Velocys Share Discussion Threads

[gac141] 03/8/2017 11:21

"I have been doing a fair bit of research on a number of subjects and my investigations are starting to add up.

19th June Velocys plc (VLS.L), the company at the forefront of smaller scale
gas-to-liquids and biomass-to-liquids (BTL), is pleased to announce that the
U.S. Department of Agriculture (USDA) has invited Velocys to submit a Phase
II Application to obtain a loan guarantee for a commercial-scale
bio refinery. This invitation was made after a successful Phase I Application
process. The loan guarantee could apply to up to $200 million of debt as
part of the total installed cost of the project. My understanding is that this cash is “ring fenced” for Velocys and they just need to finalize the program they have agreed with the USDA.

1.
The plant is being designed to produce approximately 19 million gallons per
year (1,400 barrels per day) of advanced cellulosic renewable diesel. This will be a high value “drop-in”; renewable diesel fuel that has no blend wall restrictions and meets the stringent specification ASTM-D975. The feedstock is from approximately 1,000 dry tons per day of woody biomass residues in the Southeast U.S. There is an abundant supply of low-cost feedstock sourced from this region that will provide a long term strategic supply of biomass to the plant.

I think that they have been very astute to use this feedstock as it’s so abundant and cheap in the US that they have no scale up restrictions and my assessment of their competition is that their feedstocks are not scalable, very supply demand price sensitive and much is imported into the US market where there is likely to be a clamp down on these imports in the future. Velocys is cleverly tapping into a supply chain that has been badly affected over recent decades as the pulp industry went into decline and they will be rejuvenating this wood cutting industry creating hundreds of jobs in badly affected states in US – there will be real political support and focus to their benefit.

2.
So to build a 1400 bpd plant costs about $100/b and to manufacture about
$40/b.. I looked back at my notes from existing AGM's and conversations had
with management over the last few years. If this is currently correct and
this is an assumption (Quite close I think)

Value of Bio Diesel $£70/b currently (NYMEX quoted) is I have been told a good approximation for renewable diesel.
US RIN (D7) Federal Credit (under the Renewable Fuel Standard) $200/b currently
California Low Carbon Fuel Standard (LCFS) state credit $30/b currently

(From what I can see, its worth noting that these credits are all published and are increasing in value over time. The federal and state governments know that they need to incentivize this sector for decades to come and that’s why US laws are currently in place and will continue to be in place underpinning this market to support Velocys and others to get the investment they need to build many plants)
3.

So Total revenues in round numbers $300/b offset cost of development and building/manufacturing finished product say $140/b leaves a surplus of say $160/b. Multiply that by a 1400 bpd plant x 365 days = profit per plant per year of $81,760,000- so nearly $82 Million per year!!! for just one plant.

4.

Velocys completed phase 1 of the USDA program and invited to complete phase two which covers the successful integrated demonstration of its FT technology with TRI’s gasification technology at pilot plant scale later this year and is a
demonstration and proof of offtake and supply etc agreements together with
the backing of a major Bank- Sumitomo Mitsui Banking Corporation (SMBC), is
the lender of record. This is a huge coup for Velocys as these guys are one
of the biggest on the globe for this sort of venture.
They do not get out of bed unless the see huge potential going forward and the number above suggests just that.

It’s clear that these kinds of partners see the Velocys route to market as the most exciting prospect to building a large number of these plants. If they get it right, which I think they will do, this could be the next “cookie cutter” plant build program to revolutionize the renewable fuels (diesel and jet) market in the US and maybe other markets around the world.

FID could be just a formality and is expected in 2018. We have done everything right and I heard from a contact in California Govt that Velocys's name is known in Washington and they are also a member of ABFA and clearly on top and follow the regulatory side closely and are in very good company.

If one plant can generate this sort of return then think where we will be with 5 or 10 plants.. running year after year which I hear is very realistic, in my view, in the next 5-10 years when this takes off!. My reckoning payback could be
as little as 5 years and maybe a lot less as the company implements its plan to reduce costs of the plant design and construction (modularization with Morimatsu) with its strategic technology partners which is we are told a key part of their strategy!

I have been contacting a number of my sources in the industry and it sounds like several of the major Oil companies are also interested in Velocys. Not to buy but work with. It would not surprise me to see BP and Shell having more to do with our company as time passes on as they are both active in this market and have been vocal on their renewed focus for de-carbonization programs where renewable fuels has a big role to play. These big companies with massive crude assets know the transition to a low carbon future will take many decades and it’s not going to be just about electric cars as in the current press!

This sector in the renewable Fuel market is huge as the current US market alone today is +150 billion gallons per year of diesel and jet and it looks like Velocys have identified a number of sites that a 1400bpd could be replicated with feedstock for decades ahead.

5.

We know from previous, that Ervington is a huge supporter and shareholder and maybe this potential UK GTL plant, earlier news released, will become a reality- more than one contact thinks so. If British Airways is not involved I am a Dutchman...no
offence to my friends in Holland.

6.

The share price is not exciting at the moment but the potential is absolutely enormous and when what I believe to be true is confirmed, we will see a multiple rise.

I hope you find this helpful in understanding Velocys potential ...Exciting times ahead....

[deutsch3] 02/8/2017 15:13

Meantime, in the midst of all this academic jam tomorrow stuff, have we sold a barrel of product yet? - Has everyone forgotten the name of the game? - Is it a secret to be kept from the shareholders - or has it not happened yet? - It would be nice to know.

[visionon] 02/8/2017 14:02

Minnesota upping biodiesel summer mandate from B10 to B20 wef May 2018. Good news for the industry. Hopefully other states will follow.

[gac141] 01/8/2017 16:51

Yes I believe this is all very good news for Velocys. Thanks for the updates. Interesting to note that RINS prices were up 10% yesterday. Again great for Velocys.

[visionon] 01/8/2017 16:22

and lobbying of the EPA over RFS continues:

hxxp://biofuels-news.com/display_news/12692/us_environmental_protection_agency_holds_public_hearing_on_rfs_proposal_and_hears_views_from_biofuels_industry/

more demanding volumes for cellulosic would arguably favour VLS projects contemplated e.g. woody biomass to liquids

[arf dysg] 01/8/2017 13:37

New method of producing syngas using an electric field.


hxxps://phys.org/news/2017-08-alternative-methane-flaring.html

"a small reactor that inexpensively breaks water and methane into carbon monoxide and hydrogen, which can be used for energy and industrial products. They report their discovery in the journal ACS Catalysis.

[...] inexpensive nickel catalyst in the presence of an electrical field to orient methane and water in a way that makes them easier to break apart [...] end up with carbon monoxide and hydrogen, the ingredients of syngas [...]"

[visionon] 01/8/2017 09:27

hxxp://www.biofuelsdigest.com/bdigest/2017/07/30/strength-through-choice-the-digests-2017-multi-slide-guide-to-the-us-navys-military-biofuels-program/

This also merits reading. I wish our own Navy was so forward looking. Sadly it appears to be run by BAe these days and has seemingly excelled in procuring ships with unproven engines and aircraft carriers without sufficient crew.

Note the US Navy phase 1 winners, none of which seem to have a plant up and running yet. It's a long road.

[gac141] 01/8/2017 00:19

Because so few are following Velocys and its fortunes. However it is a ticking clock and the seemingly brave will be rewarded. Imho. More to follow.

[gac141] 31/7/2017 21:55

Great day for Velocys and Biofuels..Thank you visionon .This shows how serious the US is about Biofuels.

[visionon] 31/7/2017 15:13

And another take on it:

hxxp://www.biofuelsdigest.com/bdigest/2017/07/30/us-court-of-appeals-bodyslams-epa-in-renewable-fuel-standard-battle/

[visionon] 31/7/2017 15:10

This looks like a good ruling.

hxxp://biofuels-news.com/display_news/12675/us_court_decision_on_renewable_fuel_standard_good_day_for_biofuels/

[gac141] 26/7/2017 14:35

I think the tide is about to turn..Just my thoughts.

[woolybanana] 24/7/2017 16:45

Velocys has been very good to me thus far. Being uncomfortable about something does not mean abandoning it.

[visionon] 24/7/2017 12:59

You do have the option of selling your shares if you don't agree with VLS's strategy.

[woolybanana] 24/7/2017 12:48

The closure of R and D in UK is bad for shareholders and for UKPC, IMHO and makes me nervous. It feels as if they are abandoning those opportunities which the UK and Europe might offer, particulalry as we already know that UK airlines would like to invest in biofuel projects to produce airline kerosene.
How long before they delist in London to go elsewhere?

[deutsch3] 24/7/2017 12:00

They have no idea about marketing - One Airliner crossing to Europe using fuel produced by GTL would light up the airwaves and the newsrooms around the world
would go bonkers. - You do wonder about the people running this?

[visionon] 24/7/2017 11:40

Fulcrum and Red Rock have offtake agreements but neither have managed to build a plant yet...

I would prefer to be in ENVIA position ie have a plant already built and announce offtake as and when appropriate.

[beeezzz] 24/7/2017 11:31

Deutsch3....Yes that would be useful to know.

Have the company stated what revenue they expect from ENVIA plant, if any this year....

[fluky] 23/7/2017 20:05

No and I have not heard about any off-take agreement either.

[deutsch3] 23/7/2017 19:27

Has anyone seen evidence that one barrel of product has been produced and sold at a commercial rate? - This is the acid test that seems to elude us?

[visionon] 23/7/2017 14:38

thanks for that fluky. I don't see 4. Working because Lansdowne and Invesco have, I think, quite high av. share price But they might act in concert now that they have debentures.

I still quite like my 50p prediction with raise assumed. my gut feeling is that the uplift won't come till H1 2018 but I guess there might be some Q4 rise in anticipation. Below the original list.

gac141. 140p (I'll laugh if it's 141p)
Fluky 125p (but see terms and conditions)
Errogenous 98p
Fern5 66p (that looks promising)
Vision 50p
Dog walker 43p (currently in the money)
Beeezz 42p

There may have been one more.