Velocys achieves commercialization milestones

By Anna Simet | October 02, 2014

In the span of one week, modular gas-to-liquids (GTL) and biomass-to-liquids (BTL) technology supplier Velocys plc won a patent case, announced that it has raised £52 ($85 million) million through an oversubscribed equity placing, and was awarded a $70 million construction grant from Red Rock Biofuels, one of three recent U.S. Department of Defense biofuel contract recipients.  

On its interim results for the six-month-period ending June 30, CEO Roy Lipski said 2014 is shaping up to be the best year yet in the history of Velocys, which was formed in 2001, a spin-off of Battelle. “With the first commercial GTL plant using the company’s technology under construction, Velocys has firmly established itself as global leader in smaller-scale GTL,” he said. “Market conditions remain favorable and the pipeline of opportunities is healthy. The £52 million recently raised will provide a firm base for commercial roll-out and underscores the market’s strong confidence in Velocys.”

On Sept. 22, the U.K. High Court ruled in its favor of Velocys on a patent infringement case it brought against CompactGTL Ltd. The case was filed by Velocys in March 2013, and concerned infringement by CompactGTL in relation to its smaller scale Fischer-Tropsch technology.

The same day, the company announced that customer Red Rock Biofuels was been awarded a $70 million grant under the DOD Defense Product Act to construct a BTL plant incorporating Velocys FT technology. The new BTL plant, the design of which was completed in phase one of the DOD program via a $4.1 million contract, will be built in Oregon and convert some 170,000 tons per year of forestry and sawmill waste into approximately 1,100 barrels per day of ultra clean transportation fuels.

Earlier in the year, Velocys reported that a commercial GTL plant will be built in Oklahoma and utilize the company’s technology, through a joint venture with Waste Management, NRG Energy and Ventech Engineers International. The JV was formed to develop GTL plants in the U.S. and other locations a combination of renewable biogas, including landfill gas, and natural gas.

On the project, Lipski said while large-scale GTL plants have been operational for years, this is the first time that major companies have committed to smaller-scale GTL. The Oklahoma plant, which is designed to be profitable on a standalone basis, according to Lipski, will be located at Waste Management's East Oak landfill site and provide a commercial reference site for the Velocys technology and deploy a number of the company's full-scale FT reactors.

Purchase of major equipment has begun, Lipski said, with construction and commissioning expected to be completed in Q2 2016.

Lipski concluded by stating that long-term conditions for smaller-scale GTL remain favorable, particularly in North America, where the company anticipates the majority of early plants to be built, as investors and businesses seek ways to benefit from the arbitrage between low gas prices and high value refined products. “There is also strong interest from Russia and former CIS countries surrounding stranded and flare gas opportunities,” he said.  

Total revenues for Velocys for the period were £1.0 million, cash at period end stood at £18.3 million, while cash outflow was £9.3 million. Following period end, Velocys raised £52 million (before expenses) through the placing of over 23.1 million ordinary shares (representing 16 percent of the enlarged issued share capital of the company), at a placing price of 25 pence per share.