VLS.L Regulatory News (VLS)

22nd September 2014

Velocys plc

("Velocys" or "the Company")

 $70 million construction grant

Velocys plc (VLS.L), the technology innovator for smaller scale gas-to-liquids (GTL), is pleased to announce that its customer, Red Rock Biofuels, has been awarded a $70 million grant to construct a biomass-to-liquids (BTL) plant incorporating Velocys Fischer-Tropsch (FT) technology.

Red Rock Biofuels, a Fort Collins, Colorado based subsidiary of IR1 Group LLC ("IR1"), has extensive experience constructing and operating commercial-scale biofuels facilities. This new BTL plant in Oregon will convert some 170,000 tons per year of forestry and sawmill waste into approximately 1,100 barrels per day of ultra clean transportation fuels.

The $70 million grant is being awarded under phase 2 of the US Defense Production Act Title III Advanced Drop-in Biofuels project. In July 2013, Red Rock Biofuels was awarded $4.1 million under phase 1 of the same programme to conduct detailed engineering for the BTL facility, which is now complete.

Successful execution of Red Rock's project in Oregon is expected to result in revenues to Velocys in excess of $15 million during construction, and an additional $30 million or more over the life of the facility. Red Rock is targeting final investment decision on the project within 6 months, with construction lasting about 18-24 months.

Roy Lipski, CEO of Velocys, said:

"We are very pleased to see the Red Rock project moving ahead. This $70 million government grant is set to make the Oregon project happen and will act as a catalyst for early adoption of BTL in North America. We are proud to be at the leading edge of this important market."

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Notes to editors

Velocys enables modular gas-to-liquids (GTL) and biomass-to-liquids (BTL) plants to convert unconventional, remote and problem gas, as well as waste biomass into valuable liquid fuels. Systems based on the Company's technology are significantly smaller than those using conventional technology, enabling modular plants that can be deployed cost effectively at scales that match the biomass collection logistics of BTL facilities. Together with world-class partners, Velocys provides complete modular GTL solutions that address an untapped market of up to 25 million barrels of fuel a day.

Velocys plc is listed on the AIM market of the London Stock Exchange (LSE: VLS). The Company has approx. 100 employees with facilities in Houston, Texas, USA and near Oxford, UK and Columbus, Ohio, USA.

www.velocys.com

About IR1 Group

IR1 Group LLC, is an experienced project developer currently developing next generation biofuels projects. IR1 brings a core set of project development disciplines to guide projects through feasibility, development, finance, design and engineering, construction and operations. In total, to date, IR1 plants represent more than $650 million invested and 325 million gallons of installed capacity.

www.ir1group.com

About DPA Title III Program

The Defense Production Act Title III Advanced Drop-in Biofuel Production Project ("DPA Title III Program") was established to provide incentives for US operators to create, maintain or expand second generation biofuel production facilities to better meet the needs of the US Department of Defense. The DPA Title III Program is a two phased $420 million initiative, including $210 million in government funding plus matching funds. The first phase awarded up to $5 million to each of four projects to complete detailed engineering, and the second phase awaded grants up to $70 million to help fund construction.