Member Info for Donatron

Agreed. I'm still lurking in the background reading the posts and am still holding 1.67m shares that I have no intention of selling for less than £1. All my spare cash is earmarked for an upcoming house move, otherwise I would be hoovering up everything I can.

Expat - good to see you've turned to the Light Side! Long may it continue.

Red Rock were able to get finance because the USDA backed them with $200m of loan guarantees. That therefore hugely de-risked the financing to third parties and hence it was both forthcoming and at low rates of interest.

My article from yesterday suggests that this is what is being called for at Altalto, hence this is a very major development if the government follows the recommendation.

Hi all, hope you're well.

I just saw this article, which I think is very interesting.

Suddenly that £350-500m build cost for Altalto wouldn't be such a mountain. Also, I cannot stress how transformational the returns for shareholders will be if they don't need to raise much more equity for the build.

https://www.business-live.co.uk/economic-development/humber-highlighted-being-key-sustainable-19090649

"The support package, equal to the top end plan for the area, would be made up of £429 million in Government-backed loan guarantees for the initial first-of-its-kind SAF production facilities, £50 million in grants and development support for new SAF technologies, and £21 million to establish a UK clearing house to enable SAF testing and approval.

In addition to the Humber, six other potential SAF clusters have been identified including Teesside, the North West, South Wales, Hampshire, St Fergus and Grangemouth."

Interesting that there is so much in the way of local engineering and construction expertise. Presumably building a big plant is a lot easier when components are made (literally) up the road. Might this be a route Velocys explore or are they in bed with this Japanese engineering company (whose name escapes me)?

Nothing new, but still useful to see publications spreading the word to potential new investors.

Nice to see this one wasn't written by a kid that works in the local supermarket!

I'd very much like to read one of the proper analyst notes, but they are very hard to track down without paying.

Still not totally sure what you mean by a "sponsor". I think you're either asking what happens if:

1) One or more major companies (e.g. Shell/BA) provides £500m of the capital cost of the plant. In that situation, there would be no movement in the share price, beyond what I mentioned earlier about the prospects of future revenue, etc. £500m cash would be offset by £500m of either equity or a loan, which would therefore cause no movement in net assets. This is pretty unlikely, they are more likely to invest directly into Altalto Immingham.

2) Someone (the government?) just gives them £500m to build it. This would eventually cause the share price to go up by the 50p you mention, as the £500m would be eventually be fully recognised in the P&L in the form of a government grant. This is very, very unlikely. The government isn't in the habit of giving a private company half a billion pounds with no strings attached! More likely that they would guarantee loans, match equity funding, invest via a government-backed green infrastructure fund, etc.

The CCS point is a crucial one I think. Big differentiator vs other plants planned around the world.

Sounds like it can be bolted on with little effort given the local infrastructure, but would be interested to understand exactly how this works. Do they basically pipe the CO2 into an existing underground facility? Is this an old mine or is it purpose-built?

I don't think it comes as a shock that SAF will be multiples of the fossil fuel price. It's going to be a loss-making endeavour in the short-term without policy support of some form. However, I don't doubt that the government will support SAF to make it profitable for producers, as there isn't an alternative at this time.

You only have to look at the trajectory of wind power generation to get an idea of how this might work. In 2012-14 the generation cost was £131/MWh (vs £40-50/MWh wholesale price at the time). By 2019 it was £47, which is lower than the wholesale price, i.e. it was profitable without subsidy.

The obvious thing to do is to whack a big tax on traditional aviation fuel to fund SAF.

To be honest, no I don't think they could raise £500m equity all by themselves. Might be wrong, but it's just too much vs the market cap as it stands. Clearly by the time they need to raise funds they'd have the FEED, so perhaps the market cap would be higher and so it's more achievable.

The more likely options in my view are joint financing with BA and Shell (and perhaps others?) via Altalto Immingham (in which case maybe VLS "only" need to stump up £100m), partial bond financing via something like a green infrastructure fund or a full takeover of the company (e.g. by an oil major).

I wrote a more detailed explanation of how funding works in this thread if you fancy a read https://www.lse.co.uk/ShareChat.asp?ShareTicker=VLS&share=Velocys&page=9&thread=FADDA57E-C72D-4AB1-957E-93892C9E3947

If they issued £500m of new shares (which I think is what you're asking?) then it wouldn't increase the share price in and of itself. They'd have £500m more cash but they'd have £500m more shares, i.e. the price wouldn't particularly move. Am massively over-simplifying, but you get the gist.

What would move the share price is the fact that the company would then have enough money to build its plant and would therefore hope to start generating some meaningful revenue within a couple of years. That could well increase the price significantly, but how much is anyone's guess.

Issuing that number of shares is really no different to the recent 5p placing in terms of the mechanics, albeit £500m would more than fund the plant, so has other positive implications.

Great stuff, they are clearly still keen to press ahead given renewed mention of the plant recently. Having some extra cash to tide them will make their eventual investment into Altalto far more likely.

FYI, I just received my open offer cash back. I use Interactive Investor.

My partner hasn't got hers back and she's with HL.

Am sure there are lots of people who would love to top up but who haven't yet received their open offer money back.

That could drive a lot of buying early next week (Hargreaves Lansdowne saying cash will be returned in the next few days).

I topped up this morning for another 217k shares (two lots of £7.5k). Happy to have caught it at 6.9p just before the rise.

Takes me to 1.59m shares. Will probably stop at 2m if the price doesn't rocket before then...

Good luck all!

Thought this was an interesting read and I think for Altalto to issue debt, either off their own back or by having it underwritten by the government, is the way to finance the Immingham plant. Obviously the below article is about the water sector, but many of the same principles apply.

https://www.icaew.com/insights/viewpoints-on-the-news/2020/july-2020/how-the-tideway-project-used-sustainability-to-open-up-financing

"When Tideway first started issuing green bonds, it was a relatively new concept in the UK, with only a small handful of companies issuing similar sustainable financial instruments. “People thought it was a nice to have but didn’t see much value in it.”

Three years later, and green financing is exploding. “There is increasing evidence that by being sustainable, we attract a wider range of investors, which makes execution safer and we get better terms,” says Faden. “Sustainable is quickly becoming the default, and I think that we’re moving quickly to a point where sustainable financing will no longer be the exception.”

Faden believes that sustainable financing could be a solution for many companies looking to raise cash as we ease out of lockdown. For one thing, it attracts a wider range of investors – those with specific mandates to invest in sustainable assets.

“I can attract all of the investors that are interested in infrastructure, or in regulated assets and the water sector. But I also attract all of the investors that have a specific mandate in sustainability,” Faden explains. “That reduces the risk of execution and potentially enables more competition, better pricing, and more importantly, more certainty of getting a deal done.”

From an investor perspective, sustainable investments are perceived as less risky, says Faden. As green bonds and other sustainable financial instruments are usually third-party certified as compliant with sustainable standards, it’s easier to do due diligence. "

Agreed, I think the >3% list should be pretty illuminating. Surely several more TR-1s due today?

I imagine a lot of people are waiting for their money back for the unsuccessful excess shares before buying. £1m shares were 4.23x oversubscribed, so there is £4.23m heading back into people's share dealing accounts at some point soon.

If any of that money is used to buy shares in the open market then that's a lot of buying pressure (potentially 70m+ shares at current prices).

Sorry, misunderstood your point there, I thought you were saying that is the current table.

With the greatest respect, I'm struggling to see what your point is. You've pasted a table that was correct as at 31 May and for which we know two of the holdings are definitely wrong (Amati and Ervington haven't bought any shares).

If your point is actually that the 31.4% not held in public hands as at 31 May is now 31.9% and that is therefore reassuring, then I again struggle to see what that says. The company only includes holdings > 10% and directors. Amati are no longer included at all (below 10%) and Ervington/Norma are down almost 9%, which together reduces the total by 19%. Clearly those shares have been bought by someone, but we don't yet know by whom.

Either existing holders have increased their holdings (either to take them above 10% so that they're included for the first time or to further increase their % above 10%) or we have - at most - one new investor that has come straight in above 10%. Again, that's not surprising, we knew the shares had been bought by someone.

If anything the interesting things here are:

1) Ervington haven't topped up again. If it's such a sure investment then why not fill their boots? For me this is a bit of a nothing though, I always thought people were overselling the Abramovich connection - like he's some kind of Midas. The man has very little (no?) reputation for investing legitimately and I'm not even sure to what extent he has any direct involvement in these investment vehicles. I have always assumed they are a glorified family office and he has almost no knowledge of what they actually do on his behalf.

2) We've just placed £20m = 400m shares = almost 40% of the enlarged share capital of the company with institutions and the total "not held in public hands" has barely moved. As mentioned above, there can be maximum one new investor with more than 10% of the capital. Who are all these new investors and why has only one of them committed to >10%?

On its own, that 31.4/31.9% number is meaningless, because we know the true number held by institutional investors is now far higher thanks to 400m new institutional shares. Using a 10% cut-off removes any ability for those numbers to tell a meaningful story.

I just can't see it's worth speculating on such patchy info.

But surely you are including the shares that you were already entitled to, of which you got 100%?

Am talking about the excess, i.e. the ones that you had no guarantee of getting.