Madison Bidco Set to Acquire SAF Producer Velocys
12.06.2023 By Tank Terminals - NEWS

December 6, 2023 [Biomass Magazine]- U.K.-based Velocys, a company that is developing proposed sustainable aviation fuel (SAF) projects in the both the U.K. and U.S., is set to be acquired by Madison Bidco Ltd., a newly formed company associated with a consortium of private equity and green investors.

 

Bidco, which was incorporated in the U.K. on Nov. 28, is indirectly owned by a fund advised by Lightrock, a fund advised by Carbon Direct Capital, GenZero and Kibo Investments.

The boards of Velocys and Bidco on Dec. 5 announced they have reached an agreement on the terms and conditions of a recommended cash acquisition by Bidco of the entire issued, and to be issued, ordinary share capital of Velocys.

Under the terms of the acquisition, each Velocys shareholder will be entitled to receive 0.25 pence in cash for each Velocys share. In addition, Bidco has agreed to provide up to $40 million of growth capital to Velocys, which is expected to ensure that the company and its management have the capital resources needed to deliver against its medium-term strategic plans. In connection to the acquisition, the Carbon Direct Fund has agreed to provide a secured bridging loan of £3.5 million with a view to providing sufficient capital for Velocys through to the acquisition becoming effective.

In a funding update issued by Velocys on Nov. 20, the company said it would be unlikely to be able to continue operations beyond December 2023 unless it was able to find meaningful sources of funding or strategic options. That date has now been extended into early January 2024 as a result of cost control and cash management initiatives, according to the Dec. 5 announcement. The acquisition scheme is currently expected to become effective in January 2024.

Velocys in October announced the launch of its new technology facility in Plain City, Ohio, that will house the reactor core assembly and catalysis operations related to its production process for sustainable aviation fuel (SAF).

The company is currently developing two proposed SAF projects. The proposed Bayou Fuels project, under development in Natchez, Mississippi, aims to produce 36 MMgy of SAF from wood biomass feedstock. An integrated carbon capture and storage (CCS) project and the use of renewable power is expected to enable the production of negative carbon intensity (CI) fuel. In its half year financial report issued in September, Velocys said it hired EcoEngineers to validate the reasonableness and accuracy of the life cycle assessment (LCA) of the proposed project. That analysis predicts the facility will be able to produce SAF with a deeply negative CI score of -389 grams of CO2 equivalent per megajoule (gCO2ei/MJ), which translates into a more than 500 percent carbon savings relative to fossil jet fuel.

The Altalto project, under development in Immingham, U.K., aims to produce 20 MMgy of SAF from municipal and commercial solid waste feedstock. Velocys said in September that FEED, the final state of engineering prior to a final investment decision (FID) is advancing as planned. In addition, license and engineering services agreements have been concluded with key technology licensors, including Topsoe, Air Liquide and TRI to support the FEED phase. The technology licensing agreement with Velocys is expected to be finalized during the fourth quarter of this year. The company also noted that an archaeological survey has been completed, along with construction of an initial site access road.

 

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