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31st Mar 2023

UK Government SAF Policy Update

Velocys plc (VLS.L), the sustainable fuels technology company, welcomes yesterday’s consultation paper from the UK Government which contains a number of proposals aimed at supporting and financing the development of the sustainable aviation fuel (“SAF”) industry. Velocys believes this will help to support the further development of its UK reference project, Altalto Immingham and other UK pipeline opportunities, building on the recent UK government grants awarded from the Advanced Fuel Fund.

The Government has confirmed its desire to establish the UK as a global leader in the development, production and use of SAF by creating secure and growing SAF demand, kickstarting a domestic SAF industry and working in partnership with industry and investors to build long term supply. Yesterday’s consultation comes amid growing support for decarbonisation and further supports the UK Government’s ambition of reaching net zero by 2050 and its Jet Zero strategy. The Gasification plus Fischer Tropsch (FT) process has been identified as the main pathway to sustain SAF uptake to 2030 and beyond. Velocys’ patented FT process is well positioned to fulfil this demand.

The proposed SAF mandate offers a guaranteed level of demand and creates a long-term requirement to supply SAF, provides incentives to SAF producers in the form of tradeable certificates and signals the vital role SAF will play in the future of UK aviation. The tradable certificates are intended to close the gap between the cost of jetfuel and the cost of SAF, with additional certificates awarded in proportion to avoided carbon dioxide emissions.

The proposals in this consultation will help support the ongoing development and financing of the Company’s Altalto Immingham reference project. As announced in December 2022, Altalto Immingham was awarded £27 million from the Department for Transport’s Advanced Fuel Fund to support Front End Engineering Design, the final engineering phase required prior to construction, subject to matched funding.  

Due to begin commercial operation in 2028, the biorefinery is expected to be one of the first commercial scale waste-to-jet fuel facilities in the UK. It will convert over half a million tonnes per day of commercial, industrial and municipal solid waste into 20 million gallons per year of sustainable fuel, with an overall lifecycle emissions saving of more than 300,000 tonnes carbon dioxide per year, equivalent to taking 140,000 cars off the road.

Henrik Wareborn, CEO, said: “Velocys’ technology is immediately ready to support commercial scale production of SAF with ultra-low carbon intensity and input from a range of feedstocks.

“There is a clear groundswell of legislative and policy support for the use of sustainable aviation fuel with the Inflation Reduction Act in the US, the ReFuelEU initiative in Europe and now today’s news from the UK. This level of government support is critical, so that industry and policy can work in parallel and at speed to reduce emissions. There is still a need for a clear mechanism to ensure price stability for SAF, but the proposed mandate is an important step in the right direction.

“Today’s news further underpins the investment case for our Altalto reference project in Immingham. The project will put the UK firmly at the forefront of the global move to decarbonise the aviation sector.”

For further information, please contact:

Henrik Wareborn, CEO
Philip Sanderson, CFO
+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)
Joshua Cryer
Iain Daly
+44 20 3897 1830

Buchanan (Financial PR)
Helen Tarbet
Simon Compton
+44 20 7466 5000

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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.

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