VLS.L Regulatory News (VLS)

News release

Velocys plc

("Velocys" or the "Company")

This announcement contains price sensitive information.

21st September 2016

Construction complete at ENVIA's GTL plant

Velocys plc (VLS.L), the company at the forefront of smaller scale gas-to-liquids (GTL), is pleased to announce that construction of ENVIA Energy's GTL plant in Oklahoma City is now complete. On-site loading of catalyst into the Fischer-Tropsch reactors has been completed by Velocys with support from its internationally-recognised partner, Mourik. Photographs of recent progress on site are available at www.velocys.com/media_image_library.php.

Highlights:

· Construction of ENVIA Energy's GTL plant in Oklahoma City complete.

· On-site loading of catalyst into Velocys reactors complete.

· Pre-commissioning activities substantially complete.

· Early commissioning steps begun.

· ENVIA GTL plant provides a commercial reference site for the Velocys technology.

· Drawdown of Velocys' US$9 million senior loan to begin in Q4 2016.

Pre-commissioning work, including hydro-testing of the lines and vessels, and a rigorous inspection process, is substantially complete. The team has made extensive and detailed preparations; operating manuals and procedures have been completed and robust commissioning and start-up plans are in place. In line with best practice, the commissioning plan will ensure that each process system in sequence is working robustly, safely, and within specification, in order to best assure a successful, safe and uneventful plant start up. Early commissioning steps have begun.

In February 2016, as part of a stakeholder capital contribution, Velocys made available to ENVIA a senior loan of US$9 million, secured on the project. Additional equity ownership units and voting rights were granted to the Company as part of the terms of the loan agreement and Velocys sought and gained greater operational management involvement in the project.

Velocys has been supporting the EPC contractor, Ventech, in leading and executing the planning for the commissioning, start-up and operation of the plant. For example, the Company has provided, under contract, an operability review, operating procedures and commissioning management.

Additionally, under the secondment agreement with ENVIA, Velocys' team of experienced GTL operations managers, operators and engineers have been on site in Oklahoma City since their deployment began in July. This Velocys operations team, which is serving under the ENVIA Plant Manager, will bring essential support to the ENVIA team through commissioning, start-up and early stage operations until the permanent operations team is phased in over a planned period. The Velocys team brings a wealth of operational GTL plant expertise including commissioning and plant performance optimisation, drawing on experience gained at a number of large scale commercial GTL projects as well as from the Velocys pilot plant.

Drawdown on the loan to ENVIA will begin in Q4 2016, with the final drawdown expected in Q1 2017. The majority of the drawdown will fall in the current financial year. Velocys will pursue options for the early repayment of the loan once the plant is operational. The Company does not currently anticipate any additional funding needs from Velocys for the project.

Evaluation continues, with our partners, on future ENVIA projects using learnings from the Oklahoma City project.

David Pummell, CEO of Velocys, said:

"Operational start-up of the ENVIA plant is now within sight; its successful steady state operation will represent the next seminal milestone for Velocys and a significant step for the smaller scale GTL industry. Velocys and its partners continue to work together on site in a high-performing professional collaboration and I remain confident that we will continue to build on this progress to deliver a safe and successful start-up of the plant in the near future, and the timely production of in-specification product."

- Ends -

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Notes to editors

About Velocys

Velocys is the company at the forefront of smaller scale gas-to-liquids (GTL) that turns natural gas or biomass into premium products such as diesel, jet fuel, waxes and base oils. Smaller scale GTL adds value to a range of gas and biomass resources, and makes stranded or flared gas economic - an untapped market of up to 25 million barrels per day.

Velocys technology, protected by several hundred patents in over 30 countries, is specifically designed for smaller scales, combining super-active catalysts with intensified reactor systems. The Company's standardised modular plants are easier to ship and faster to install, at lower risk, even in the most remote or challenging locations. Together with world-class partners, Velocys works flexibly to unlock gas resources of 15,000 to 150,000 mmbtu per day, allowing more companies to take advantage of more opportunities.

Velocys plc is listed on the AIM market of the London Stock Exchange (LSE: VLS). The Company has a strong, multi-disciplinary staff operating from its commercial centre in Houston, Texas, USA and technical facilities near Oxford, UK and Columbus, Ohio, USA. Construction is complete at its commercial reference plant, which is located adjacent to Waste Management's East Oak landfill site in Oklahoma City.

www.velocys.com

Think Smaller™. Velocys is changing the way fuels are made.