Velocys plc (AIM: VLS), the sustainable fuels technology company, is pleased to provide the following business and post close update for the 12 months ending 31 December 2022 (“FY22”).
Based on unaudited accounts for FY22, the financial performance of the Company was in line with market expectations. As of 31 December 2022, Velocys had a cash balance of £13.4 million (2021: £25.5 million). The Company expects to report its results for the year to 31 December 2022 in May 2023.
During 2022, Velocys saw the achievement of a number of key milestones and objectives which put the Company in a strong position to progress its reference projects through to key valuation inflection points and build its commercial pipeline.
Business Scale-up and Delivery
Bayou Fuels Project (US)
Altalto and e-Alto Projects (UK)
Post year-end, Velocys has entered into a Master Relationship Agreement (“MRA”) with Bechtel Limited, one of the world’s most respected engineering companies. The MRA, which will be instrumental in delivering the next important milestones for the reference projects and future commercialisation, sets out a framework and roadmap for the parties to collaborate with each other with the objective of developing an EPC execution model for sustainable fuel plants.
The Company is also in the final stages of appointing a global investment bank as Financial Adviser to assist with, and advise on, the delivery of development capital into the Bayou Fuels (US) and Altalto (UK) projects. As this activity accelerates, we have commenced a broader recruitment programme with a focus on increasing our project engineering and business development capability.
Operations and Business Development
Bayou Fuels Project
With the support of the Financial Adviser, the Company expects the Series A funding for the development capital for the Bayou Fuels project to be launched in Q2 2023, with an aim to enter in to FEED by Q4 2023, delivering a pathway to Financial Investment Decision (“FID”) in Q1 2025. Once the project enters FEED, the Company expects to generate revenues for its technology license and engineering service. Velocys expects to retain a reduced equity position in the Bayou project post the Series A fundraising.
Following FID in early 2025, the Company expects to enter into construction with commissioning and start up anticipated in 2028, at which point Velocys expects to be generating revenue from reactor and catalyst sales, engineering services and technology licensing.
The 15-year, fixed price, offtake agreement remains in place with Southwest Airlines, amended recently to reflect the updated project schedule, as well as a Memorandum of Understanding with IAG for a 10-year fixed price offtake for 100% of the SAF produced at the biorefinery.
As previously announced, the project has significantly improved its carbon intensity score from -144g CO2e/MJ to -375g CO2e/MJ through the provision of a biomass boiler renewable power solution with CCS integration. This improvement has the potential to increase future revenue for Bayou Fuels and further support third party project funding. The Inflation Reduction Act of 2022 supports the project greatly as the 45Z tax credits incentivises the total amount of avoided carbon rather than the volume of sustainable fuel supplied, therefore prioritises our technology which offers a direct route to negative carbon intensity fuels.
A grant award of £27 million was received for this project from the DfT’s Advanced Fuels Fund, the highest such award from the DfT to any party involved in the competition. This award, along with private sector matched funding, will be used for the completion of the project FEED and places Altalto on a clear pathway to FID by the end of 2024 and recognises the progress that has been made in advancing the project. Altalto expects to enter into construction in 2025 with commissioning and start up anticipated in 2027, at which point Velocys expects to generate revenue from reactor and catalyst sales, engineering services and technology licensing.
Licensor and engineering service agreements are being finalised and, subject to contract, it is expected that Bechtel will commence FEED in Q2 2023. With the support of our Financial Adviser, matched funding will be sought in Q2 2023. This will provide an opportunity for new partners to participate in the early development capital ahead of FID, as well as the development of offtake arrangements. Velocys expects to retain a reduced equity position in the Altalto project post the funding. The project is being jointly developed with British Airways.
Henrik Wareborn, CEO, said:
“The progress and partnerships outlined in this business update reflect the significant achievements made in 2022 and Velocys’ position of strength in a rapidly evolving global market for advanced synthetic fuels technology.
“We have the here-and-now technology to enable SAF production close to sustainable feedstock sources to decarbonise the aviation industry at scale. In order for SAF production plants to be successful, several threads need to be in place, such as government regulatory support, abundant and sustainable feedstock, carbon capture and sequestration, supply of renewable power, and most of all, a technology that works. Velocys provides a uniquely integrated package with its IP-protected technology at its core.
“The progress we continue to make, supported by these new developments and the policy tailwinds, means we have a solid platform to deliver. Consequently, we are confident about the years ahead and our commercialisation strategy.”
This announcement contains inside information for the purposes of the UK Market Abuse Regulation.
For further information, please contact:
Henrik Wareborn, CEO
Philip Sanderson, CFO
Lak Siriwardene, Director of Communications & Sustainability
+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 customers with a technology solution to enable the production of negative Carbon Intensity synthetic, drop-in fuels from a variety of waste materials. Synthetic fuel is the only commercially available, permanent alternative to fossil aviation fuels. The Velocys technology is IP-protected in all major jurisdictions.
Two reference projects (Bayou Fuels, US, and Altalto, UK) 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 synthetic fuel production in response to the clean energy transition, with significant additional positive air quality impacts.
18 May 2023
10 May 2023
31 March 2023