Velocys begins second phase of USDA loan guarantee process

By Erin Voegele | June 20, 2017

Velocys plc recently announced the USDA has invited it to submit a Phase II application for a loan guarantee to support the development of a commercial-scale biorefinery with the capacity to produce 19 million gallons of renewable diesel per year.

According to Velocys, the proposed 19 MMgy biorefinery would process approximately 1,000 dry tons of woody biomass residues each day, producing approximately 1,400 barrels per day of fuel. The company said the plant will be located in the southeast U.S., where there is an abundant supply of low-cost biomass that will provide a long-term strategic supply of feedstock to the facility.

The invitation was made following a successful Phase I application process under the USDA 9003 Biorefinery Assistance, Renewable Chemical and Biobased Product Manufacturing Program.  According to Velocys, the loan guarantee could apply to up to $200 million of debt as part of the total installed cost of the project.

Under the 9003 program, a material portion of the project is guaranteed by the USDA, accelerating the timeline and financially de-risking the project to final investment decision. Velocys indicated it has engaged Sumitomo Mitsui Banking Corp. as the lender of record and as its financial advisor.

Velocys said it will now initiate the final phase of the loan guarantee process. The next steps required under the process identify and mitigate risk and complete evaluation of the project. Work is already underway on Velocys’ integrated technology demonstration with its strategic gasification partner and ThermoChem Recovery International, and the front end loading (FEL-2) study with IHI E&C International Corp. Velocy’s said it aims to complete all work packages required by the 9003 program, concluding commercial negotiations, such as feedstock supply and offtake agreements, securing project equity funding and reaching final investment decision in 2018.

In early June, the company announced the selection of IHI E&C to carry out the FEL-2 engineering for its first biomass-to-liquids plant. The engineering study is expected to be complete during second half of this year.

"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,” said David Pummell, CEO of Velocys. “Today's announcement builds on the deployment of our technology at EnviaEnergy'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 U.S. that could host plants with capacities totaling 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,” Pummell continued. “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."

Formerly known as the Biorefinery Assistance Program, the Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program was revamped and expanded by the 2014 Farm Bill. The program now provides loan guarantees for biorefineries to support the production of advanced biofuels and renewable chemicals, and biobased product manufacturing facilities.