TIDMVLS
RNS Number : 9169R
Velocys PLC
10 November 2021
10 November 2021
Velocys plc
("Velocys" or the "Company")
SAF OFFTAKE WITH IAG
10-year offtake MoU for 73 million US gallons of carbon negative
SAF by IAG
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
CO(2) 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."
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
R adnor 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.
www.velocys.com
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
.
www.bayoufuels.com
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