 

"We are delighted that IAG, our partner for many years through our work with
British Airways, intend to purchase a large volume of SAF from the Bayou Fuels
project. This long-dated offtake, encompassing support for environmental
credits, will provide certainty of revenue for the Project which should enable
construction capital financing. We have now secured long term offtake clients
for 100% of the expected SAF production and associated environmental credits
for the Bayou Fuels facility.

 

"Velocys' focus is now on accelerating technology delivery with our partners
to allow client facilities, including Bayou Fuels, to reach Final Investment
Decision and then go into construction. Our capital-light,
technology-licensing model will enable many more aviation clients to
transition to Sustainable Aviation Fuel as required by the race to Net Zero."

 

 

Luis Gallego, CEO of IAG, said:

 

"IAG is investing US$400 million in the development of sustainable aviation
fuel in the next 20 years. This new agreement is another important step
towards achieving our goal of 10 per cent sustainable aviation fuel use by
2030.

 

"Sustainable aviation fuel is a critical element for the decarbonisation of
the aviation industry. Clear policy support is needed to attract investment to
construct the necessary plants to deliver enough supply for the airline
industry. This project has benefitted from strong policy support from the US,
creating highly valued green jobs and economic growth. We would encourage the
UK and the EU to follow suit in supporting the development and deployment of
green technologies including carbon capture."

 

 

 

 

Certain information contained in this announcement would have constituted
inside information (as defined by Article 7 of Regulation (EU) No 596/2014)
prior to its release as part of this announcement.

 

---------

For further information, please contact:

 Velocys                                                            +44 1865 800821

 Henrik Wareborn, CEO

 Andrew Morris, CFO

 Lak Siriwardene, Director of Communications & Sustainability

 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)

 Liam Zabludowicz (Corporate Advisory)

 Buchanan (Financial PR)                                            +44 20 7466 5000

 Helen Tarbet

 Simon Compton

 Radnor Capital (Investor Relations)                                +44 20 3897 1830

 Joshua Cryer

 Iain Daly

 

 

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 in the US and UK (Bayou Fuels and Altalto) 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 capture and storage. 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)

 

 

 

Bayou Fuels project

 

The Bayou Fuels project in Natchez, Mississippi, US will take waste woody
biomass and convert it into sustainable aviation fuel and naphtha using
Velocys' proprietary micro-channel FT reactors. The project will incorporate
carbon capture and storage (CCS) to enable the commercial-scale production of
SAF with an extremely negative carbon intensity. Integrating CCS and
renewable power into the Bayou Fuels biorefinery maximises certain targeted
revenue streams, such as those incentives derived from the California Low
Carbon Fuels Standard, and U.S. 45Q tax credits. This is expected to have a
meaningful positive impact on project returns.

 

Project financing for the final engineering phase of the Bayou Fuels project
is targeted to occur in HY1 2022. The plant is designed to produce
approximately 22 million US gallons per annum of SAF, which in turn after
blending will produce approximately 57 million US gallons per annum of net
zero SAF under US regulations.

 

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

 

 

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  MSCURSNRAUUAARA