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Veolcys biorefinery takes steps forwards

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Hydrocarbon Engineering,

The US Department of Agriculture (USDA) has invited Velocys plc to submit a Phase II Application to obtain a loan guarantee for a commercial-scale biorefinery.

This invitation was made after a successful Phase I Application process. The loan guarantee could apply to up to US$200 million of debt as part of the total installed cost of the project.

The plant is being designed to produce approximately 19 million gal./y of renewable diesel fuel from approximately 1000 dry tons per day of woody biomass residues in the Southeast US. There is an abundant supply of low-cost feedstock sourced from this region that will provide a long-term strategic supply of biomass to the plant.

The USDA 9003 Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program (9003 Program) enhances the economy of rural America by providing loan guarantees to biorefineries, such as those that Velocys and its partners are developing, which produce advanced biofuels. Under this programme, a material portion of the project debt is guaranteed by the USDA, accelerating the timeline and financially de-risking the project to final investment decision (FID). Velocys has engaged the global leading project finance bank, Sumitomo Mitsui Banking Corp. (SMBC), as the lender of record and as its financial advisor.

The company will now initiate the final phase of the loan guarantee process. The steps required under this process identify and mitigate risk and complete evaluation of the project. These steps match the typical development stages for biorefineries. Work is already underway on Velocys’ integrated technology demonstration with its strategic gasification partner ThermoChem Recovery International (TRI), and the Front End Loading (FEL-2) study with IHI E&C.

Velocys has the goal of completing all work packages required by the USDA 9003 Program, concluding commercial negotiations such as feedstock supply and offtake agreements, securing project equity funding, and reaching FID during the course of 2018.

David Pummell, CEO of Velocys, said: “We have made strong progress in accelerating the implementation of the first stage of our strategy as we start to deploy the additional funds raised in May. Today’s announcement builds on the deployment of our technology at ENVIA Energy’s plant in Oklahoma City; technology that will be used in our first biorefinery. As well as the first plant, Velocys has identified other locations in the Southeast US that could host plants with capacities totalling 100 million gallons over the next 10 years.

“This announcement represents an important step in the ongoing development of the integrated plant offer that we and our partners are developing for the renewable fuels market. We remain on track to secure a conditional commitment from the USDA and this would financially de-risk our first BTL project, creating an attractive financeable solution for project investors in what we intend to be the first of many repeatable plants.”

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