New Isa allowance comes up around on the 6th April which should, if the price stays the same, present the opportunity for popping £20k's worth into it and keeping the anticipated future gains tax free.
Skys the limit for Velocys after ENVIA secures approval for landfill gas to renewable fuel plant (VLS)
by ValueTheMarkets March 15, 2018
Velocys (LSE:VLS) shot up by nearly a third in early trading after the Renewable Identification Numbers (RINs) produced at its joint venture ENVIA Energys plant in Oklahoma City received government verification. The RINs were approved by Weaver, an independent third-party auditor operating under the Quality Assurance Program (QAP) approved by the US Environmental Protection Agency (US EPA).
RINs are serial numbers assigned to a batch of biofuel to track its production, use, and trading, as required by the US EPA.They are used to track the compliance of obligated parties like oil companies which the EPA requires to process certain volumes of biofuel every year in its efforts to drive US energy independence and clean fuel production. Like a currency, the credits are generated by renewable fuel producers, traded by market participants and then purchased by obligated parties like gasoline companies. These obligated parties then retire the RINs into compliance and supply the attached biofuel into the wider fuel market.
Todays news is a landmark for Velocys because the diesel produced at ENVIA made from the landfill gas portion of the feedstock can be used by obligated parties to meet their environmental requirements. This opens up its market greatly, with ENVIA already signing an agreement with TransMontaigne Product Services which will see it purchase all of the available RINs generated by ENVIA for six months from April.
Based on 2017 RIN values, the possible revenue from RINs attributable to ENVIAs mixed feedstock fuel was equivalent to $2.4/gallon or above throughout 2017. As a result, Velocys said a significant contribution of ENVIAs revenues could be derived from the ongoing sale of RINs.
Most importantly, todays news provides a commercial proof of concept for the company. Velocys is planning to turn woody biomass into renewable fuels at its large Mississippi-based biorefinery, which is slated to reach final investment decision around the middle of 2019.
The Mississippi biorefinery is expected to produce 20m gallons of renewable fuel a year, with Velocys generating $6.90 of revenue for every gallon against opex costs of £2.50 a gallon. Not bad for a business with a current market cap of just £26.05m and additional plans to develop renewable jet fuel with British Airways up its sleeve.
David Pummel, chief executive of Velocys, said todays news will help progress in Mississippi: This is a significant landmark for ENVIA and represents a further validation step for Velocys strategy to build biorefineries that convert woody biomass to renewable fuels. ENVIA demonstrates that we have the capability to produce verified RINs that will enable Velocys to unlock the attractive US renewable fuels market and, in time, grow a material supply position. This milestone is also important to our ongoing Mississippi biorefinery project, being one of the key requirements that will support building a consortium of strategic investment partners into the project.
With todays news being highly anticipated by the market, shares rose by as much as 30pc in early trading. At the time of writing, they were up 9.5pc, or 1.3p, to 15p. With plenty of news flow on the way regarding Velocyss Mississippi biorefinery, the firm could still be undervalued at this price.
Are we really in a worse position now than pre pre-placing? Absolutely not, the market cap ought to be significantly higher.
I totally concur with you.
Think of it in these two ways.
1. Firstly RTFO's in the Great Britain now favour and include the VLS biofuel target market in the aircraft industry.
2. RIN accreditation for D3 but more importantly D7 RINs have just been achieved in the USA.
These will be two of the biggest drivers of the profitability of Velocys as it progresses as a growing company.
Now ask yourself how much money actually has the company physically spent of the £18.4 Million pounds raised and any previous cash balance that was on the profit and loss accounts.
One has come as a freebie due to global climate change targets and the other in the USA would have required a bic pen and first class stamp for the completion and postage of the RIN accreditation form. That plus a courier with the required samples.
All that was there with Velocys just the day after the fundraising money wise should still be there there, the Envia plant itself, intellectual property, patents, Mississippi plant, advanced plans for a GB biorefinery and the £18.4 Million cash added to the previous surplus on the balance sheet. All that is give or take some operating expenses.
To cut a long story short. Two major profitability drivers have just been granted to Velocys in the last 10 days - and for not a lot of dollars and sterling. The balance sheet should therefore still be about the same as it was the morning after the fundraising.
Lots of bang for not a lot of bucks.
The market cap should should move higher level to reflect this progress and I'd expect it to show a healthy re-rate upwards over the next few days and weeks.
As with all shares that have 'bombed' from high where expectation was for further growth it is important for new shareholders to appreciate the frustrations of LTHs carrying large losses. I for one lost nearly £15k chasing excite energy from highs to bust.
With this share I was lucky to stumble on it at 10p and reading the range of posts on this board and some related info decided to take a punt. However I do accept that this just the start of a long journey with a long road ahead full of potholes and hurdles which I really hope the BoD can steer us around and over, for the ultimate benefit of both long term and newbies.
Today is a good time to start buying again, I agree. It was a bit too risky for me after the placing, but a decent chunk of that risk has now gone. There are a few large milestones to tick off, e.g. US loan, etc.
Are we really in a worse position now than pre-placing? Absolutely not, the market cap ought to be significantly higher than it was at the beginning of Jan. Sadly the placing has created so many new shares at 10p that it will take a while to get rid of all sellers to get it back to the spike it hit in 2017 (101p in pre-placing terms, 70p in diluted terms). Hopefully tomorrow might generate some more momentum once people have had a chance to digest, but I think part of the problem is that this company just isn't that well known by Joe Average Investor.
Sadly I put most of my money in from September 2017 - January 2018 on the basis of what the company was saying at the time (including £10k exactly a week before the placing). I won't have any more funds until this December, so the cheap shares are going to pass me by.
Best of luck to everyone who has managed to get the cheap shares, I am sure there is a long way to rise for these if they do what they promise. I wouldn't keep holding if I didn't believe that.
(Donatron we disagree on much on here and I'll continue to hold and add and watch my money grow thanks. I bought very low and bullish on the stock and take more out of the Velocys investor material on the website than anything you post).
It should not imho be too long before we are back in the 20's. Todays positive news though says probably a lot further to me.
I didn't sell, so am as happy as anyone else to see this rising. Probably slightly less so, because I know how far to go until I break even... At least today gives me a hope that I'll actually live to see that day.
So to summarise, do you actually have any opinion on what I posted today?
That was my take on it then, because the company had provided no news for months and suddenly announced a 10p placing out of the blue. It reeked of desperation so, on the lack of other news, implied things were not progressing well. A helluva lot of people sold out then and there was a lot of stock to soak up. It is not "ridiculous" to think that the share price could have fallen to the 6-8p range given it fell to a low of 9.34p. That's only a further 14-36% fall from there; hardly shocking when it had just dropped 70% or so.
My take on it now is as I wrote earlier.
It's easy to snipe now we know that the RINs have been approved, but there was a question mark over the company's ability to survive another 12-18 months based on the information available at the time. No RINs = no VLS, it's a simple as that.
Your take on it Donatron when the fundraising was announced was this.
"I see 6-8p as people head for the exits. Only so many the MM will want to buy before they drop the price." Your posting history thereafter is there for all to see."
That if I remember was posted at 8:03 a.m. and after time to sell.
It didn't ever get anywhere near those ridiculous numbers and those that disregarded what you said and the advfn bulletin board to which you tried to refer and instead went with their gut feeling and took up their entitlements of shares or even bought in the open market are now sitting pretty.
It should not be too long before it is back into the 20p's.
Ah understood. Makes sense, thanks for the clarification.
So taking that into account, we can say that 66,667 gallons of RIN-qualifying fuel is produced, i.e. the 63 bpd figure. Giving them the benefit of the doubt that the 200 bpd figure is still being met, we can say we're producing about 137 bpd of "regular" diesel. Total fuel available for sale is therefore 200 bpd x 34.97 x 30 days = 210,000 gallons.
Let's say RINs are going to be $2.70 this year (about 10% higher than the 2017 minimum). So ignoring the actual value of selling the fuel, we're looking at about $2.7 x 66,667 gallons = $180k per month revenue from the RINs.
Does the underlying product have the same value as standard ULSD? If so then let's take a look here:
Diesel in Jan 2018 had a at the pump value of $3.02 per gallon. However, the graphic shows that 18% of that is tax and 16% is distribution and marketing. ENVIA's share is presumably therefore just the raw material and refining proportion, which comes to 66% or $1.99 per gallon. $1.99 x 66,667 gallons = $132k per month revenue. This is borne out by futures on ULSD, e.g.:
Ignore the fact the link says heating oil, the underlying commodity was updated in 2013 to incorporate ultra low sulphur diesel:
So add that all together and we're looking at about $1.90 per gallon (in reality we may be getting a slight discount to market rate in exchange for finding an off-take partner) x 210k gallons = $400k per month for the fuel, plus $180k per month for the RINS = $580k per month or $7m per year.
I'm not sure that covers the annual running costs of the ENVIA plant, but hopefully it does. Even so, our share of the joint venture is only likely to be about 10-30% of the total, so the numbers may be small. It's good that ENVIA will stop being a cash drain, but it's unlikely to be a money spinner.
I imagine we will sell our stake in the JV to raise funds for Natchez.
"ENVIA, a joint venture in which Velocys is a member, employs a process which creates a drop-in fuel from renewable biogas and pipeline natural gas. Throughout 2017 the type of RIN produced by ENVIA, based on its feedstock mix, traded above USD2.4 per gallon. For a fuel produced exclusively from renewable feedstock, this equals to RIN values at around USD4.0 per gallon throughout the year."
Looks like only a percentage of the overall production qualifies for RINs - the portion relating to the biogas. The piped gas is obviously not a renewable source. So actually o.6 RIN credits are produced per gallon 2.4/4.
100k per month therefore equates to 66.7k gallons of actual fuel. There are 34.97 gallons in a barrel of oil, which suggests we are producing 1,900 barrels per month. Divide this by an average of thirty days in a month and that suggests we are producing about 63 barrels per day of fuel.
Unless I'm missing something fundamental, isn't ENVIA designed to operate at nearly 4 times that level (i.e. 250 barrels per day)? There is no direct mention of production levels at ENVIA, but we were told in October that it had reached operational capacity of 200 barrels per day. Seems very worrying if my sums are correct...!
Velocys plc (VLS.L), the renewable fuels company, is pleased to announce that the RINs (Renewable Identification Numbers) produced at ENVIA Energy's Oklahoma City plant have been verified by Weaver, an independent third party auditor
David Pummell,, CEO, is an invited panellist at the Investing in Clean Transport investor briefing on 14th March. Take a look at the event details
Thanks for your view Dave. I have taken a 50,000 share position here based on current information and following the big drop which appeared oversold. also heartened by the fact that the share has been as high as £1.80 (Less shares in issue) but also traded above £1 for quite some time Prior to the latest developments of grants in the USA etc. My personal strategy will likely be to sell half should the sp get over 20 and leave the rest for a long term free carry
"Does anyone have a reasonable feel for how VLS is positioned in the market against leading competitors"
Take a look at GreyRock who are building a small GTL plant near Calgary. CompactGTL was also a competitor but hit problems a year or two ago as far as I know. There are one or two other companies who claim to have their own proprietary small scale FT technology I believe.
As it stands VLS can claim to be ahead, as the Envia plant it up and running. Also, they now have a fair bit of experience from that and from the extensive testing on their own pilot plant.
The problem holding this technology back has been getting funding due to the vagaries of the oil/gas price and the unpredictability of government supports for green fuels. Although it is called 'small-scale' FT the plants incorporating this technology are still very expensive requiring a lot of other high tech kit to convert the biomass/waste to gas suitable for the FT reactors.
VLS appears to have given up on the stranded gas market which was their original main target and is now concentrating on BTL/WTL where support is available from governments. They have also had to switch from being just suppliers of FT reactors to others companies to become developers the plants themselves in some sort of JV.
The whole world wants more biofuels but whether the two plants that VLS are focussing on now ever get fully funded remains the big issue as far as I am concerned!
I have worked with new technologies for conversion of waste to energy for several years. I have also held VLS for several years. I have watched several new technologies that looked impressive in the lab/pilot plant status struggle to prove themselves in commercial production. There is often a scaling issue that stops the technology from reaching commercial viability. There is also often an inability of the clever technologists to turn the idea into a commercial venture. Finally companies that learn to live on grants and public sector support sometimes never graduate to the cut and thrust of the commercial world.
With VLS I have never known what the main problem had been. I have held on believing in its, now amended, objectives. There is still lots of waste and cheap biomass that could be usefully turned into fuel. I dont think the VLS technology is second to anyone elses. However, I have always wandered why Mr. A has not bought the company with his petty cash unless he is still waiting to be convinced it will be commercial venture.
I hang in there in a very modest way hoping one day that the flying pigs arrive!
It may take the market a few days to digest the impact of this new government directive. I am new to this share coming in on the drop to 10p as I felt it had been oversold. Does anyone have a reasonable feel for how VLS is positioned in the market against leading competitors. The potential rewards for any highly successful company in this relatively new industry of waste to aviation fuel will obviously attract a lot of existing and new companies. Are we ahead of the game or just part of the race??
RTFO clears final hurdle with House of Lords approval
In the end, it was as painless as the government said it would be the revamped Renewable Transport Fuel Obligation order was passed unanimously through the House of Lords during the final stage of the Statutory Instrument process, Tuesday.
After many years in development and consultation, the final debate got off to an unpromising false start, when Baroness Sugg introduced the legislation for consideration only to be reminded by a fellow peer that "the Minister does not want them considered, but approved."
The changes to the RTFO, which will now come into effect from April 15, commits the UK to dramatically increasing the contribution of biofuels to the overall fuel mix from 4.75% to 7.25% in 2018, rising to 12.4% by 2032.
It introduces targets for the biofuel contributions, reducing the presence of crop-based biofuels from 4% in 2018 to 2% by 2032, bolstering the contribution of waste-based biofuels and encouraging investment and development of advanced or development biofuels.
It also shortens Year 11 to an April 2018 to December 2018 timeline, and thereafter resets the annual cycle of the scheme from a financial year cycle to a calendar year cycle.
Baroness Sugg hailed the success of the RTFO to date, stating that the average greenhouse gas saving of a litre of renewable fuel last year was 71% versus petrol and diesel, Baroness Sugg recognised that the legislation was a long time coming.
The Department has rightly taken time to build consensus in a controversial and complex policy area, Baroness Sugg told members of the House of Lords.
The regulations also strike a balance between maintaining support for an established UK biofuel industry, which faces challenging market conditions, and setting ambitious stretching targets to support new development fuels.
"The noble Baroness asked how we can help new suppliers, particularly to aviation, get from the demonstration scale to the commercial one. Under our second competition, up to £22 million of government funding will be matched by private sector investment to construct a first-of-a-kind fuel production facility in the UK which will enable the demonstration of technical and commercial viability, including for aviation fuel."
Am a bit unclear as to whether that is already earmarked for a specific project or whether VLS could apply for some/all of that money. I have emailed Baroness Sugg to ask that question and will let everyone know her response on that.
Grants ought to be a significant income stream in any alternative fuel start-up (even ones that have been going for 12 years...).
Who told you this? And why do we not hear things like this from the company?
I appreciate your posts, but you suggest you are being passed information from the company or those close to it. At the same time, your statements are often wildly inaccurate:
24 Nov 2017:
"RIN accreditation is ongoing. I am hopeful that we may hear more from VLS on this point within a month or so... I also expect positive news on a successful fund raise."
11 Feb 2018:
"I am looking forward to hearing about RIN's in the next couple of weeks."
I don't doubt that RIN accreditation is on-going and will be good news if/when it happens but, unless you know otherwise, the fact is we just don't know when we'll hear about it. Could be tomorrow, could be in 3 months.
I'm not trying to put you down, but you often write like you are passing along news rather than expressing your opinion.
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