(Alliance News) - Velocys PLC on Wednesday said its subsidiary, Velocys Renewables LLC, entered offtake agreements with British Airways parent International Consolidated Airlines Group SA and Southwest Airlines to produce sustainable aviation fuel at its planned Bayou Fuel biorefinery project.
Shares were up 30% at 8.10 pence on Wednesday morning in London.
The subsidiary of the sustainable fuels technology company entered a memorandum of understanding with IAG.
It covers the purchase of 73 million gallons of sustainable aviation fuel within a 10-year contract starting 2026.
The fuel will be produced at Velocys' Bayou Fuels project in Mississippi, US and equate 192 million gallons of net-zero sustainable aviation fuel after blending with conventional jet fuel.
Both parties aim to change the non-binding memorandum of understanding into a contract "as soon as possible," Velocys says.
The agreement is expected to generate around USD800 million of revenue for the Bayou project.
"IAG is investing USD400 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% sustainable aviation fuel use by 2030," IAG's Chief Executive Luis Gallego said.
Velocys Renewables also entered an agreement with Southwest Airlines. It covers a purchase of 219 million gallons of sustainable aviation fuel by Southwest.
The gallons will equal about 575 million gallons of net-zero sustainable aviation fuel after "blending."
Velocys says that the offtake agreement will cover two-thirds of the Bayou Fuels project's facilities and is expected to generate "multi-billion[s]" of revenue in the 15 year contract period starting as early as 2026. The IAG deal will cover the remaining one-third of planned output.
"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," Stacy Malphurs, Vice President of Supply Chain Management & Environmental Sustainability at Southwest Airlines, said.
Velocys Chief Executive Henrik Wareborn added: "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."
By Abby Amoakuh; abbyamoakuh@alliancenews.com
Copyright 2021 Alliance News Limited. All Rights Reserved.