VLS.L Share News (VLS)

LONDON (Alliance News) - Gas to liquids technology company Velocys PLC aims to have three projects under construction by the time its first plant in Oklahoma is commissioned in the first-half of 2016, Chief Executive Roy Lipski told Alliance News in an interview.

In March, Velocys announced a joint venture with Waste Management, NRG and Ventech to develop the first gas to liquids plant in the US using Velocys technology. The plant will be fueled by a combination of renewable biogas, including landfill gas and natural gas.

"The plant will be mechanically completed by the end of 2015, and commissioning is due to be completed in the first or second quarter of 2016," said Lipski.

"In the meantime, we hope to develop four projects with the aim of having them under construction by the time the plant in Oklahoma is complete in 2015," he added.

The Oklahoma plant is one of the four projects Lipski is talking about.

"We are looking at different projects, but it is a reasonable bet that four projects will go ahead," said Lipski.

"We have a venture with British Airways, called the GreenSky London project [announced in 2012] which they [BA] are sponsoring. A former refinery in Essex will produce jet fuel with a capacity of 2,500 barrels per day to be used by BA. The project is about a year away from construction," Lipski told Alliance News.

The project will generate revenues in excess of USD30 million for Velocys during the construction phase, and additional ongoing revenues of more than USD50 million over the first 15 years of the plant?s operation, said the company.

Its proposed plant east of Ashtabula in Ohio, US, announced in June and the second of the three plants the company wants under construction using its technology when the first plant is commissioned, aims to produce approximately 3,000 barrels a day, and the company expects to receive approval for construction of the plant in the first-half of next year.

In September, Velocys announced that its customer, Red Rock Biofuels had been awarded a USD70 million government grant for a plant in Oregon, US, with construction approval due in the first quarter of 2015. The project will generate revenues for Velocys in excess of USD15 million during construction, and an additional USD30 million over the life of the facility.

"In two and a half years time, Velocys will have its first commissioned plant, four projects under construction that will turn the cash-flow positive and give us the financial and technical capability to push forward," Lipski told alliance News.

"We have a portfolio of over 900 patents, the largest of its kind in the world and it is benefitting from increased demand for clean and sustainable energy," said Lipski.

In its earnings report released in September, Velocys announced it had raised gross proceeds of about GBP52 million through an over-subscribed placing to fund working capital and development, and to strengthen the balance sheet.

"At first glance, existing shareholders have increased their stakes in the company, and we secured investment from blue chip institutions," said Lipski.

"The funding for the upcoming projects comes from special investors, such as infrastructure investors and the government grant awarded to Red Rock. We are a technology company, not a developer," he added.

Over the next quarter, Velocys plans to release an update on both new and existing projects alongside potential for an update about its judgement hearing regarding its legal case with CompactGTL, due Thursday, in which the court have ruled in Velocys' favour.

The case involved CompactGTL's alleged infringement of Velocys's Fischer-Tropsch technology. "We do not expect a decision about the case to be made tomorrow [Thursday]," added Lipski.

Velocys shares were down 0.4% to 224.00 pence per share Wednesday afternoon.

By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance

Copyright 2014 Alliance News Limited. All Rights Reserved.