Velocys Share Discussion Threads

[kirk 6] 12/9/2018 17:30

Significant value for our shareholders

[seadiver] 12/9/2018 16:56

Great info thanks.

[gac141] 12/9/2018 15:56

Just in case any of you missed this.

Q&A with Velocys CEO, David Pummell

On the topic of Velocys’ announcement about ceasing operations at the ENVIA Energy plant.

1. David, thank you for joining us. To start with, why are you suspending operations at the plant and does it mean that operations will never recommence?
We have announced that the Board of ENVIA has decided to suspend operations at the Oklahoma City plant and to undertake a review of strategic alternatives in order to preserve the value inherent in the facility.

This decision was driven by financial circumstances following a leak at the plant which we announced several months ago. ENVIA’s appointed insurance company has independently confirmed that the leak was not the result of any flaw in our core technology, nonetheless the incident was a setback.

During this period ENVIA has been operating the plant at reduced capacity using a single reactor to generate products, but in this configuration the plant does not meet the specific process energy requirements applicable under its RFS pathway to generate RINs, which further exacerbates operating losses.

Following careful consideration of the facts, projections and available financing, the ENVIA board decided to suspend operations at the facility. We fully support the ENVIA board’s decision given the likely capital requirements of the plant and believe that Velocys’ capital is better invested in progressing our two biorefinery projects in the US and UK, which have the potential to generate significant value for our shareholders.

We are focused on finding a strategic alternative that will preserve the value inherent in the facility and we intend to provide additional updates as appropriate.

2. Why resort to a shutdown? Why not continue to operate the plant while the insurance settlement plays out?
There is simply too much uncertainty around the timing and the potential amount of the insurance settlement. The projected costs required to get the plant to sustainable cash generation is likely to be many millions of pounds. It’s simply not a prudent business decision to do this, when we have much more significant opportunities with our next plants in the US and the UK.

3. Let’s talk about those other plants. How will this affect the process to find a strategic investor in the MS project? Will it impact your UK facility?
We don’t believe this decision will negatively impact prospects for our planned Bayou Fuels or our UK facilities. A significant amount of learning has been taken from ENVIA and the design of our US and UK plants are very different. We will use process technologies which are superior, carefully chosen and designed to meet the process requirements for these new plants. Most importantly we will engage EPC’s that have the right experience, standards and track record of delivery. In addition, we have generated significant amounts of data and demonstrated successful operation of our F-T technology from commissioning and start-up through full commercial operation. We’ve produced fuel that qualifies for the highest level of credit from the US government. All of this is critical to taking the next steps in our planned facilities.

4. What do you say to investors or others who will call this a failure?
First, we don’t consider the ENVIA project a failure by any means. We achieved significant milestones and learnings that demonstrated that our technology can operate at commercial scale. The setbacks we encountered were unfortunate, but common with new technology development. Probably the single most important learning from ENVIA is the importance of selecting the right EPC. We joined ENVIA initially purely as a licensor of our technology and so we had no influence on the selection of Ventech XTL Oklahoma City, LLC, as the EPC nor access to assessing the detailed plant design and the specifications for the unit process operations in the plant. What was evident, is that the design and engineering execution by Ventech created many operational issues that led to significantly more capital to be invested and considerably longer timeline to get the plant fully operational.

Many of the issues were resolved or work around solutions found, but the reactor leak incident had the root cause of a poorly designed ancillary coolant system. We must now deal with the reality of the situation. This decision was difficult, but it is the right financial decision for Velocys, now that we have collected our valuable commercial scale data for our technology.

Finally, the operation of the ENVIA plant for over two years without a lost time accident speaks to the culture of quality and safety which are fundamental to Velocys and the operational leadership we provided the ENVIA plant. We can now fully direct capital and teams on our Mississippi and UK projects, where we are in the position to leverage our teams’ extensive experiences across engineering, technology, operations and project management.

5. What is the financial impact on Velocys?
As we said during our recent fundraise process, we intended to set aside funds to continue to operate ENVIA during the claims process – and those are still being deployed. There are already funds set aside by ENVIA to use to fund a wind-down, should that be necessary. Additional funds could be required to achieve the best net return to Velocys, but these would be small and only deployed if this resulted in delivering greater asset value. In the long term, this means we have essentially eliminated the uncertainty surrounding the need for additional, potentially significant, funding. By taking these steps we ensure that we will no longer need to continue supporting the facility, and we can turn our full efforts and capital to our two planned facilities. We expect to communicate additional details in due course, likely in conjunction with our interim reporting during 3Q18.

6. What about lost revenue from the plant? Won’t that negatively impact the balance sheet?
While we had been projecting that ENVIA would become cash-flow positive during 1H 2018, prior to the leak incident, the reality is that we now simply can’t predict when that will be given the uncertainty around the claims process. What I can say is that even at cash-flow positive status, the plant is not likely to be a significant generator of financial returns. When we weighed the risk/reward profile of continuing to fund this plant with all the uncertainty around it, we determined that it was best to reallocate the funding to projects with bigger upside, now that we have acquired significant commercial scale operational data from the plant.

7. Did you know this was a possibility when you went out and raised the money?
At the time of the fund raise the best information we had from ENVIA was that the insurance claims would be quickly resolved. The resolution of these claims has taken much longer than ENVIA expected and remains uncertain at this time. The inability to establish a reliable timeline for reactor replacement and operation was only recently made available to us by ENVIA. During our fundraise we clearly stated that proceeds of the raise would be used to continue to support the ENVIA project to the point where the Company understands the financial plan to restore the second reactor to operation and get the plant to sustainable cash generation which we have just now become aware of.

8. What do you say to those who are extremely concerned about the share price?
I say to them that we understand their concerns. I believe the steps we’re taking today are the right ones because they will remove uncertainty around the ENVIA plant and enable us to put all our efforts into our US and UK plants. I believe we are making fiscally prudent decisions because they will strengthen our balance sheet in the near term and better position us for success in the long term. The data we have taken from the plant is an extremely valuable asset to the Company and will be essential information that will support the successful delivery of our US and UK projects.

9. What do shareholders have to look forward to?
Let me use this as an opportunity for a quick update on our three key projects.

First, our Mississippi biorefinery project remains on track. In fact, we recently announced that we obtained a ‘Finding of No Significant Impact’ from the U.S. Department of Agriculture on the project’s Environmental Assessment report. This is a key regulatory milestone for the further development of the site and we believe it reflects the quality of our design and overall approach. In the meantime, we continue with our process to secure the necessary development capital investment by one or more strategic partners. We have a number of extremely attractive strategic investors who have joined the process and have begun their detailed due diligence on the project. This process will lead to a commercial deal with one or more of these investors and I hope to have news for you on that before the year is out.

Second, the UK waste-to-renewable jet fuel plant project is also progressing to plan. We announced recently having received £434k from the Department for Transport (DfT) under the Future Fuels for Flight and Freight Competition (F4C), as part of an overall £4.9m funding from project partners. We were very pleased that Shell joined us and British Airways as project partners. Pre-FEED work on the project is ongoing and we plan to announce a site location in the coming weeks.

Third, the Red Rock Biofuels’ project is continuing on track with its biorefinery project. We participated in their ground-breaking event several weeks ago and we wish them all the best for continued successful development.

Last, I do want once again thank all of our shareholders for your support. Please know that the entire team is working tirelessly to bring our next projects online and begin delivering on the future that we all believe is possible.

[paddyfool] 12/9/2018 13:26

someones just thrown #3.6 million at this

[garth] 12/9/2018 12:16

Beeezzz,

re cleaning up those coal power stations you should run the rule over AEG if you haven't already...

G.

[beeezzz] 11/9/2018 22:06

Its all comes down to economics....Germany is building a number of coal fired power stations, giving up on Nuclear a green energy source.. Germany have reasons for increasing carbon footprint, or do they look on energy security more important than the planet, or is it that Germans would riot if they had to pay high electricity prices....

We have huge reserves of coal, if we built 6-10 coal power stations and move to all electric, for transport, heating, everything. Its easier to filter the power stations than millions of car, trucks and individual heating systems.

In fact you could use the gas network via the power station waste hot water to heat peoples homes in near by towns. Sorry just rambling....

[fluky] 11/9/2018 19:39

Seadiver: I agree: the future will be green but the question is when does the future begin...

[seadiver] 11/9/2018 16:26

Well, the law of supply and demand will determine future share price. If we don't switch to green fuel we will not be able to breathe clean air!So, the future has to be green.

[pictureframe] 11/9/2018 15:59

The future is sub 5p

[seadiver] 11/9/2018 12:14

The future is green fuel, the future is VLS.

[woolybanana] 11/9/2018 11:19

Owenski, I take it you have a short position here.

[deutsch3] 11/9/2018 08:59

The problem is in front of us in the Head Office. - Although it is in Pantomimes where the problem quote is " its behind you "

[owenski] 11/9/2018 08:54

There is no business model, there is no business, there is also no money.

[seadiver] 11/9/2018 07:28

Velocy has a great business model going forward. Now the problem is behind us, we will see a steady recovery from here.

[seadiver] 11/9/2018 06:37

I will top-up today big time! Velocy has a unique technology for clean fuel/air and that is the future I believe.

[owenski] 10/9/2018 22:16

They'll need money again, will be a fool that tops up this trough, there's no business here.

[owenski] 10/9/2018 22:15

"NUMIS REITERATES VLS AS A BUY AT 40p"

Christ.. they should be locked up and these are so called professional analysts.

[garth] 10/9/2018 22:09

Where did Laptop go?

Laptop1523 Aug '18 - 19:49 - 2125 of 2174
0 1 0
NUMIS REITERATES VLS AS A BUY AT 40p....current share price 9.11p....so over 400% upside from here guys :))

[beeezzz] 10/9/2018 21:27

Its pretty obvious the company have not been telling the truth the whole truth, and nothing but a load of BS....finished.. Heading into AIM history like a lot of other university spin off's that should never have been given a listing.

[owenski] 10/9/2018 13:43

Looking at the selling volume over the last few days, it looks like a few knew this was coming, leaky ship, stuffed mug PI's yet again.

But there again, anyone who was still holding/buying this is a mug anyway.

[john henry] 10/9/2018 08:53

The recent investors in the placing must be Livid.

Non holder.