TIDMVLS
RNS Number : 8967N
Velocys PLC
26 January 2023
26 January 2023
News Release
Velocys plc
("the Company")
Business Update
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 GBP13.4 million (2021:
GBP25.5 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
-- Appointment of Global Head of Business Development and
Technology Delivery and new Chief Financial Officer, together with
a number of key technical and engineering roles in Houston, Texas
and Columbus, Ohio.
-- Provision of technical and engineering services to commercial clients.
-- Commencement and completion of construction of a new
Columbus, Ohio reactor core manufacturing facility.
-- Sale of the Ashtabula site in Ohio.
-- Establishment of the Scientific Advisory Board for catalysis.
Bayou Fuels Project (US)
-- Further optimisation on the Bayou Fuels plant design,
enabling the delivery of industry leading negative carbon intensity
Sustainable Aviation Fuel ("SAF").
-- Implementation of the Landmark US Inflation Reduction Act
("IRA") legislation will significantly support development of the
US sustainable fuels industry, including SAF and enabling the
Company to progress Series A funding for the project.
Altalto and e-Alto Projects (UK)
-- Award of two grants from the UK Government's Department for
Transport ("DfT") Advanced Fuel Funds for an aggregate of GBP29.5
million:
o GBP27 million- to deliver the Altalto Front-End Engineering
Design ("FEED")
o GBP2.5 million - to contribute towards a new e-fuels project
("e-Alto").
-- Secured long term site-control for the Altalto project in
collaboration with the Foresight Group.
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 b usiness d evelopment
capability.
2023 Outlook
Operations and Business Development
-- Manufacturing capability:
o Construction has been completed at the new reactor core
assembly facility in Columbus, Ohio, with fit-out now being
undertaken on site
o Recruitment of manufacturing personnel has begun, and
commissioning will commence in Q3 2023
o The site will significantly scale up the Company's reactor
core assembly capabilities, with a capacity to produce 12 reactors
a year (each comprising of four cores).
-- Toyo, Japan - the Company continues to provide services and
support to Toyo Engineering Corporation under the Collaboration
Agreement signed in late 2021 as progress continues on the NEDO
projects to proceed towards FEED in 2024.
-- Velocys' technology capability in power-to-liquid was
recognised by a further grant award of GBP2.5 million from the
DfT's Advanced Fuels Fund to the e-Alto project, a new e-fuels
concept development project in the UK. Velocys will be contributing
its proprietary technology to e-Alto, alongside other partners
including Clariant Catalysts, Technip Energies and British
Airways.
-- The business development pipeline continues to grow, with a
number of feasibility studies underway with both biorefinery and
advanced power-to-liquid developers, as well as an increase in
enquiries for potential projects. Velocys expects to move forward
with a number of new global clients over the course of 2023.
-- Organisation scale-up is planned to support commercial
strategy. With the commissioning of the manufacturing facility in
Ohio and the significant progress made at the Company's reference
projects, the Company is planning to materially expand the
workforce in 2023, with a particular focus on project and
operations engineering and manufacturing resources, business
development and a small number of functional support staff.
-- The Company continues to develop its commercial revenue model
focussing on providing clients with fully integrated technology
packages.
-- Velocys expects to build its revenue generation during 2023
from fees generated by its reference projects as they move into
FEED stage, along with additional income from other feasibility
studies.
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.
Altalto Project
A grant award of GBP27 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:
Velocys
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)
Joshua Cryer
Iain Daly +44 20 3897 1830
Buchanan (Financial PR)
Helen Tarbet
Simon Compton +44 20 7466 5000
--Ends-
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.
www.velocys.com
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END
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