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 CO2 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.”
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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
Henrik Wareborn, CEO
Andrew Morris, 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)
Liam Zabludowicz (Corporate Advisory)
+44 20 7408 4090
Buchanan (Financial PR)
Helen Tarbet
Simon Compton
+44 20 7466 5000
Radnor Capital (Investor Relations)
Joshua Cryer
Iain Daly
+44 20 3897 1830
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.
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.
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 SAF. (Net zero is determined as a fuel with a carbon intensity of zero (0) gCO2e/MJ or lower on a lifecycle basis.)
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 CO2 over the term of the contract.
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.
Velocys VP Waste to Fuels, Neville Hargreaves, was interviewed on the BBC Radio Lincolnshire breakfast programme who were running a theme related to COP26 and the local area. He spoke to host Sean Dunderdale on the proposed Altalto project that will turn municipal solid waste into sustainable aviation fuel (SAF) at a biorefinery plant in North East Lincolnshire. The proposed plant will utilise Velocys technology to enable the production of SAF. He gave an update on progress with planning permission obtained and much of the design and engineering work completed. He noted that further clarity on policy from the UK Government would be a next step, which he hoped would be similar to the support already given to the renewable electricity industry to share the costs of new technology fairly. He emphasised the recent sustainable aviation fuel mandate was a good start.
Neville Hargreaves noted that Lincolnshire is an ideal location for the proposed plant with the presence of skilled people and advanced infrastructure, particularly the forthcoming East Coast carbon capture & storage pipeline that could give the sustainable aviation fuel produced a negative carbon intensity. With the Humber becoming the energy estuary of the UK, basing Altalto there was an ideal fit. “We’ve really felt welcome there”, he said.Audio Player
Listen to the interview on BBC Sounds
Velocys is pleased to announce the appointment of Dawid Duvenhage in the role of Vice President, Catalysis based in the Columbus office.
Dawid has over 30 years of industrial and academic experience in heterogeneous catalysis, syngas production and syngas clean-up. He also has a strong background in process data analytics, process performance audits, test run planning and execution, and technology management.
Prior to joining us, Dawid worked at Rentech where he developed syngas conversion catalysts. His research background includes experience at Sundrop Fuels, deriving clean syngas from the high temperature reforming of biomass. He has held research and management positions within the Sasol Group of companies where he developed, scaled up, implemented and supported low and high temperature Fischer-Tropsch catalyst technologies.
Dawid holds an MSc and a PhD in chemistry, specialising in Fischer-Tropsch catalyst deactivation and supported iron and cobalt catalyst development.
This year’s ABLC conference was held in San Francisco where Jeff McDaniel, Velocys VP of New Projects, gave a presentation as part of the conference’s ‘Sustainable Fuels Summit’ on the planned Bayou Fuels refinery in Natchez, Mississippi. He also showed a computer generated visualisation of the new sustainable fuels plant.
The United States government has set commercial aviation a target of a 20% decrease in greenhouse gas emissions by 2030 and of being fully zero carbon by 2050. McDaniel described how Velocys’ end-to-end technology solution will help achieve these targets, producing sustainable aviation fuel from woody biomass waste from forestry operations.
The biofuels refinery will also use renewable power and carbon capture and storage (CCS) technology. Carbon dioxide that is produced as a by-product of the waste-to-fuels process will be captured and sequestered underground. This will lead to an end product that has an overall negative carbon impact.
Velocys were pleased to have the opportunity to reconnect in person with colleagues from across the biofuels sector at this exciting time for sustainable fuels.
>> View the computer generated visualisation of the Bayou Fuels plant
Velocys has welcomed the recognition in the Government’s newly published Net Zero Strategy that sustainable fuels are a practical way to decarbonise the aviation sector.
In the document the Prime Minister says: “Our strategy for net zero is to lead the world in ending our contribution to climate change, while turning this mission into the greatest opportunity for jobs and prosperity for our country since the industrial revolution.” £180 million of funding has been committed to support the development of SAF plants such as Altalto in Humberside.
Velocys’ high performance catalyst and reactor technology, used with carbon capture, utilisation and storage (CCUS), can produce aviation fuel with negative-carbon emissions. In a significant step forward, the East Coast Cluster, which includes the Altalto plant, has been selected by Government for Track 1 of the CCUS cluster sequencing process.
Velocys looks forward to building on the current engagement it has with Government to make the UK a world leader in sustainable fuels technology.
Velocys has today launched a website for the Bayou Fuels reference project that will use Velocys FT technology to produce sustainable aviation fuel (SAF) from waste woody biomass. This fuel will have an overall negative carbon impact through the use of renewable power and carbon capture and storage (CCS), which sequesters underground the carbon dioxide that is produced as a by-product of the waste-to-fuel process.
The new Bayou Fuels website is now online – www.bayoufuels.com – and shows the scale and benefits of the project, which will be located in Natchez, Mississippi. It highlights the important role for sustainable aviation fuel (SAF) in reaching targets for emissions reduction and ultimately net zero. Plans for the facility and Velocys’ integrated technology are demonstrated. The website provides summary information on this first-of-its-kind facility.
The Bayou Fuels brand includes a trademarked name and logo as well as a dedicated colour palette to reflect its individual identity. The launch recognises the significant progress of the project along with political strides forward at federal and state level.
The Bayou Fuels plant will enable the commercial-scale production of negative-carbon liquid fuels to help deliver net zero carbon aviation by 2050. Once operational, the plant will have a nameplate capacity of 25 million gallons per annum of negative carbon intensity SAF which can be blended with conventional Jet A to deliver net zero fuel to airlines.
The project has received noteworthy local support in Mississippi, with the Mayor of Natchez, Dan Gibson, calling the project “historic”. Chandler Ross, Executive Director of local development support organisation, Natchez Inc, commented, “This is a huge opportunity for us and the benefit to the county is more than $1 billion of capital outlay to the site”.
This local endorsement mirrors the significant federal support for the development of a domestic SAF industry in the United States. The Biden White House recently committed to producing billions of gallons of SAF to reduce aviation emissions of greenhouse gases. The White House briefing paper cited Velocys as a project that will “help us achieve our 2030 goals”.
Other federal initiatives include the launch of a new Sustainable Aviation Fuel Grand Challenge to inspire a dramatic increase in the production of SAF to at least 3 billion gallons per year by 2030 and providing financial support for SAF projects and fuel producers totalling up to $4.3 billion alongside ongoing funding opportunities.
Velocys has welcomed these developments and recognises the prime position of the Bayou Fuels project to meet SAF demand and net zero goals in the USA. The new Bayou Fuels website and brand will help drive future growth in this initiative.
Velocys has appeared at the second annual Net Zero Festival, organised by leading industry publication Business Green, in a segment titled ‘Embracing Net Zero Technology’. The session presented a roundup of some of the most exciting, game-changing, clean technologies and provided insights into how they can be deployed to transform markets and drive down emissions.
Velocys’ Vice President Waste to Fuels, Dr Neville Hargreaves, gave a presentation on the role that the company’s technology could play in reaching net zero. He said, “We at Velocys are taking something we don’t want – waste – and create something we can’t do without in a net zero world – sustainable aviation fuel”.
Dr Hargreaves discussed how aviation’s need for the high power and energy density that liquid fuels provide makes the move to new powertrains like battery and hydrogen fuel cells difficult. Sustainable aviation fuel (SAF) is unique in its maturity and requires no changes to aircraft or infrastructure. It is the only long term solution that can address emissions from medium and long haul flights.
He described Velocys’ UK reference project, Altalto, which will take municipal solid waste to produce fuel that will deliver a net CO2 saving of up to 70%, with the potential to achieve over 100% savings with Carbon Capture and Storage (CCS), once that infrastructure is in place in the Humber region.
Dr Hargreaves concluded, “At Velocys, we believe a new era of green flying is on the horizon, and it’s an incredibly exciting prospect”.
Velocys plc (VLS.L), the sustainable fuels technology company, is pleased to announce that Henrik Wareborn, CEO, and Andrew Morris, CFO, will provide a live presentation relating to the interim results for the period ending 30 June 2021 via the Investor Meet Company platform on Friday 1st October 2021 at 10.30am BST.
The presentation is open to all existing and potential shareholders. Questions can be submitted pre-event via your Investor Meet Company dashboard up until 9am the day before the meeting or at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and add to meet VELOCYS PLC via: https://www.investormeetcompany.com/velocys-plc/register-investor
Investors who already follow VELOCYS PLC on the Investor Meet Company platform will automatically be invited.
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For further information, please contact:
Velocys
Henrik Wareborn, CEO
Andrew Morris, 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)
Liam Zabludowicz (Corporate Advisory)
+44 20 7408 4090
Radnor Capital (Investor Relations)
Joshua Cryer
Iain Daly
+44 20 3897 1830
Field Consulting (General PR)
Rob Jeffery
+44 20 3697 7953
Notes to Editors
Velocys is an international UK-based sustainable fuels technology company. Velocys designed, developed and now licenses proprietary Fischer-Tropsch technology for the generation of clean, low carbon, synthetic drop-in aviation and road transport fuel from residual woody biomass and municipal solid waste. The Velocys technology can also enable the production of zero carbon fuels for the airline industry from renewable power and CO2.
Velocys is at present developing two reference projects: the Bayou Fuels project in Natchez, Mississippi, USA (incorporating Carbon Capture and Storage) and the Altalto project in 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 reactor technology developed at the Pacific Northwest National Laboratory. Velocys is headquartered in Oxford in the United Kingdom.
Velocys plc (VLS.L), the sustainable fuels technology company, is pleased to announce its interim results for the six months ended 30 June 2021.
Interim results for the six months ended 30 June 2021 (23-Sep-2021)