REG - Velocys PLC - SAF OFFTAKE WITH SOUTHWEST AIRLINES

VelocysAnnouncement

10/11/2021 07:05

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RNS Number : 9167R  Velocys PLC  10 November 2021

10 November 2021

Velocys plc

 

("Velocys" or the "Company")

 

SAF OFFTAKE WITH SOUTHWEST AIRLINES

 

15-year offtake agreement enables 575 million blended gallons of net zero SAF
for Southwest Airlines

Alongside offtake MoU with IAG, commitment 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 its first offtake agreement for the sustainable aviation fuel ("SAF") to
be produced at the planned Bayou Fuels biorefinery project in Mississippi, USA
("Project"), with Southwest Airlines Co.® ("Southwest").

 

The agreement covers the purchase by Southwest of an expected 219 million
gallons of SAF at a fixed price, over a fifteen-year term starting as early
as 2026, when the biorefinery is scheduled to begin commercial delivery of
fuel. After blending, this will enable approximately 575 million gallons of
net zero(1) SAF.

 

The offtake agreement covers two thirds of the Project facility's planned
output and has the potential to generate multi-billion revenues over the life
of the contract. Each gallon of SAF generated by the Project is expected to
generate tradable greenhouse gas credits for which Southwest guarantees a
minimum price payable to the Project (included in the fuel fixed price),
de-risking a significant proportion of the revenue stream to the Project. The
Project may additionally benefit from the value of greenhouse gas credits if
sold above the minimum price by Southwest.

 

In addition, Southwest and Velocys have established a long-term strategic
relationship as a part of the offtake agreement - potentially advancing future
Velocys SAF-producing facilities and allowing Southwest first offer rights to
purchase significant volumes of SAF from such facilities.

 

Through the combination of biogenic feedstock, renewable power and carbon
capture and storage, Velocys' carbon mitigation technology will enable the
commercial-scale production of SAF at the Bayou Fuels plant with a strongly
negative carbon intensity of up to -144g CO2e/MJ, which is expected to achieve
a total of 6.5 million tonnes of avoided CO(2) over the term of the contract.

 

 1  Net zero is determined as a fuel with a carbon intensity of zero (0)
gCO2e/MJ or lower on a lifecycle basis.

 

 

Henrik Wareborn, CEO of Velocys, said:

 

"Today's announcement is a major milestone for the Bayou Fuels reference
project and further strengthens our conviction in the important role
sustainable fuel will play in the future of the aviation industry.

 

"It is very encouraging to see Southwest make such a strong commitment to
using fossil free fuel as part of its environmental sustainability plan and to
see Velocys technology performing a central role in making this possible.

 

"This unique long dated offtake, encompassing fuel purchases and sales of
greenhouse gas credits, underpins the financing of the construction capital
for the Project.

 

"This agreement shows that commercial scale demand for SAF can be satisfied
already by the middle of this decade and that Velocys plays a pivotal role in
enabling this."

 

 

Stacy Malphurs, Vice President of Supply Chain Management & Environmental
Sustainability for Southwest Airlines, said:

 

"We're excited to enter into a 15-year offtake agreement with Velocys,
enabling Southwest to utilise negative carbon intensity SAF to produce
significant quantities of net zero fuel after blending with conventional jet
fuel.

 

"As we work toward our ultimate goal of carbon neutrality by 2050, this
offtake agreement will play an important role in our strategy to reduce our
carbon emissions intensity and incorporate SAF into our operations on our
journey improve our environmental stewardship."

 

 

Further terms of the Offtake Agreement

 

The agreement is subject to certain customary conditions precedent including
completion of satisfactory financing for the final engineering phase and
certain construction milestones, eligibility for greenhouse gas credits as
well as the enactment of the proposed SAF tax credit legislation.

 

 

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 of -144g CO2e/MJ. 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.

 

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

 

 

SOUTHWEST AIRLINES CO.

 

In its 51(st) year of service, Dallas-based Southwest Airlines Co. continues
to differentiate itself from other air carriers with exemplary Customer
Service delivered by nearly 54,000 Employees to a Customer base that
topped 130 million Passengers in 2019. Southwest has a robust network of
point-to-point service with a strong presence across top leisure and business
markets. In peak travel seasons during 2019, Southwest operated more than
4,000 weekday departures among a network of 101 destinations in the United
States and 10 additional countries. In 2020, the carrier added service to
Hilo, Hawaii; Cozumel, Mexico; Miami; Palm Springs, Calif.; Steamboat Springs;
and Montrose (Telluride), Colo. Thus far in 2021, Southwest has initiated
service to Chicago (O'Hare) and Sarasota/Bradenton both on Feb. 14;
Savannah/Hilton Head and Colorado Springs both on March 11; Houston (Bush) and
Santa Barbara, Calif. both on April 12; Fresno, Calif. on April
25; Destin/Fort Walton Beach on May 6; Myrtle Beach, S.C. on May 23;
Bozeman, Mont. on May 27; Jackson, Miss. on June 6; Eugene, Ore. on Aug.
29; and Bellingham, Wash. on Nov. 7. Southwest will begin service to Syracuse
on Nov. 14.

 

Southwest coined Transfarency(®) to describe its purposed philosophy of
treating Customers honestly and fairly, and low fares actually staying low.
Southwest is the only major U.S. airline to offer bags fly free(®) to
everyone (first and second checked pieces of luggage, size and weight limits
apply, some carriers offer free checked bags on select routes or in qualified
circumstances). Southwest does not charge change fees, though fare differences
might apply.  

 

Southwest is one of the most honored airlines in the world, known for a triple
bottom line approach that contributes to the carrier's performance and
productivity, the importance of its People and the communities they serve,
and an overall commitment to efficiency and the planet. Learn more about how
the carrier gives back to communities across the world by
visiting Southwest.com/citizenship.  

 

Book Southwest Airlines' low fares online at Southwest.com or by phone at
800-I-FLY-SWA(®).  

 

Media Contacts:

Visit the Southwest Newsroom at swamedia.com for multimedia assets and other
Company news.

Media Relations Team: 214-792-4847, option 1

 

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