Your Feedback

Energy News Monitoring

Velocys 2016

Despite a challenging funding environment and low oil prices, Velocys is moving forward to transform its technology into a highly profitable business

Velocys is a renewable fuels company with its leading position in connecting low value feedstock, such as natural gas, landfill gas or biomass, with markets for premium products, such as renewable diesel, jet fuel and waxes. Velocys is an expert in converting natural gas into liquid fuels and other products. Velocys enables the production of renewable jet fuel and diesel from forestry by-products. Velocys produces renewable fuels and chemicals from landfill gas and natural gas using gas-to-liquids (GTL) technology. Velocys is incorporated in England and Wales and domiciled in England. It operates through a number of subsidiaries in the UK and the US. The commercial centre of Velocys is located in Houston (Texas) and has technical facilities near Oxford (UK) and Columbus (Ohio).
Velocys has an experienced Fischer-Tropsch team with its core competences of technology development, engineering and start-up of commercial gas-to-liquids (GTL) projects. ENVIA Energy in Oklahoma City was the first commercial smaller scale GTL plant in the world, whose construction was completed in 2016. This project was a great milestone in the history of Velocys, achieved during that year. Another historic moment for Velocys came with the start-up of the Fischer-Tropsch (FT) process units and the first FT product was successfully produced. The performance data for syngas purity, methane selectivity, liquid production, carbon monoxide conversion and activity index, which are available from the ENVIA plant, meet performance expectations. Targets for the conversion of syngas to FT products and the yield of liquid products were achieved within 12 hours of the first start-up of the FT modules. The technology at Velocys is specifically designed for smaller scale gas-to-liquids (GTL) and biomass-to-liquids (BTL) and protected by several hundred patents in over 30 countries. Revenue for Velocys flows from technology sales and licensing, from sales of reactors and catalyst throughout the lifetime of a plant.  
According to the Annual Financial Report
of Velocys, the Company´s revenue in 2016 was £1.4 million and represented a drop of 30% compared to £2.0 million in 2015. Revenue in 2016 was made up entirely of service income from engineering design studies and operational support services and was in line with the Company´s budget expectations. Gross margin amounted to £0.4 million in 2016 and represented a drop of 43% compared to £0.7 million in 2015. The reason for such a reduction was that revenue from reactor sales to ENVIA was recognised in 2015, while revenue from the lease of catalyst to ENVIA will start to be recognised in the financial results for 2017. Thus, the majority of the Company’s revenue in 2016 is derived from Engineering Services and amounted to £1,445 million compared to £182 million in 2015, while the revenue in 2015 came entirely from FT reactor and catalyst sales totalling £1,820 million compared to £0 in 2016. Velocys expects to receive additional revenue from ENVIA from the change-out of its catalyst approximately every two years. Geographically, the Company’s operates in three main segments: the United States, Europe (mostly in the UK) and in the Asia & Pacific regions. The total amount of revenue comes predominantly from the United States (£1,163 million in 2016 versus £1,589 million in 2015), followed by Europe (£273 million in 2016 versus £400 million in 2015) and Asian/Pacific Markets (£9 million in 2016 versus £13 million in 2015). Total administrative expenses decreased by 32% from £25.5 million in 2015 to £17.4 million in 2016 before exceptional items. The reduction in cost was caused by placing the Velocys pilot plant into standby mode, scaling back external project development spending. Assets and cash net assets of the Company were £63.7 million, down from £68.5 million in 2015; the main change was due to the cash outflow offset by the impact of the stronger US dollar exchange rate on the Company’s US denominated assets. Another reason was that at the end of January 2016, Velocys entered into a financing arrangement with ENVIA under which it contributed additional equity finance of $2,587,000 and committed to providing loan finance of up to $9,310,000. Intangible assets (licenses, patents, trademarks and other intellectual property) grew by almost 20% from £27,956 million in 2015 to £33,590 million in 2016. Property, plant and equipment increased slightly by 5.5% from £5,075 million in 2015 to £5,355 million in 2016. Goodwill of £8,113 million in 2016 (compared to £6,733 million in 2015) originates from the acquisition of Velocys, Inc. in 2008 and from the acquisition of VPS [1]  in 2014. Velocys, with its successful demonstration of FT technology at ENVIA Oklahoma, the first smaller scale GTL plant in the world, will surely have a significant and positive impact on the renewable fuels markets in the future.  

[1] VPS is one the of the leading project developers of smaller scale GTL in North America.