VLS.L Regulatory News (VLS)

News release

Velocys plc

("Velocys" or "the Company")

4 May 2018

Velocys sells its second commercial license to Red Rock Biofuels

Velocys receives first $6 million as part of "notice to proceed" action

Velocys plc (VLS.L), the renewable fuels company, has received a "notice to proceed" action to commence manufacturing of the Fischer-Tropsch reactors and catalyst for the Red Rock Biofuels LLC ("RRB") biorefinery that will be located in Lakeview, Oregon, USA. RRB has commenced construction of the biorefinery, which will incorporate Velocys' technology, and produce low-carbon, renewable diesel and jet fuel. Velocys' role will be as a licensor for its technology to the project.

RRB is a subsidiary of IR1 Group LLC, which has 325 million gallons of installed biofuels capacity. The biorefinery in Lakeview will convert forestry residue into 15 million gallons per year of renewable transportation fuels including diesel and jet fuel. Enough jet fuel will be produced by the plant to fuel 1,800 round trips per year from Portland, Oregon to San Francisco. RRB has in place contracts from several airlines to purchase 100 percent of the jet fuel produced each year.

RRB's Lakeview project is expected to deliver around $15 million revenues to Velocys during the construction and early operation stages of the plant, and an additional $30 million or more over the life of the biorefinery. Over $6 million has already been invoiced and received from RRB.

With broad international agreement in the aviation industry for carbon-free growth beyond 2020, airlines are actively seeking low-carbon jet fuel to reduce their greenhouse gas emissions. The civil aviation industry alone will require around 1.5 billion gallons per year of new renewable jet fuel production capacity to meet this commitment.

Velocys' technology, be it via licensed third party projects like RRB's biorefinery, or through Velocys' own projects such as the Natchez, Mississippi project, will supply the aviation and road haulage industries with a scalable, sustainable supply of fuel.

By using forest and sawmill residues, RRB's biorefinery will not only avoid competition for agricultural resources, but also reduce the risk of catastrophic wildfires by removing waste biomass from overgrown forests. It will also help to regenerate the local forestry industry.

David Pummell, CEO of Velocys, said:

"This is a very important milestone for Velocys, our second commercial license sold; our first licence being ENVIA. Our technology positions us at the forefront of this huge market opportunity. RRB's success is a significant milestone for the sector, one that further demonstrates the market's appetite for renewable transportation fuels. The successful funding of this project is a validation of the commercial viability and bankability of Velocys' technology. The licensing of our technology to RRB is complementary to our strategy to develop our own biorefineries, the first of which will be located in Natchez, Mississippi."

- Ends -

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.

Velocys: Web | Twitter

www.redrockbio.com

About IR1 Group

IR1 Group provides biofuels industry clients with complete project development, engineering, procurement, construction and operations services. 

IR1 Group personnel have successfully constructed and operated eight biofuel plants covering three distinct process designs over the last 18 years and managed a $25 million retrofit on a fourth biofuel process technology. In total, IR1 plants represent more than $650 million of construction and 325 million gallons of installed capacity.

IR1 is developing next generation biofuels projects and is currently serving as the lead developer of a next-gen biofuels project in Oregon. We bring a core set of project development disciplines to guide projects through feasibility, development, finance, design & engineering, procurement, construction and operations. IR1 also works with private equity groups, banks, insurers, producers and others to evaluate and repair facilities, estimate capital costs for reconstruction, and provide specific expert advisory services.

www.ir1group.com