TIDMVLS
RNS Number : 9167R
Velocys PLC
10 November 2021
10 November 2021
Velocys plc
("Velocys" or the "Company")
SAF OFFTAKE WITH SOUTHWEST AIRLINES
15-year offtake agreement enables 575 million blended gallons of
net zero SAF for Southwest Airlines
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.(R) ("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(1) SAF.
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 CO(2) over the term of the contract.
[1] Net zero is determined as a fuel with a carbon intensity of
zero (0) gCO2e/MJ or lower on a lifecycle basis.
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.
---------
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 of -144g CO2e/MJ . 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.
www.bayoufuels.com
SOUTHWEST AIRLINES CO.
In its 51(st) year of service, Dallas-based Southwest Airlines
Co. continues to differentiate itself from other air carriers with
exemplary Customer Service delivered by nearly 54,000 Employees to
a Customer base that topped 130 million Passengers in 2019.
Southwest has a robust network of point-to-point service with a
strong presence across top leisure and business markets. In peak
travel seasons during 2019, Southwest operated more than 4,000
weekday departures among a network of 101 destinations in the
United States and 10 additional countries. In 2020, the carrier
added service to Hilo, Hawaii; Cozumel, Mexico; Miami; Palm
Springs, Calif.; Steamboat Springs; and Montrose (Telluride), Colo.
Thus far in 2021, Southwest has initiated service to Chicago
(O'Hare) and Sarasota/Bradenton both on Feb. 14; Savannah/Hilton
Head and Colorado Springs both on March 11; Houston (Bush) and
Santa Barbara, Calif. both on April 12; Fresno, Calif. on April 25;
Destin/Fort Walton Beach on May 6; Myrtle Beach, S.C. on May 23;
Bozeman, Mont. on May 27; Jackson, Miss. on June 6; Eugene, Ore. on
Aug. 29; and Bellingham, Wash. on Nov. 7. Southwest will begin
service to Syracuse on Nov. 14.
Southwest coined Transfarency(R) to describe its purposed
philosophy of treating Customers honestly and fairly, and low fares
actually staying low. Southwest is the only major U.S. airline to
offer bags fly free(R) to everyone (first and second checked pieces
of luggage, size and weight limits apply, some carriers offer free
checked bags on select routes or in qualified circumstances).
Southwest does not charge change fees, though fare differences
might apply.
Southwest is one of the most honored airlines in the world,
known for a triple bottom line approach that contributes to the
carrier's performance and productivity, the importance of its
People and the communities they serve, and an overall commitment to
efficiency and the planet. Learn more about how the carrier gives
back to communities across the world by visiting
Southwest.com/citizenship .
Book Southwest Airlines' low fares online at Southwest.com or by
phone at 800-I-FLY-SWA(R) .
Media Contacts:
Visit the Southwest Newsroom at swamedia.com for multimedia
assets and other Company news.
Media Relations Team: 214-792-4847, option 1
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