UK government SAF revenue certainty scheme update

Velocys plc (VLS.L), the sustainable fuels technology company, welcomes yesterday’s announcement by the UK Department for Transport (“DfT”) confirming its commitment to introduce a revenue certainty scheme (“Scheme”) for Sustainable Aviation Fuel (“SAF”). The DfT will launch a consultation on the design and delivery of the Scheme, which should attract further investment into the UK SAF industry.

A SAF Scheme is expected to be highly beneficial to the Altalto Immingham project as it sends a positive long-term signal to investors which will underpin the financing of plant construction. The project is making good progress through its Front End Engineering Design (FEED) stage, including the conclusion of license and engineering service agreements with key technology licensors, supported by a £27 million grant from the DfT under the Advanced Fuels Fund as announced in December 2022. Discussions remain ongoing with private sector investors to obtain the required remaining matched funding to be in place by the end of the year.

The DfT’s announcement also states that the Scheme will work alongside the SAF mandate to be introduced in 2025 and reaffirms the Government’s intention to have five UK SAF plants in construction by that year.

Henrik Wareborn, Velocys CEO, said: “Yesterday’s announcement is very positive for the UK SAF industry and especially for the Altalto project. Thanks to our progress with engineering and licensor engagements, Altalto is leading the way as the furthest developed within the group of projects supported under the Advanced Fuels Fund. It stands to benefit from the revenue certainty scheme as well as from the SAF mandate.

This commitment from the Government is a major step towards unlocking the capital required to further fund SAF projects in the UK. As noted by the Department for Transport (DfT), this revenue certainty will provide SAF producers greater assurance over the earnings from the SAF produced in projects such as Altalto, enabling projects to attract the necessary finance. We look forward to engaging further with the DfT and seeing more detail on the mechanism and the timescale in order for the Government target of five plants in construction by 2025 to be met.”