After it announced that a funding round was not going ahead, shares in a “carbon negative” jet fuel manufacturer which has received tens and millions of pounds worth of grants from the government collapsed by over two thirds.
Velocys, a company quoted on London’s Aim Market, has said that the conditions for securing $15 million from Carbon Direct Capital as an investor have not been met and they will need to find alternative financing. The company has said that funding must be secured by the end December.
Velocys claims that its patented technology enables the production of sustainable aircraft fuels which can be produced “safely and efficiently on a commercial level” and used without modification in existing engines.
The company claims that the fuel can be produced from a wide range of wastes, including municipal wastes and woody biomass. The company considers the manufacturing process to be carbon-negative due to the use of Carbon Capture and Storage Technology.
Velocys secured an agreement with Carbon Direct Capital for a convertible loan of $15 million in May, subject to certain conditions. These included a $40 million funding round.
The deadline of September 21 was extended until the end October, but the business announced on Tuesday that it could not meet the requirements.
It stated that it was still in “active discussions about funding with all strategic investors, who have been doing due diligence for several months with the aim of obtaining long-term financing”.
It said that it had become “clear that any investment in the company that results from these discussions will not be on the exact same terms” that the offer made by Carbon Direct Capital, and that the deadline of the agreement would no longer be extended.
It said: “Velocys continues to anticipate that funding will be needed before the end this calendar year. The board is therefore prudently exploring short-term funding options while discussions with strategic investors continue.”
The company reported in September that it only had enough cash to last until the end of 2023.
Velocys, a company that develops waste-to fuel plants, received £29.5 million from the government in December of last year. This was mainly to assist it in developing a waste-tofuel plant in Immingham in Lincolnshire in collaboration with British Airways. Mark Harper, then the transport minister, stated that the investment would “help us to make guilt-free fly a reality”.
It has also announced that it is building a second plant in Mississippi and its manufacturing facility in Columbus Ohio is aiming to commercial production by mid-2024.
Norma Investments (a vehicle linked to Roman Abramovic) and Ervington Investments are among its shareholders. After Russia invaded Ukraine, the oligarch gave up control of his offshore vehicles. Lansdowne Partners is an asset manager and Hargreaves Lansdown is a wealth manager.
Velocys was spun out of a University of Oxford spin-out technology company named Oxford Catalysts in 2006, and floated on the stock market.
In 2021, British Airways’ owner IAG, and Southwest Airlines (US airline) agreed to purchase hundreds of millions gallons fuel from Velocys. Henrik Wareborn has stated that the company is “firmly” in the commercialisation stage.
Velocys shares closed at 1/4p down 3/4p or 70.2 percent.