VLS.L Regulatory News (VLS)

News release

Velocys plc

("Velocys" or "the Company")

18 June 2018

Development funding of £4.9m secured for next stage of UK waste-to-jet fuel project from industry partners and Department for Transport

Velocys plc (VLS.L), the renewable fuels company, is pleased to announce that £4.9m of funding has been secured to deliver the next development phase of the waste-to-sustainable jet fuel project that the Company is developing in the UK. As part of the funding package a grant of £434k has been secured from the Department for Transport (DfT) under the Future Fuels for Flight and Freight Competition (F4C). The award of this grant, together with ongoing policy support provided by the Renewable Transport Fuel Obligation, will help this innovative waste-to-fuels project bring jobs and clean growth to the UK. The project is being developed with the financial and technical support of Shell and British Airways.

Highlights

· Initial feasibility stage of project development successfully completed.

· Project awarded £434k under the F4C.

· Next stage to include detailed pre-FEED (Front End Engineering and Design) engineering study and site permitting activities, fully funded by a combination of the F4C grant and £4.5m committed by the industry partners including Velocys.

- Velocys will continue to lead the project and has committed £1.5m to this next development phase, a significant proportion of which is in the form of an in-kind contribution.

- The next stage of the project will be developed by Velocys, Shell and British Airways.

The team is developing the engineering and business case for the construction of a first plant in the UK. Subject to a final investment decision, this plant will take hundreds of thousands of tonnes per year of post-recycled waste, destined for landfill or incineration, and convert it into clean-burning, sustainable fuels. The jet fuel produced, to be used by British Airways, is expected to deliver over 70% greenhouse gas reduction and 90% reduction in particulate matter emissions compared with conventional jet fuel. This would contribute to both carbon emissions reductions and local air quality improvements around major airports. The project partners expect to reach a final investment decision in the first half of 2020.

David Pummell, CEO of Velocys, said:

"Successful funding of this next development phase further demonstrates the strength of Velocys' renewable fuels business. Today the UK has taken another step forward towards becoming a world leader in low carbon aviation. Government funding, recent policy changes and successful completion of the feasibility study have enabled Velocys and its partners to move forward to the next phase in developing the UK's first waste-to-renewable jet fuel plant. With Shell and British Airways we have a terrific set of partners to complete the project."

Alex Cruz, CEO of British Airways, said:

"We are very pleased that the Government has recognised the importance of alternative fuels for aviation and has supported our joint project with Velocys which will help to reduce carbon emissions and create UK jobs and growth."

Anne Anderson, Vice-President Shell Aviation, said:

"Shell's ambition is to be a leader in advancing the sustainable solutions that can deliver a low carbon future for the aviation industry," said Anne Anderson, Vice-President Shell Aviation. "In addition to combining innovative technologies with a diverse set of technical expertise and industry backgrounds, this project brings together partners across the aviation industry that share this aim. Biofuels can play a valuable role in a future low carbon energy system, and especially in sectors like aviation where the alternatives to liquid fuels are limited."

Chris Grayling MP, Secretary of State for Transport, said:

"The waste-to-jet fuel project has the potential to help transform the aviation industry by reducing greenhouse gas emissions and improving the air quality around our country's airports.

"That is why we are providing support to this important technology as part of our £22 million of funding for alternative fuels, which will pave the way for clean growth in the UK.

"Supporting important developments like this is just part of our work to help ensure our aviation sector is greener than ever, and we will explore further measures as part of our Aviation Strategy."

- Ends -

Annex:

The project partners are:

· Shell, the international energy company, which is supporting the project with technical expertise.

· British Airways, the UK's largest international airline, which intends to fly with the jet fuel made in the plant.

· Velocys, which intends to supply its technology to the plant and provide project management, engineering, operations and technical service support to the project going forward.

Advanced Plasma Power (APP) has been selected as preferred gasification technology licensor for this UK waste-to-fuels project. APP offers an efficient and tested solution for conversion of waste to synthesis gas (for onward conversion to fuels via Velocys' Fischer-Tropsch process). Velocys will be working with APP during the pre-FEED stage and, subject to appropriate conditions being met, intends to use its technology for the project.

The F4C initiative aims to increase domestic production of advanced low carbon fuels capable of tackling emissions from the hard-to-decarbonise aviation and HGV sectors. It is also intended to stimulate investment and to create jobs through the development of a prosperous domestic industry.

In a boost to the long term commercial viability of the project, changes to the Renewable Transport Fuels Obligation (RTFO) came into force on the 15 April 2018. For the first time, renewable jet fuel is to qualify for credits under the RTFO, providing long term policy support for sustainable aviation fuels.

For further information, please contact:

Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014) prior to its release as part of this announcement.

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