Velocys plc (OTCPK:OXFCF) Q4 2021 Earnings Conference Call May 20, 2022 8:00 AM ET

Henrik Wareborn – Chief Executive Officer

Andrew Morris – Chief Financial Officer

Good afternoon, ladies and gentlemen, and welcome to the Velocys plc Full Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time via the Q&A tab that just situated on the right hand corner of your screen, please simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all of the questions submitted today and publish responses where it is appropriate to do so. These will be available via your Investor Meet Company dashboard, and we will notify you by email when these are ready for your review.

Before we begin, I would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I now like to hand over to CEO, Henrik Wareborn; and CFO, Andrew Morris. Good afternoon.

Good afternoon, everyone. Thank you for joining us for our 2021 post results presentation with IMC. I'm Henrik Wareborn. I'm joined with by Andrew Morris, our CFO. And we are pleased to share the update on the results for last year, but also look forward to what we're going to deliver the next period of time. Initially I just want to take one step back and remind people what we are about and what our unique selling point and investor cases. So Velocys we are an international sustainable fuels technology company with an IP-protected route to economic production of synthetic aviation fuel. ASTM D7566, why do I say that technical term? Well, that's exactly the kind of fuel that is used today, very important. So we produce jet fuel. We help our customers produce jet fuel, which is identical to what the customers' airlines are using today in a different way.

So commercially demonstrated patented technology applicable to a variety of non-fossil feedstock, that's the main difference, same finished product, but a different feedstock, not using crude oil to produce jet fuel, but using other type of feedstocks that are sustainable. The synthetic fuel enabled by the Velocys technology provides air quality benefits as well as ultra-negative carbon intensity. So we help to reduce greenhouse gases and climate change and we also improve – the technology we provide improves the air quality in and around the aviation sector.

The reference projects are designed to accelerate the adoption of the technology and to standardize at scale in advanced engineering phase. The technology partners and clients we work with are Haldor Topsoe, Worley, Koch, Air Liquide, Arvos, Linde, Toyo in Japan, Southwest Airlines in America and British Airways here in the United Kingdom as well as the entire IAG group of airlines.

Next page, please. So the Velocys team Henrik and Andrew, its executives, very small executive committee, there's simply two people. We run the company and then we are supported by a group of world leading experts in the particular field, such as catalysis engineering, process engineering, EPC engineering, product development, government relations, communications, and finance.

Next please. The business highlights for 2021 by far the biggest validation of our pathway and technology when Southwest Airlines and IAG committed to a 15 and 10 year fixed price off-take including the fuel produced as well as the value of the avoided carbon in the form of environmental credit value for the entire expected production for the biofuel reference project that Velocys is developing over the next 10 or 15 years, that translates into a about $2 billion balance sheet commitment from Southwest Airlines and $1 billion from IAG. It's a huge commitment and helping them to meet to offset their obligations to decarbonize and helps us to de-risk the project by lifting away the uncertainty of the value of environmental credits away from the depth of capital providers. The collaboration with Toyo with Velocys technology being selected for an ethos project commissioned by the Japanese government constitutes another very strong validation point.

Toyo also commenced advanced engineering for commercial scale biorefinery, wood chips to SAF for conversion of forestry residue into SAF. The secured site for – in the UK for our reference project that we are doing within on behalf of British Airways was done at the end of last year fully financed externally by our partner Foresight Capital. So Velocys and British Airways, we were awarded a grant of about £2.5 million from UK government, Green Fuels, Green Skies scheme in order to advance the engineering of the Altalto project further into end of last year and early this year. We also pointed Koch Project Solutions, which is a subsidiary of Koch Industries, AA rated huge American conglomerate with engineering services and many other services around the petrochemicals as forestry are involved in helping us to deliver the technology via pre-FEED and FEED support with a potential to award an EPC contract for the Bayou Fuels project with lump sum turnkey scheduling cost guarantees by the EPC provider.

And now I am going to handover to Andrew to go through the financial highlights of 2021. Go ahead, please.

Thanks, Henrik. So you can see from there, so much of the things we've talked about in the past, you can see that the revenue for the company was £8.3 million for 2021 much of that was from our customer in Oregon that we completed all of the work and delivery of the equipment and the catalyst in 2020, but didn't complete our obligations to the company until early in 2021. So reported revenue from that that contract last year and that gave us £3.4 million gross profit which is excellent margins for that sort of business. In terms of our like for life basis on our administration cost, we got an increase of 13%, but the reported increase of some 44% was exaggerated by significantly smaller release in 2020 of £0.5 versus £3 million in 2020 of the Altalto credit, which is really a deposit received from British Airways for the work done to advance the Altalto project in Immingham.

In terms of an operating loss very much in line with the previous period, £9 million last year and £8.8 in 2020. Our net assets just under £30 million at the year-end, obviously we're increased by the fundraise that was completed in 20 December 2021 and the cash at the year-end in excess of £25 million and the company doesn't have any borrowings. We did have some borrowings at the end of 2020 and that was largely from the fact that we made a loan under the CARES Act under the United States COVID program. And that was forgiven as a grant in 2021. So we don't have any borrowings as a business.

In terms of just a little bit more information about our business, Henrik and I thought it would be useful to for those that haven't seen our presentations before perhaps go into a little bit of information about the company and its technology. This slide shows on the right one of our reactors with four cause inside it that are made by us on site and it contains the super active catalysts for the Fischer-Tropsch Synthesis process that we have significant amounts of intellectual property and patents over which we defend.

So the cat - the patents cover the mechanical design of the reactor and its cause as well as the super active catalyst itself, which we worked on coming as a spin out from Oxford University some 20 plus years ago. The expert team that we have both here and in the United States has significant experience in designing, commissioning and operating synthetic facilities. And what we offer is an integrated solution, not just that piece of equipment that you show there, you can see there, but actually an integrated solution for project developers and owners, operators of plants for supplying synthetic fuels into the sustainable aviation industry and into the fuels industry. We provide the reactors and catalysts ourselves and give a site license and catalysts replacement integration services, but we've also got – and the developing the integrated engineering solution that customers are going to want that give the end to end solid biomass feedstock to liquid fuel output.

Henrik I think I'm going to pass this back to you now.

Okay. Thank you, Andrew, right. So how can we be so sure that this works well? We have over the last few years gone out of the lab into pilot and commercial scale demonstrations. So we have completed, for example, an integrated demonstration at sub-commercial scale, one in the U.S. and one in Japan over the last four years. Demonstrated feedstock flexibility, we have been processing wood chips, residual waste. It can – then in addition to that that can be topped up by green hydrogen and even bio methane. Any of those in a combination of those works to generate the kind of syngas i.e. combination mixture of hydrogen and carbon monoxide, which then gets synthesized into liquid hydrocarbon fuel in the Velocys FT reactor. This process, thanks to going via or gas phase enables negative carbon intensity fuels.

Why? Well, because some of the biomass is used as process energy. And therefore once that energy is used, the resulting sort of byproduct of that is carbon dioxide and that's biogenic carbon dioxide that gets sequestered at our site and with that constitutes about 30% to 40% of the feedstock carbon, the rest gets converted into jet fuel. So we net means – that means that we take more CO2 out of the atmosphere then what goes back after combustion of the fuel, because a third of the carbon gets sequestered permanently into the geology. So that's how we at Velocys have engineered biorefinery that works at the same time as a direct air capture, not direct, but as an air capture carbon dioxide air capture facility, as well as a fuel production facility. So we're combining these two wonderful functions in one go of reducing the carbon oxide in the atmosphere and producing fuel.

In addition to that the synthetic fuel that comes out of an FT process has an ultra low sulfur and very, very low particular matter content that it goes hand in hand normally to roughly at least 90% probably 95% lower than the result of combusting fossil and jet fuel. So by us devising together with our partners is standardized solution end to end from feedstock in and fuel out, accelerates the path non-recourse project finance for our customers, which is of course reduces their cost of capital dramatically by accessing that kind of capital instead of a large equity finance otherwise. It also allows for sustainable local production and distribution of synthetic fuels. Today, crude oil gets sent around the world for them to be refined in mega refineries at the small number of places in the world into refined products that then often gets sent.

And again, another half turn around the world with a huge amount of logistical and associated emissions just for transporting the fuel and their feedstock itself. In our case, we design ecosystem or local suppliers of waste feedstocks. municipal solid waste any of the list that you see about forestry residue et cetera, whatever is available in that particular site that is cellulose and has waste carbons in it and allows supply of jet fuel and potentially also synthetic diesel for that community. That allows, of course, self sufficiency and reduce reliance on fuel imports for the host country as well as that part of the country, so very attractive in particular in the current geopolitical environment.

Thank you. I do recommend warmly that you read The World Economic Forum scheduled tomorrow McKinsey study that we referred to here on this slide, which has illustrated and dealing with the concern that some investors are asking is there enough feedstock to replace the fossil oil for the aviation sector? Is there enough feedstock available in the world for that to happen? Well for the first generation type of sustainable aviation fuel, there is not enough feedstock because that is vegetable oil. Vegetable oil can cover potentially 5% to maybe 20% of the expected SAF demand by 2030 according to World Economic Forum. And the last – since this report was written I think that everybody have seen that the price of vegetable oil have doubled or tripled, and there's a shortage already now globally of vegetable oil. So the idea of using vegetable oil, even waste oil and convert them into fuel is that opportunity is dwindling very fast. So instead the urgency is to scale up the second generation synthetic fuel production, which is the gasification and FT synthesis and/or complemented with potentially alcohol to jet, which is another pathway we are not involved with.

It's an early stage pathway, but there's some work going on, on converting, for example, cellulosic ethanol into jet field, which is another way. The beauty is that all available feedstocks and all available conversion processes are needed to urgently in order to help to decarbonize aviation sector, because we are looking to replace something between 6% and 7% of global oil demand, which is what the jet fuel demand is today by non-fossil fuel like SAF. So it's a huge, huge demand that can be met – needs to be met by in a number of different technologies, technology providers, as well as feedstocks. Ultimately in a few decades from now, possibly it could be economical and practical and realistic to convert electric – use electricity to generate green hydrogen from water and capture CO2 and reduce CO2 to carbon monoxide from the air and convert that into synthetic fuels. That's called e-fuels.

It is a tantalizing prospect, but incredibly energy and electricity hungry. You need vast amount of very cheap renewable electricity for that to work, but we are, as we mentioned before, selected for a demonstration project in Japan to test and prove out the technical feasibility for this pathway, unfortunately, economically it's unlikely to be feasible for quite some time. So therefore at least for the next 10, 20 years, biomass and municipal commercial waste is much more likely feedstock to be gasified and then synthesized into fuel in the same way.

Okay. Thank you, Andrew. So we have been alluding to SAF and unfortunately there's a bit of confusion around what is SAF and I emphasize that sustainable aviation fuel is chemically identical in terms of the work it does in the turbine, in the jet engine, the thrust it delivers is exactly the same as fossil jet fuel.

The length of the carbon change, the chemical formula of jet fuel if it's synthetic or if it is fossil is the same. So is there no difference. Well, there are differences because synthetic SAF from the FT process is much cleaner. So it's the same energy intensity, same combustion characteristics, but it is much, much cleaner. So you see that on the picture here, the chart on the left is of course, synthetic FT liquid that's burning. And the one on the right is fossil fuel. So and the yellow color is of course caused by sulfur and the average Jet A1 fossil jet fuel contains about one to 2000 particles per million, or 0.1 to 0.2, the limit is actually at 0.3 under the global specifications, like 3000 PPM.

Now the synthetic SAF that comes out of the Velocys process will have less than 10 PPM sulfur. So in a – essentially 90% yes, 95% reduction at least of the sulfur. And that reduces automatically the amount of particular matter, particularly the small 2.5 micron PMs, which tend to be particularly cancerogenic and bad for human health. Now so the beauty of the fuel is the same, much better walk, air quality properties, as well as opportunity to dramatically reduce the overall carbon intensity down to negative territories. So it reduces overall CO2 in the atmosphere.

The characteristics also is very needless to say, it's fungible, or rather it's the same thing as saying drop in no modification of airport fueling or turbines required. If that was the case, there would be no chance of commercializing this kind, these pathways, and that's why they are approved by ASTM to begin with only pathways, that allow different feedstock to be converted into this same chemical components or current today's jet fuel with the same freeze point, the same properties will ever be allowed.

So there can be no variation, can be no other type of fuel. There's only one type of jet fuel available in the world. So as we said before, we see the explosive demand for aviation decarbonization and, it is so the world, the aviation customers will be looking for the type of fuel that has the lowest carbon intensity possible. And in particular fuels that have negative carbon intensity, to offset the certain amount of fossil jet fuel that inevitably will be used still for many years to come. So, but to decarbonize as much as possible, they choose and invest in technologies and feedstocks and pathways that allows negative carbon intensity to be the result.

We, as a company may have this objective to enable and maintain a 5% to 10% market share of total avoided CO2 for our clients in the, that as the mandated demand grows. And why are we not more ambitious than that? Given the kind of dominant market position we have now and leadership? Well, it's about supply, for supply of our ability to supply reactors and catalysts and deliver services will be limited and we will be choosing the most promising the strongest, the most advanced customers in service, those in order to accelerate our own cash flow. Thank you, Andrew.

So the, in order to demonstrate how this will and can work, we have designed two reference projects, one largely with our technical partners and one for on behalf of British Airways in the UK. The one you see on the picture here is the Mississippi project, where it's – designed for feedstock is forestry residue, qualifying under the Renewable Fuel Standard two in the UK and in the U.S., which has very stringent requirements around sustainability of forestry that generates that residue. The residue must have no other use. The residue must come from plantation forests only, not from native original forest. And it can come from initial and first pre-commercial thinnings. So no roundwood, no entire trees will ever be chopped and go into this kind of biorefinery, only material from the forestry processing and activity that has no other use will go into become wood chips and be processed into jet fuel.

So it's sustainable, active forestry management increases the amount of carbon tied into the forests. If you don't manage forest at all, they would stop growing and they will lose their ability to capture carbon. So that's why this is very important to increase the carbon storage capacity of the land – surrounding the facility. So the, we mentioned before the fixed price offtake agreements, which enables the financing of the facility. The facility is, will be benefiting from Federal SAF, Blenders Tax Credit, as well as an expected transition to produce tax credit by 2027. That is on its way through Congress, as we speak.

In addition to that, the integrated CO2 sequestration that we have designed with our partners, Worley and Occidental Low Carbon Ventures, on site is supported by so-called 45Q federal credits to the tune of $50 to $60 per tonne, which is also proposed to increase up to $885[ph] per tonne in Congress right now. The – all the process around this biorefinery will be supported by a 100% renewable power and even with that power will have negative carbon intensity as well. Thanks to the sequestration of the CO2 that we designed it for. Thank you.

Same design, largely same logic for the UK project to be, it's developed for BA up in Grimsby, Immingham, in North East Lincolnshire. We have, we're very proud and pleased to have been able to invite and engage Foresight capital into this endeavor as well. The first point – first step they took was to help us to finance a 100% of the site itself. So we didn't need to use BAs or the losses precious shareholders cash to invest and actually own the site. It, so in slightly simplified, Foresight holds the site on behalf of the project and which means that there is no cash, cash or leverage impact on losses at all. The design capacity is 40,000 tonnes per year of SAF which will lead to 350,000 tonnes of avoided CO2 per year.

Thanks to the connection into the East Coast CCS Cluster that will come on stream roughly at the same time as this plant will come on stream if funded and I mentioned already that we have BA and Velocys jointly are beneficiary of a 100% grant funding by the Department of Transport for the work that is currently ongoing. The revenues come from Gate fees, which are the feedstock suppliers of the waste pay us as, which is logical because they would otherwise have to pay even higher Gate fees for landfilling the waste. Avoided CO2 via environmental credits and liquid fuel are also additional revenue, so very high operating margin, once operating but of course, quite significant initial CapEx. All right, thank you.

So mentioned a little bit, the Japanese projects we've been involved with the demonstration that preceded all this and then gave us – gave the validation by the Japanese to invite us introduced these two projects was completed in 2020 and culminated by us supplying 3000 liters of on spec synthetic SAF from wood chips via Velocys FT into finished commercial grade SAF and supplied straight into wing of a scheduled commercial flight. Very important to point out, and you see the press releases by the Japanese and by [indiscernible] consortium, this was not a test flight because this, the fuel is on spec standard. ASTM jet fuel. It is jet fuel and your FEED it straight into wing, and it's a commercial flight fully loaded with passengers, no concern. If the fuel is on spec, it is okay. If it's not on spec, it's not okay, very black and white, very simple. So there is no need to ever do a demonstration or test flight or of the synthetic SAF that comes from Velocys technology because it is fully approved and have been approved for the last 20 years.

So we are very excited about that. Maybe we can move on to the next page. Summarize a little bit here, the growth strategy going forward targeted, but selective global customer pipeline to meet increase the demand, scale up of reactive core production capacity at our new Ohio site, which was very much what the fundraise late last year was geared towards because it's about us now unlocking the revenues by being able to deliver enough reactive course and reactors and catalysts to our clients that are lining up for us. We need to qualify an additional catalyst supplier or two. We have one dedicated, loyal, very reliable catalyst supplier, but we need to spread our supply chain risk for that as well by qualifying more, more suppliers and catalysts in terms of, because we do outsource the actual production of the catalyst itself, even though it's highly supervised and protected and monitored by ourselves.

We pursue strategic investment partners to come in and further accelerate our reference project. We're increasing our technical resource capacity to support expansion of commercial scales offerings to our clients. And we are focusing the business in those countries where the government mandates and revenue support and regulatory support is available rather than where it's not.

Okay. And I think in summary, we can say, we can offer a say decarbonization solution to the aviation industry. So it's not really about the fuel. The fuel is the vehicle that is used to deliver the decarbonization. It's very important point and if it is, if you have a SAF that hypothetically reduces, it has a carbon intensity of, let's say a bit less than fossil, but still nowhere close to zero negative, it doesn't do the trick. So it is the amount of decarbonization that matters. So that's why we talk about the decarbonization solution that it's delivered the vehicle for that delivery is the fuel. Growing pipeline of customer opportunities is very, very clear. We are, we feel very good about the level of demonstration of the technology that has been demonstrated at full scale reactors at thousands of hours of run time.

So we go on, as far as you can do with the technology, before you go full commercial scale. So there, and that numbering up is going from two reactors that we ran in Oklahoma for two years up to maybe nine reactors, at one of our customer sites or four reactors, for example, in the for our customer site in Oregon. So it is a modest numbering up of the same reactors and the same catalysts that has been demonstrated running, producing commercial grade fuel for thousands of hours. So there's not a big leap of faith that is required here in order to go for the commercial, very important. The market we are operating in is a high growth market with exceptionally high barriers of entry. It takes decades to get to where we are, and we have very strong IP protection.

So you will not get FEED freedom of to operate FTO, which means that you can't raise money. If you go in and try to infringe on our IP and our trade secrets. And we deliver our technology broadly to customers around the world directly and via our EPC partners. So we want this technology to diffuse as fast as possible because it's only the next 10 years it matters. Whatever gets done in 2030, 2040s is too late. We need to get large volumes of negative carbon intensity fuel into wing in the next few years, not in the next couple of decades. So we see strong platform, highly scalable growth that we are going to diffuse together with strong global EPC partners.

I think that concludes our presentation, Andrew. Yes. So we should open up for questions.

Henrik, Andrew. That's great. And thank you very much indeed for your presentation this afternoon. [Operator Instructions] But just while Andrew and Henrik, take a few moments to review those questions submitted already. I would like to remind you that the recording of this presentation, along with the copy of the slides and the published Q&A can be accessed by your investor dashboard. Henrick, Andrews, you can see we've received a number of questions from investors throughout today's presentation. I may – may I take the opportunity to thank all the investors for submitting their questions? If I could please just hand back to you to run through that Q&A tab and where appropriate to do so, if you could please just read out the questions and give your response and then I'll pick up from you at the end. Thank you.

Okay. Thank you, very interesting questions. I spotted here from David. The question about biomethane. Very good question, biomethane is an excellent type of feedstock, very easy to reform biomethane a separate into hydrogen and carbon monoxide. Actually, frankly easier than gasification of sorted feedstock. The problem with biomethane is that it's very difficult to aggregate a large enough volume in one place. And there is no booking claim system in the UK to FEED biomethane into the national grid and then take it out somewhere else.

And so therefore today in the UK, it is unfortunately impossible and we looked into this quite carefully, actually without the project. And it's too early yet, maybe five or 10 years when the supply increases more via anaerobic digestion, it could be possible, but not for the first couple of plants, but we looked at it very carefully because it's an excellent type of feedstock, that can be easily converted into synthesized into jet fuel. So, good question. Thank you for that.

Do you want me to take one?

Another one about reference projects in California. Our business model is a capital like business model where we developed two reference projects to accelerate the uptake of our technology. It is not our intent as a company to be developing additional reference projects, but the people who invest into these reference projects and take the business forward, on in terms of building these sort of plants, they may look at California, but the fiber basket of the Southeast, United States is a tremendous source of feedstock, good feedstock for projects like the biofuels project in Mississippi.

So there's a fantastic amount of resource there for us and shipping or putting on trains. The fuel to California is not so expensive. It's a logistical issue rather than trying to make sure that you've got a refinery – biorefinery in California, where the feedstock is and run it from there.

Yes. Agree with that. It is – the challenge with the solid cellulosic feedstock is that it's bulky. It's not pretty, it’s not high density. It's very bulky, very voluminous. So you want to build biorefineries as close to that available feedstock, whatever kind it is. And then the jet fuel, the SAF is a highly concentrated form of energy that can be sent long distances at relatively low cost per unit of energy that you send. And so there's another, let's see, on the questions here.

Further regulatory hurdles, Henrik, I mean…

Yes, go on. Yes, Andrew, you can take that one.

In terms of regulatory hurdles, when you build these plants, you've got to get planning permission or findings of no significant impact in the United States. That sort of thing always has to happen for all plants like this. In terms of regulatory hurdles, the fuel by self complies with the regulations. So in that respect, no but always there are local issues with laws and planning matters that you need to comply with whenever you build a plant like this.

David M [ph] has a question about gas flaring. And it's true Velocys in the past was looking into sort of let's say alleviating and improving the situation around flaring gas around oil production. Same problem with bio-methane. The amount of gases that is available is dispersed. And the reason that's being flared is that it cannot be connected into any pipeline system locally. If it was, it would be just going to the local natural gas grid because associated gas is simply natural gas. And even easier to mix into the overall grid than bio-methane. But it is distributed and happens offshore, on-shore and it increases, and then it goes away over the lifetime of that particular oil field or oil well. So therefore it doesn't make sense to build a FT synthesis plant for, let's say a few years for a modest amount of gas available at any given point.

So there is aggregation issue around that, but I agree it is very urgent and important to work on reducing flaring. But FT synthesis is not the optimal way to do that. So, we are focusing on the deployment of our technology for sites where you have abundant availability of renewable feedstock forever. And that's what you, for example, have in in that southeast quadrant of the U.S., same thing in Scandinavia, Canada, Northern Europe and many other places in Japan as well.

So, we don't have to sort of move around and seek new feedstock sort of when that particular oil field dwindles, etcetera. So it needs to be long-term supply of abundant renewable feedstock. But, of course, flaring is not doesn't – it’s fossil natural gas, and you do not qualify therefore for carbon emissions, reductions credits. And therefore the economics are very challenging.

We've been asked a question about IAG's relationship with Velocys. I think we are very pleased with our relationship with IAG firstly, with its offtake MoU and the current position going into contract with IAG, for the offtake at biofuels a tremendous commitment by the company, putting their balance sheet at risk for that project. Fantastic from our point of view, ten-year contract, couldn't ask for more. Nearly Southwest Airlines alongside them again, fantastic commitment. In terms of their subsidiary, British Airways, full commitment to the out Altalto project in Immingham. They paid money to us. That's the out Altalto credit that I was talking about earlier on being whittled down.

Currently we are with the grant monies that we've got from the UK government. We don't need any further funds. And IAG in form of British Airways have committed to investing into the next stage of the Altalto project when it needs significant further funds.

So they are committed. They are a great partner to be working with. And it's fantastic to have them alongside us.

Yes, I agree. I have to endorse that Andrew. And I just came from IAG ESG Investor Day here in the city. The absolute leader, world-class leader in this area, I would say is only a IAG and Southwest Airlines, who have committed to fixed price and floor pricing of the environmental credits, i.e. the benefit of the voided carbon pricing that is so crucial. Everybody just want the fuel, but it is only the really enlightened the strategic airlines like IAG and Southwest Airlines, who understand that by taking on the value of the voided carbon, they are reducing their own liabilities that are arise now going forward from burning a certain amount of – still large amount of fossil fuel.

And a $1 billion commitment, a balance sheet from IAG in the kind of situation, what we just have been through is a huge commitment. So you cannot fault them for their level of commitment at this point.

Okay. So any other question, I think, the newest competing technologies looking to address the same issue as you and how advanced are they? Yes, I know it's great that there are many other attempts to solve the same problem because we need all of it. We need to remove effectively gigatons of carbon from the atmosphere. I just, at the IAG presentation today, carbon engineering presented also so direct air capture, of course, is very expensive, it's interesting and it is a technology for the future, but that is needed as well as Power-to-Liquid.

Beauty about Power-to-Liquid is that it needs FT synthesis in order to convert those gases into liquid as well. So we are not locked into any particular way of producing the syngas. It can be done a number of different ways. So Power-to-Liquid is the long-term future whereas FT synthesis is a core processing unit as well.

Alcohol-to-jet is another approved pathway, which is being explored early stage where we are, but it hopefully will work as well because all pathways that are approved need to be accelerated and scaled up in order for us to collectively have a chance to make a serious impact in de-carbonization in the aviation sector.

Beyond that there are some very early stage experiments going on, but nothing that will deliver meaningful commercial volumes inside this decade.

Henrik it could be useful to give an update of where we are with the UK government and how influential the Jet Zero Council has been and the work the Jet Zero Council have been doing surrounding what we want to achieve in terms of up in Altalto in Immingham.

Yes, that's a good point Andrew. What is so important in the UK is that a strategic focus and investment in the carbon sequestration, because without carbon sequestration you never get negative carbon intensity of anything. So the way base around this process of asking for proposals for a number of places around the UK for suitable sites for CCS clusters is visionary structured, important a phenomenal scale of economy of those kind of projects. So they need to be led by government. No single company can ever finance, or let's say utilize an entire CCS [ph] cluster. It needs to be a combination of many, many companies in industry and therefore led by the government.

So we are fortunate to have selected a site that is right on cluster, right on where the CO2 pipeline goes out to see and where the surface CO2 will be sequestered into the Northern Endurance gas field, which is called the East Coast Cluster, which is a combination of the Humber side and Teesside original cluster applications, motion to one giant CCS cluster. And the best thing that can happen is CCS cluster is that somebody like us contributes biogenic CO2.

So not just people who are removing fossil CO2 from their process, try to clean up and reduce that carbon intensity of dirty process, but also for people like us, that effectively channel CO2 from the atmosphere into the North Sea aquifer, where it dissolves into liquid originally, and then mineralizes into calcium carbonate and becomes rock. And that's the view. It’s important to remember about carbon sequestration, CO2 going into those fields become a liquid and then a rock eventually. So the kind of well monitoring needs to be going on the first few decades, which is very well-known technology that the offshore industry has done for many, many decades, but eventually it all becomes rock. So, it's absolutely permanent and essential for us to survive as a human mankind. So that's exciting.

And the government is now working on a consultation to provide a carbon intensity indexed CFD contract for difference, the same kind of style and instrument that supported the offshore wind industry 10 years ago, got that one off to become – the UK, to become a leading player in that area. And the same could happen here with SAF with a suitably designed price stability mechanism where the government supports the stability of the revenues for the avoided carbon. And that's a bit of a mouthful, but there will be a price for obligated parties who are polluting will have to buy back credits from people who are reducing pollution.

And that price could go very high and very low. And all these carbon markets are volatile, as we all know. So it's difficult in particular for debt providers to take that kind of price risk over a period of 10 years. But the capital CapEx needs to be funded with a 10-year maturity. So therefore de-risking the volatility of the price of carbon is very important. And that's where the government comes in. Over the period of the full 10 years it might be net zero, a small revenue to the taxpayer, but for some period, if the carbon price, for some point is low, then the debt providers will be kept hold because there is a CFD mechanism where the money flows to the project if the carbon pricing is low, particularly period a year or month or whatever, and then when it's very high money goes the other way. That's why it's called CFD, contract for differences. It's not a direct tax subsidy, but it is a balance sheet support from the government to the first few projects and while the market for avoided carbon credits stabilized and become liquid and tradeable, which is not the case yet.

So there's a question about partnering and who we would choose as partners to help us supply and keep our market-leading position. Generally, I mean, to date we've now got, I think, Henrik said at the beginning, we've got a very significant, experienced partnership team in the integrated solution that we're providing. There are additional partners that we're looking for, in terms of funders. So each sort of partnering position is something that is unique for each part of the business. But they need to be experts in what they do have experience in what they are doing and ensure that they've got the financial wherewithal to be able to work with us ongoing for many years.

So it's large organizations on the whole or specialist suppliers that we know well that we work with.

Okay. Broadly in terms of policy support Velocys, we are very pleased because we have generated a decarbonization industry for the aviation sector as crucial because governments should not generally support a single company. With industrial policy, they support industries. And that's what they do with ECCS cluster. And us organizing ourselves with a Renewable Transport Fuel Association together with a handful of other companies that trying to solve the problem, same problem, we work together as an industry and we put forward our requests for fair treatment, equal treatment based on the societal benefit, environmental benefit, i.e. the carbon intensity, not the amount of volume of SAF produced because SAF can be produced very many different ways in very different level of carbon intensity.

So, discounting, the liters of gallons of tons of SAF is pointless, but the amount of voided carbon associated with the total production for each asset, that is what matters. And that's what we as an industry are asking the UK government to support. So it becomes same set of incentives across the board, and the company can deliver the lowest cost per avoided ton of carbon will win. And that's where we feel very, very good about where we are.

And the fact that we use abundantly available sustainable feed stocks that are not going to run out forever, I would say.

Indeed, that's the definition of sustainable. Thank you. All right. I think we covered not every question, but that we covered all the topics that I can see so far. Andrew, anything else that you want to say?

No really no. I think these are very good set of questions. Thank you very much.

Thanks for your engagement. Thanks for supporting and following the Velocys very exciting times, going forward. So yes, we need to get back to work now. I’m very pleased with have delivered solid set of results for last year. Thank you everybody.

Henrik, Andrew that's great. And thank you very much, indeed, for taking the time to address all of those questions that came through from investors.

And of course, ladies and gentlemen, the company will review all of the questions submitted today, and will publish all those responses where it's appropriate to do so on the Investor Meet Company platform.

Henrik I know you just briefly did so, but perhaps are we redirecting investors on the call to provide with their feedback, which I know is particularly important to both for yourselves and the company. If I could ask you for few closing comments to wrap up that would be great.

Right. Yes, I think I will say that the geopolitical situation in the world has focused minds and accelerated the need to find ways to manufacture fuel that does not come from fossil crude oil or I would say crude oil from conflicted areas of the world, let's say. And using crude oil, not only ruins the climate and the planet, but it also fuels conflict, which makes our determination to deliver the solution and reduce conflict as well as environmental impact, particularly important at this point.

For investors and capital providers, it is challenging. The markets are volatile. We need government support, but we also need to show vision and determination ourselves and put the money where the mouth is, and then invest strategically in technologies and sustainable assets that will help us and our children going forward a long time.

We can ask the government to do a lot, but we also have to show leadership and take some risk and push this thing forward between us as well. Thank you.

Henrik, Andrew that's great. And thank you very much, indeed, for taking the time to update investors this afternoon.

Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations? This will only take a few moments to complete, but I'm sure will be greatly valued by the company.

On behalf of the management team of Velocys plc we would like to thank you for attending today's presentation. That now concludes today's session. Good afternoon to you all.