As announced on 24 March 2020, Velocys has responded well to the Covid-19 related lockdowns in the UK and the US, implementing procedures which have allowed the Company to operate close to “Business as usual” during this period. Progress has been made on all aspects of the business and all critical milestones have been met. Manufacturing of reactors for Red Rock Biofuels has progressed as per the agreed schedule and we anticipate being able to complete the delivery of all four reactors by the end of June 2020. The ongoing work on our reference projects and our customers’ projects is also on schedule. We have announced an extension of our JDA with British Airways and Shell as well as Planning Permission for the Altalto project in the UK during this period. We have received grants and subsidised Payroll Protection loans from the UK and US governments respectively in recognition of our continued commercial progress and absence of redundancies or furlough of any employees.
Due to the logistical difficulties involved in completing the audit while operating under lockdown restrictions, the Company believes that it will not be possible to complete the annual audit in time for an Annual General Meeting and presentation of the Annual Report and Accounts prior to 30 June 2020. The London Stock Exchange and the Registrar of Companies have approved a delay to the filing and publication of the Company’s audited annual accounts for the financial year ended 31 December 2019 and the holding of its 2020 AGM by three months in line with current broad industry practice due to the restrictions imposed by the Covid-19 pandemic. The Company confirms that it now expects to release the Annual Report and audited accounts during early August 2020.
Given this delay, the Company is today providing shareholders with an unaudited update on trading for the year ended 31 December 2019, details of which are set out below.
Headline Financial Results for year ended 31 December 2019 (Unaudited)
Today, Velocys is delivering the technology to provide the next generation of sustainable fuels for difficult to decarbonise sectors, particularly for aviation and heavy goods transport. Our technology converts biogenic sustainable waste materials, to cut net greenhouse gas emissions and improve air quality.
Combining transformative technology, operational expertise and a partnership approach, we are enabling commercial biorefinery projects, today, that will deliver the sustainable fuels required that will allow our clients to advance towards their net zero objectives.
Our technology can reduce the impact aviation has on the climate – the toughest area of transport to decarbonise – by delivering aviation fuel with a low or even carbon-negative footprint.
Velocys’ commercial strategy and future revenue generation is derived in three ways:
1) The sale of engineering services, FT reactors, catalysts and FT technology licences to commercial customers;
2) The limited initiation, design and development of joint venture biorefineries and sale of related engineering and technology services to the two Reference Projects.
3) The sale of integrated technology packages for end to end solid waste biomass to liquid synthetic fuels earning revenues from engineering, technology hardware including the FT reactors and catalysts and from technology licenses and decarbonisation royalties.
Red Rock Biofuels, Oregon biorefinery (“RRB”)
This wood chips to sustainable fuel biorefinery commenced construction during 2018. During 2019 we reached agreement on a series of amendments in our licensing contracts with RRB, seeing the delivery of the first of four reactors and the first four charges of catalyst, reducing the commitment for reactors from six to four. Manufacturing the reactors and catalyst for this £9.2m order was commenced in 2019. During the year we invoiced £1.2m for the delivery of one reactor and four loads of catalyst and have £5.6m deferred revenue awaiting the completion of the delivery of the three remaining reactors, which will be completed in June 2020 and the commissioning of the FT process once the customer’s plant is fully constructed later this year.
Toyo Engineering Corporation
During 2019 we secured a purchase order and technical service agreement with Toyo Engineering Corporation (Toyo) for the use of Velocys technology in a publicly funded demonstration facility in Nagoya, Japan, as well as an advance deposit for the use of the Velocys technology by Toyo in a subsequent commercial plant.
The Toyo order with Velocys, worth approximately £0.4 million is for the supply of Velocys’ FT technology, equipment and catalyst for a biomass-to-jet fuel demonstration facility currently under construction by a consortium of Japanese companies.
In addition, Velocys has agreed that it will grant an exclusive right for Toyo to secure and use the license and technical services of the Velocys FT technology for a future potential commercial plant in Japan with an advance deposit of £3.2 million. The deposit was paid in a non-refundable tranche of $0.5 million (£0.4 million) and a further tranche which is potentially refundable and subject to milestones.
Our Reference Projects
Henrik Wareborn, CEO of Velocys, observed:
“Velocys is now within reach of being able to offer a tangible solution to support decarbonisation of air travel; a critical sector supporting the global economy with very stringent fuel criteria and few alternatives to hydrocarbon fuels. The aviation sector needs renewable fuels which meet the complex standards of fossil fuels for engine safety and performance reasons. I believe Velocys is well positioned to create significant shareholder value from our unique position at the cutting edge of sustainable aviation.
“Velocys has entered into an exciting period of its commercial development as we are progressing with the Altalto Immingham Project with our partners British Airways and Shell, having appointed Worley as our engineering contractor for the FEED stage. We announced a groundbreaking development in our Mississippi Biorefinery Project with its Carbon Capture and Storage contract with Oxy Low Carbon Ventures, which means that the fuel produced from this plant will have a negative carbon intensity. We expect negative carbon intensity to be required for competitive sustainable fuels in the future to assist our clients to progress towards their “net zero” objectives.
“Whilst developing these two reference projects for our technology we have reached agreement with our technology partners to work with us to bring their technologies into our integrated package solution providing a standardised conversion process from solid waste feedstocks to liquid synthetic fuels, which burn cleaner than conventional fuels and have low or negative Carbon Intensity.”
For further information, please contact:
Henrik Wareborn, CEO
Andrew Morris, CFO
Lak Siriwardene, Head of Communications & Sustainability
+44 1865 800821
Numis Securities (Nomad and joint broker)
+44 20 7260 1000
Canaccord Genuity (Joint broker)
+44 20 7523 8000
Radnor Capital (Investor relations)
+44 20 3897 1830
Field Consulting (PR)
+44 20 7096 7730
Notes to Editors
Velocys is an international UK-based sustainable fuels technology company. Velocys designed, developed and now licences proprietary Fischer-Tropsch technology for the generation of clean, low carbon, synthetic drop-in aviation and transport fuel from municipal solid waste and waste woody biomass.
Velocys is currently developing projects in Natchez, Mississippi, USA (incorporating Carbon Capture Use and Storage) and Immingham, UK to produce fuels that significantly reduce both greenhouse gas emissions and key exhaust pollutants for aviation and road transport. Originally a spin-out from Oxford University, in 2008 the company acquired a US company based on complementary technology developed at the Pacific Northwest National Laboratory. Velocys is headquartered in Oxford in the United Kingdom.
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