Sustainable aviation fuel innovator Velocys today saw its share price surge 19%, as it celebrated securing two government grants totalling nearly £30 million in its quest to make planes’ motion lotion out of dead plastic.
Backed already by British Airways, the Oxford-based enterprise is partnering to build a plant on Humberside, designed to convert end-of-life plastic waste into SAF, or sustainable aviation fuel.
Easing the plant’s construction is £27 million announced today from Whitehall’s £165 million Advanced Fuel Fund, awarded to Velocys’ wholly owned subsidiary Altalto Immingham.
Injected into the project’s figurative combustion chamber between now and March 2025, the award will propel front-end engineering design for the SAF project.
Necessary to securing the public cash, however, is a 50:50 burn mix with private capital, yet to be confirmed. Letters of intent already secured by Altalto Immingham underpin existing and new partners to inject private cash, timed to be place by April 2023.
Velocys’ cash contribution into the Altalto Immingham project over the two years from April 2023 is not expected to exceed £8 million, it told investors. Participation by new backers may further reduce that sum.
Front-end engineering design (FEED) covers validating and securing licensors‘ technology packages, drawing up the plant’s EPC contract and confirming necessary additional commercial terms.
Given a smooth ascent to full funding, construction of the plant is scheduled for 2025, and its first SAF could flow in 2027. Once building begins, Velocys will charge its partners license fees for its technology.
Today’s funding pledge is Velocys’ biggest received to date for Altalto Immingham. Earlier support including £1.7 million from the Green Fuels, Green Skies competition overseen by the Department for Transport and a series of grants totaling £934,000 from that fund’s predecessor.
Also announced today, a second grant from the same government fund, this time of £2.5 million, will support efforts by Velocys & partners to conduct feasibility, technical validation, site selection and pre-FEED engineering studies for a separate e-fuels project. Instead of end-of-life plastics, carbon dioxide and hydrogen are intended feedstock to prime another UK SAF venture.
“We are extremely pleased the UK government has awarded Velocys these important grants”. said Henrik Wareborn, CEO of the avgas chemists.
“We welcome this clear commitment to having commercial SAF plants built in the UK”, he added. “We are delighted that a number of large commercial companies have indicated their support for the project through indications of matched funding contribution and the provision of services to progress the project.”
US carrier Southwestern and IAG, owners of British Airways, Aer Lingus and Vueling, have signed outline off-taker agreements for the Immingham plant’s output. Velocys has also embarked on technical trials with Japanese petrochemical engineers Toyo Corporation.