The renewable fuels company
July 2018
Ambition | Growth | Sustainability
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Company overviewVelocys, the renewable fuels company, is at the forefront of thedecarbonisation of fuels for aviation and road transport
VLS.L Ticker
Share price13p
Issuedshares330m
Market cap£43m
£
Notes: see notes 1 & 3, all values are estimates
Velocys focus:• Renewable jet fuel production in the UK with Shell and BA
— Waste-to-jet biorefinery has started pre-FEED stage• Renewable diesel production in the US
— Mississippi biorefinery project completed pre-FEED stage• ENVIA landfill gas-to-fuels JV has proven the Velocys Fischer-Tropsch
(FT) technology at commercial scaleVelocys FT technology enables:• Economic conversion of wide range of low cost, abundant feedstocks
(like municipal waste and woody biomass) into high value fuels• Distributed smaller scale biorefineries• Fuels that qualify for high value credits in the US (federal and state),
UK, and other countries to follow• Meeting strong demand from corporations for greenhouse gas (GHG)
and particulate reductions (up to 70% and 90% respectively4,5)• Entirely “drop-in” into conventional fossil fuels with no blend limitations
for naphtha and diesel and 50% for jet fuel
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The teamBig oil & gas experienceBP, Shell, Phillips:refining & marketing businessmanagement, manufacturing,finance, supply & logistics
Renewable / GTL experienceSasol, Syntroleum, SGS:project management, plantcommissioning & startup,operations, GTL products
Commercial & financing experienceGoldman Sachs, Natixis:investment banking, commoditiestrading, PE/VC fund raising, projectfinance
Rest of Velocys team• Oil & gas, GTL, project engineers• Commissioning and operating experts• Commercial finance professionals
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Henrik WarebornInterim Chief CommercialOfficer
David PummellChief Executive Officer
John TunisonInterim Chief FinancialOfficer
Dr. Paul SchubertChief Operating Officer
Velocys timeline – innovation delivered
Velocys Inc.formed (fromBattelle)
Oxford Catalystsformed (fromOxford Univ)
Micro-channel FTdemoAustria
Oxford Catalystslisted on AIM
OxfordCatalysts &Velocysmerged
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‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 ‘19 ‘20 ‘21 ‘22‘01 ‘02 ‘03 ‘04
FT fielddemo withPetrobras
Namechanged toVelocys plc
ENVIA JVformed & FID
ENVIAoperational
UK biorefineryproject enterpre-FEED withShell and BA
USbiorefineryproject start
Notes: see note 1, 2
R&D Development Commercialisation• New team• New strategy• New focus delivery
Velocys projects
Operational
2018 20192017
Development
Development
Landfill gas-to-wax plant performing at commercial scaleValidation of Velocys’ commercial scale FT technology completed
2020 20222021
Commissioning thenoperational
Commissioning thenoperational
20232016
Construction
ENVIA OKC
Mississippi forestry residue biorefinery
UK waste to jet-fuel biorefinery
Woody biomass-to-fuels plant - pre-FEED completeIntegrated demonstration in progressSite secured in Natchez, MS. Permitting at advanced stage
Waste to jet-fuel plant - consortium announced with Shell andBritish Airways. Pre-FEED started
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Targeted dates
Notes: see notes 1 & 2
Construction
Construction
The opportunityPetroleum-based fuels cause GHGsand pollution and are not sustainableor renewable
of RIN generatingfuels deliver >20%GHG reductions6
<25%
of RIN generatingfuels are cellulosic6
~1%
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Demand for diesel and jet fuelcontinues to increase, making thechallenge bigger
Notes: a) with legislative support via US RFS
1st and 2nd generation biofuelsa havenot maximised sustainable carbonemissions reductions
2nd generation advanced cellulosicbiofuels projects are capital intensiveand require legislative support
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There is an abundant low cost feedstock supply of waste and woody biomassglobally
Velocys fuels can yield GHG and particulate reductions of up to 70% and 90%respectively4,5
Accelerating demand continues to outstrip available supply and this is forecast tocontinue
Legislation promoting advanced biofuels has been established in US since 2006and the UK in 2018. Momentum is building in many other countries
Airlines are aggressively seeking solutions to reduce their carbon emissions andmany have invested into renewable jet fuel projects
Business drivers
Notes: see notes 1 & 3, all values indicative
UK Renewable Transport Fuel Obligation requires 5% renewable-derived sourcingfor large resellers beginning in 2019 (up to 12.4% by 2032)13
Velocys fuels are drop-in fuels with no impact on engine design and supply chain
Velocys’ first-of-a-kind commercial scale proven technology and business modelenable entry to renewable fuels markets to grow a material supply position
Mississippi biorefinery update
8Notes: see notes 1 & 3
• Project development strategic investment process to onboard one or morestrategic investors is underway and on track
• Site secured in Natchez, Mississippi with $60m of state/local incentives
• In US Department of Agriculture (USDA) Loan Guarantee phase II process— With Sumitomo Mitsui Banking Corp (SMBC) as the lender of record
• Final investment decision expected in early 2020
• Significant value uplift from feedstock at equivalent $1/gallon to finalproducts at $8.20/gallon15
— Of which federal credits (approximately 50%), state credits(approximately 25%) and product revenues (approximately 25%)
• Team is delivering a complex programme of activities— Working with partners and licensors to further commercially de-risk the
project through maximising product revenues and minimising costs
• Project is on track to deliver an investable first-of-its-kind project
Excellent infrastructure & utilities, attractive incentive packageSite selected in US - Natchez, Mississippi
Biorefinery site
Mississippi riverNatchez
Adams Port
Railroad
Water mains
Proposed water wellsand well header
Electrical substations,transmission anddistribution lines
Effluent pipingand outfall
9Notes: see notes 1 & 2
10Notes: see notes 1 & 2
UK waste-to-jet fuel project update• Development partnership in place with Shell and BA for a commercial scale waste to
renewable jet fuel biorefinery— 10 million gallons per year capacity— Experienced global players in both production and consumption of biofuels— Velocys project development team supported by the significant experience and
competencies of its partners
• RTFO legislation has created strong policy support for biofuels in the UK
• The project is proceeding at pace— Project feasibility study is complete— Pre-FEED funded by £4.5m partner investment and approximately £0.5m UK DfT
grant— FEED expected to start in H1 2019
• Significant benefits to Velocys— Supports messaging of “Velocys, the renewable fuels company”— Validates our strategy and business model to attract strategic investors and open
up a second market— Demonstrates our renewable feedstock flexibility (landfill natural gas, woody
biomass residues and municipal waste)
11Notes: see notes 1 & 2
ENVIA update• Velocys is a JV partner in ENVIA
• Commercial scale Oklahoma City plant converts landfill gas to diesel, naphtha and wax
• Velocys’ FT technology data will be used in commercial discussions with future strategicpartners for the Company’s US and UK projects
• Key ENVIA milestones— October 2017; met performance and regulatory requirements by reaching
200 barrels per day operational capacity— December 2017: completed qualification run for Renewable Identification Number
(RIN credits) registration— March 2018: RINs verified— April 2018+: ENIVA has sold D7 RINs and its liquid products to contracted 3rd
parties
• Current operations— Operating in reduced production due to a reactor leak event— Coolant system on the second FT reactor modified and operating procedures
updated— Second FT reactor has been operated in the same operating cycle during which the
first reactor developed the leak, without incident
Red Rock Biofuels – Lakeview project
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• Red Rock Biofuels (RRB) recently announced construction of a biorefinery inOregon— To produce diesel and jet fuel— Offtake agreements in place for all future jet fuel production with several
major airlines— Will use Velocys FT technology under licence— Velocys received $6m from RRB in May 2018— Deal worth around $15m to Velocys during construction and early operation
stages of the plant plus $30m over the life of the biorefinery
• Velocys now implementing supply chain activities to deliver reactors andcatalyst
• As licensor of FT technology, Velocys is working closely with RRB and theirEPC to support the project through construction to operation
• Our business model is to both develop our own biorefineries and license our FTtechnology where it makes strategic and commercial sense
• RRB project further validates the attractiveness of the US woody biomass torenewable fuels market
Slide notes1. Velocys internal/proprietary information, which has not been verified by any independent source, unless specifically noted2. Velocys RNS/press releases 2010-present3. Velocys indicative, internal/EY advisor modelling, where project specific numbers are used, these are indicative and will refine as
engineering studies complete and will be communicated in due course. Files used include project models, enterprise model,project economics model, financial statements/management information and cash models
4. NNFCC Report “Greenhouse gas calculator development for British Airways/Velocys,” November 20175. Anderson, B. E. and e. al. (February 2011). Alternative Aviation Fuel Experiment (AAFEX), NASA Langley Research Center6. https://www.gpo.gov/fdsys/pkg/FR-2016-12-12/pdf/2016-28879.pdf7. https://energy.gov/eere/bioenergy/2016-billion-ton-report (reported in US tons)8. https://www.eia.gov/outlooks/steo/report/us_oil.cfm9. US Energy Information Administration (EIA), Annual Energy Outlook 2017 with Projections to 2050, March 2017, p. 99, available
at https://www.eia.gov/outlooks/aeo/10. US Energy Information Administration, Annual Energy Outlook with Projections to 2040, DOE/EIA-0383 (2016), August 2016
available at https://www.eia.gov/outlooks/aeo/pdf/0383(2016).pdf (hereinafter "AEO 2016"). The "Reference" is EIA's base casewhile its "Extended Policies" case assumes future extensions of some major energy policies, including various energy tax credits,fuel economy regulations for light-duty and heavy-duty vehicles, and CO2 emissions standards for existing power plants. Thedecline in diesel (and gasoline) demand in the Extended Policies case is attributed to EIA's assumption that fuel economystandards will continue to be tightened
11. UK waste to jet source is internal research by Dr Neville Hargreaves. ICAO (International Civil Aviation Organisation) rules.Changes to the Renewable Transport Fuels Obligation (published by the Government in September 2017 and became law inApril 2018)
12. RVO for cellulosic fuels for 2017 https://www.epa.gov/renewable-fuel-standard-program/final-renewable-fuel-standards-2017-and-biomass-based-diesel-volume
13. RTFO development fuels subtargethttps://www.gov.uk/government/uploads/system/uploads/attachment_data/file/644843/renewable-transport-fuel-obligations-order-government-response-to-consultations-on-amendments.pdf Road fuels demand http://www.racfoundation.org/data/volume-petrol-diesel-consumed-uk-over-time-by-year
14. Argus petroleum price forecast for liquid products and environmental credits report dated 4 May 2018
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