SAF technology developer Velocys running out of money, danger of insolvency
The board of directors of Oxford, UK-based Velocys has given its backing to an offer from a consortium of US, UK and Singapore investment houses to buy the company. Without an immediate injection of funds, Velocys is in danger of running out of cash next month and going into insolvency. Velocys has been developing technology to enable production of drop-in so-called sustainable aviation fuels (SAF) from a variety of waste materials and is involved in two projects in the UK and US to build commercial-scale SAF production plants. Velocys shares have fallen from a high of £5.80 a share during the past year to 0.23 pence, valuing the company at just under £4 million. Carbon Direct Capital had previously been expected to make a $15 million investment in Velocys but withdrew when it did not get further investment from other backers by the end of October. Companies trying to make jet fuel out of various waste materials have gone out of business in the past. It is very difficult to get a standard, cheap fuel from inconsistent, variable source waste materials. The UK government is keen to get SAF produced in significant amounts – but there are immense problems.
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Investor consortium in late bid to save cash-strapped SAF technology developer Velocys
By Christopher Surgenor (GreenAir)
7 December 2023
The board of directors of Oxford, UK-based Velocys has given its backing to an offer from a consortium of US, UK and Singapore climate-focused investment houses to acquire the company. Without an immediate injection of funds, Velocys is in danger of running out of cash next month and going into insolvency, warned the company. A spin-out from the University of Oxford, Velocys has been developing technology to enable production of drop-in sustainable aviation fuels from a variety of waste materials and is involved in two projects in the UK and US to build commercial-scale SAF production plants. Listed on the London Stock Exchange, Velocys shares have fallen from a high of £5.80 a share during the past year to 0.23 pence, valuing the company at just under £4 million. The consortium, which is offering 0.25 pence per share in cash and, if the bid is successful, a secured bridging loan of £3.5 million and growth capital of up to $40 million (£31.5m), said Velocys was well-positioned to capitalise on “a compelling market opportunity” for the production of SAF.
The consortium, which has set up a company, Madison Bidco, for the purposes of the acquisition, is made up of London-headquartered global private equity firm Lightrock; New-York based global growth investment firm Carbon Direct Capital; GenZero, an investment platform founded last year by Temasek, the global investment company owned by the Singapore government; and Kibo Investments, a Singapore-based private investment office focused on climate technology. Carbon Direct Capital had previously been expected to make a $15 million investment in Velocys but withdrew when the latter failed to secure further investment from other backers by the end of October.
In a market announcement, Philip Holland, the Chair of Velocys, commented: “The Velocys Board and management have spent a great deal of time and effort trying to secure significant long-term funding to grow the business and accelerate the delivery of its technology to clients. However, reflecting Velocys’ material funding requirements, business model and limited revenue together with the continued challenging public market environment, it has not been possible to raise sufficient funds. This has put the business in an extremely challenging position, with a very real prospect of not being able to continue as a going concern when we reach the end of our cash runway in early January
“Bidco is offering the business a secure platform for future growth, alongside an injection of up to $40 million of growth capital, which is expected to ensure that Velocys has the capital resources needed to deliver against its medium-term strategic plans, including to scale up and grow and work towards its long-stated goal of supporting the decarbonisation of the global aviation sector. Whilst it is very disappointing for the business to need to leave the public markets, Bidco’s offer will enable Velocys to continue operating as a going concern.”
The consortium’s confidence in SAF production is based on what the market announcement describes as a “confluence of regulatory support, demand pull by airlines and increased technology readiness,“ adding “Velocys is well positioned to capitalise on these sector tailwinds, given its patented integrated Fischer-Tropsch reactor and catalysis solution and its pipeline of commercial licensing opportunities.”
Velocys said it has a number of third-party clients to whom it supplies its technology, along with its two biorefinery reference projects, the Bayou Fuels Project in Mississippi that would utilise woody waste to produce sustainable fuels and the Altalto Project in Immingham, north-east England, that would process municipal and commercial solid waste into sustainable fuels.
According to the Velocys website, Bayou Fuels is expected to produce 36 million gallons per year of negative-emission transportation fuels using a combination of biogenic feedstock, biomass power and carbon capture and sequestration. Long-term SAF offtake agreements have been signed with Southwest Airlines (15 years) and IAG/British Airways (10 years). In October 2022, the company announced that when the project entered production, then forecast for 2026, the facility would use renewable energy derived from sustainable biomass power instead of solar power that would double the carbon savings for its aviation customers and the enhanced negative carbon intensity would also increase the credits generated under the US Inflation Reduction Act and the California Low Carbon Fuel Standard, improving the revenue and economic profile of the project.
A year ago, the Altalto project, a collaboration with British Airways to produce 20 million gallons of sustainable fuels annually with net negative carbon emissions, was awarded up to £27 million ($34m) in grant funding, with an initial tranche of £7 million from the UK Department for Transport, along with matched private funding, towards completing the Front-End Engineering Design stage. “Following completion of FEED and a successful final investment decision, construction will commence in 2025 with full commercial operation expected in 2028,” the company announced in May. The UK government has set a target of five SAF production facilities to be under construction in the UK by 2025.
https://www.greenairnews.com/?p=5068
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See earlier:
BA and Velocys planning to produce aviation fuels in Immingham
Velocys, a company keen to produce alternative aviation fuels, has extended its agreements with British Airways over plans for a fuel refinery on the South Humber Bank. Velocys and BA have signed up to further the joint development proposal for the £350 million Altalto Immingham project, as well as an option agreement for BA to buy 50% of it. Velocys has also entered into a contract with an un-named European renewable fuels developer to provide initial engineering services. The aim is to use “sustainable residues” (not adequately defined) into lower carbon fuels, using the energy intensive Fischer Tropsch process. BA says it has just started receiving “sustainable aviation fuel” from the nearby Phillips 66 Humber Refinery. BA originally, in 2020, joined up with Velocys and Shell, to produce “low carbon” jet fuel in Immingham, but Shell pulled out in January 2021 to develop on its own in Germany. Velocys is also developing aviation fuels with other companies, in the US.
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Shell pulls out of UK joint venture with BA and Velocys to produce “low carbon” jetfuel
Shell has pulled out of the joint Altalto venture with British Airways and Velocys to build a plant in Immingham, Humberside to make “sustainable” jet fuels from non-recyclable household waste. There has been a lot of hype about novel fuels for aviation, and how they will help reduce the CO2 emissions from flights slightly – even while the sector stays the same size or grows. Shell will instead join a more lucrative fuels project in Canada, which plans to produce fuel more efficiently (using a better source of waste – as they include wood “waste”). The Altalto projects hopes to be producing jet fuel within 5 years. The existence of the Humberside plant enabled Boris to claim Britain would be in the forefront of low carbon fuels etc (Britain always has to be on top …) Producing standard, high quality jet fuel from highly variable domestic waste is difficult. Other projects have not been a success. In 2017 the fuel project in Essex by Solena, to produce fuel for British Airways, was scrapped as Solena went bankrupt (presumably before producing any fuel). While the Canadian scheme plans to use over 200,000 tonnes of non-recyclable and wood waste annually to produce nearly 125m litres of fuel, the UK Altalto project would use 500,000 tonnes of waste to make 60m litres.
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British Airways receives batch of SAF made from “waste oils” from Phillips 66
British Airways says it has received its first batch of “sustainable aviation fuel” (SAF) after it launched into a multi-year agreement with Phillips 66 Humber Refinery. Phillips 66 say the y can produce the fuel at “commercial scale.” BA is hoping to be able to get SAF at significant scale, to say it is cutting its carbon emissions – while continuing to fly ever more planes and flights. The parent company of BA, IAG, says it hoped to power 10% of flights with SAF by 2030. There is lots of hype about jobs etc. and that Phillips 66 has invested £20 million in the fuel production complex. Phillips 66 are (as usual for these fuels and ventures) coy about saying what the fuel is actually made from, except that it is from “waste oils”, but say they are “currently refining almost half a million litres of sustainable waste feedstocks a day, and this is just a start.” IAG is investing $400 million over the next 20 years into the development of SAF. As well as Phillips 66, IAG is hoping to get fuel from the planned Altalto Immingham refinery (using plastic waste) which is not yet even built. The concern is if the jet fuels produced contain any palm oil, or its derivatives, or other plant oils, that compete with food production and increase habitat destruction.
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Hopes of “sustainable jet fuel” from waste are always just around the corner, for British Airways
British Airways (not much to do at present …) says it “will operate transatlantic flights partially powered by sustainable fuels as early as 2022”. BA says it will invest in a new US plant to be built in Georgia by LanzaJet producing commercial-scale volumes of “sustainable” aviation fuel (SAF), made from ethanol derived from agricultural and other waste. It claims this would “create 70% less carbon emissions than conventional jet fuel.” It will actually produce tiny amounts of fuel. IAG says it will invest almost £300m in SAF as part of its pledge to decarbonise by 2050 (while increasing numbers of passengers and flights!), and would investigate building a refinery with LanzaTech in the UK. BA is also involved in a domestic- waste-to-fuel plant in partnership with Velocys, in Immingham, Humberside, that Shell pulled out of in January. Sean Doyle, of BA, said (they always want public funds to help produce alternative fuels for planes) “We need government support” for this. BA and LanzaTech are part of the Jet Zero Council, launched to some fanfare by Boris Johnson in July 2020; it has not met since then.
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