Velocys plc

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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION 2014/596/EU AS IT FORMS PART OF THE LAW OF ENGLAND AND WALES BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018. IN ADDITION, MARKET SOUNDINGS WERE TAKEN IN RESPECT OF THE MATTERS CONTAINED IN THIS ANNOUNCEMENT, WITH THE RESULT THAT CERTAIN PERSONS BECAME AWARE OF SUCH INSIDE INFORMATION. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN AND SUCH PERSONS SHALL THEREFORE CEASE TO BE IN POSSESSION OF INSIDE INFORMATION.

19 May 2023

Velocys plc

("Velocys", the "Company" or the "Group")

Result of Placing and Retail Offer

Velocys plc (AIM: VLS), the sustainable fuels technology company, is pleased to announce the completion of the Bookbuild and the Retail Offer, following the announcement of the proposed Fundraise and Retail Offer made yesterday 18 May 2023. A total of 240,000,000 Placing Shares and Retail Offer Shares have been conditionally placed at the Issue Price to raise gross proceeds of £6 million. The Issue Price of 2.5 pence per Placing Share represents a discount of approximately 26.9 per cent. to the closing middle market price of 3.42 pence per ordinary share on 17 May 2023.

Allocation was made to existing retail Shareholders through the Retail Offer applying the principles of soft pre-emption. Shareholders were allocated 100 per cent. of their soft pre-emptive allowance.

The Company has also announced details of an Open Offer to Eligible Shareholders to subscribe for an aggregate of up to 77,648,390 Open Offer Shares at the Issue Price, to raise additional gross proceeds of up to approximately £2 million on the basis of 1 Open Offer Share for every 18 Existing Ordinary Shares held at the Record Date. Qualifying Shareholders subscribing for their full entitlement under the Open Offer may also request additional Open Offer Shares through the Excess Application Facility.

The Company has also announced a proposed conditional issue of convertible loan notes. Carbon Direct Capital (a growth investment firm focused on carbon management technologies) has conditionally agreed to subscribe for a minimum of $15 million (approximately £12 million) Convertible Loan Notes, subject to, inter alia, the Company raising or having received legally binding commitments in respect of the Minimum Amount. The Convertible Loan Notes are convertible at the Issue Price (subject to a limited number of customary adjustments). A number of discussions are underway with additional potential investors to raise further amounts to satisfy the Minimum Amount Condition either through further issuances of Convertible Loan Notes and/or new Ordinary Shares to investors other than Carbon Direct Capital.

The Placing, Retail Offer and Open Offer are conditional on, inter alia, the Resolutions relating thereto being passed by the Shareholders at the General Meeting to be held at 10.30 a.m. on 8 June 2023 at Magdalen Centre, Robert Robinson Avenue, The Oxford Science Park, Oxford OX4 4GA ("GM").

The issue of Convertible Loan Notes to Carbon Direct and potential further issuances of Convertible Loan Notes and/or new Ordinary Shares) is conditional on, inter alia, the passing of all of the Resolutions by the Shareholders at the GM. The Placing, the Retail Offer and the Open Offer are not conditional on the issue of the Convertible Loan Notes or on the Minimum Amount being raised. The Retail Offer and the Open Offer are conditional upon completion of the Placing.  The Placing is not conditional on any other part of the Fundraising completing. Subscription by Carbon Direct Capital for the Convertible Loan Notes is conditional on the Company having raised or having received legally binding commitments in respect of the Minimum Amount from the Fundraise. Should Shareholder approval for the Resolutions relating to the Placing, the Retail Offer and the Open Offer not be obtained at the General Meeting, neither the Placing, the Retail Offer nor the Open Offer will proceed. Should Shareholder approval for the Resolutions not be obtained at the General Meeting, the proposed conditional issue of Convertible Loan Notes to Carbon Direct Capital will not proceed. The Minimum Amount Condition has not currently been satisfied.

Use of Proceeds

·      The net proceeds of the Placing, the Retail Offer and the Open Offer will be used primarily for:

o  organisation costs including project delivery and business development;

o  engineering scale-up with investment in engineering resource;

o  initial commissioning of the Ohio manufacturing facility; and

o  working capital requirements to invest in achieving supply chain resilience and to cover timeline of grant receipts.

·      In the event of the Minimum Amount being raised, the net proceeds of the issuance of the Convertible Loan Notes to Carbon Direct Capital and the issuance of further Convertible Loan Notes and/or Ordinary Shares to investors other than Carbon Direct Capital will be used primarily for:

o  scaling-up of the organisation and corporate costs including increasing labour from approximately 40 full time employees to approximately 100 full time employees gradually over the next 12 to 18 months in line with client and project demand in order to accelerate the capability of the Company to deliver its technology to its clients at scale;

o  completion of capital investment in the Ohio reactor core manufacturing facility including production start-up and catalysis upgrades;

o  funding for US Listing costs or interest payments due on the Convertible Loan Notes in the event no US Listing occurs during the 21-month period from issue of the Convertible Loan Notes;

o  supporting performance guarantees for the Company's proprietary Fischer-Tropsch technology to be delivered to client projects; and

o  working capital requirements, build-up of reactor inventory at the Ohio manufacturing facility and to manage timing of payments and grant receipts.

Henrik Wareborn, CEO of Velocys, commented:

"We are pleased with the result for the Placing and to have received the support of our shareholders as well as a number of new investors. We are now focussed on delivering important value inflection points for the Company and continuing discussions with strategic investors into the Convertible Loan Notes.

"The proposed transaction in Velocys plc which follows recent positive project funding updates on the Altalto reference project will help consolidate our position as the leading global provider of sustainable aviation fuel technology and enable the supply of negative carbon intensity fuels to airlines and others aiming towards net zero targets.

"We are fully committed on delivering the clear benefits of our patented technology to support the decarbonisation of the aviation sector and enhance shareholder returns."

Related Party Transaction and Director Participation

As part of the Placing, Lansdowne Partners (UK) LLP ("Lansdowne"), a substantial shareholder of the Company and therefore a Related Party as defined by the AIM Rules ("Related Party"), has subscribed for a total of 48,000,000 Placing Shares at the Issue Price under the Placing. Following completion of the Placing, the Retail Offer and the Open Offer (assuming subscription for the Open Offer Shares in full), Lansdowne will have an aggregate interest in 303,156,632 Ordinary Shares, representing approximately 17.7 per cent. of the share capital of the Company as enlarged by the issue of the New Ordinary Shares (Enlarged Share Capital").

Certain Directors of the Company, being Henrik Wareborn, Philip Sanderson, Philip Holland, Ann Markey, and Thomas Quigley, all of which are deemed to be a Related Party pursuant to the AIM Rules, have subscribed for an aggregate of 2,400,000 Placing Shares at the Issue Price. Following completion of the Placing, the Retail Offer and the Open Offer (assuming subscription for Open Offer Shares in full), the above Directors will hold an aggregate interest in 6,654,896 Ordinary Shares, representing approximately 0.4 per cent. of the Enlarged Share Capital of the Company. A number of Velocys senior managers have also subscribed for in aggregate 1,000,000 Placing Shares.

Darren Messem, being the director who is independent of the Placing, having consulted with the Company's nominated adviser, considers that the terms of the participation in the Placing by Lansdowne and certain of the Directors are fair and reasonable insofar as its shareholders are concerned.

Admission and Settlement

Application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM. Subject, inter alia, to the Resolutions relating to the Placing, the Retail Offer and the Open Offer being passed, it is expected that Admission will become effective and that dealings in the New Ordinary Shares will commence on AIM at 8.00 a.m. on or around 9 June 2023. The New Ordinary Shares will rank pari passu in all respects with the Existing Ordinary Shares.

Upon Admission, and assuming full take up of the Open Offer Shares, the Enlarged Share Capital is expected to be 1,715,319,421 Ordinary Shares. On this basis, the new Ordinary Shares will represent approximately 18.5 per cent. of the Enlarged Share Capital. These figures do not take into account the proposed conditional issue of the Convertible Loan Notes (and/or new Ordinary Shares) up to the Maximum Amount.

Posting of Circular

A Circular to shareholders containing full details of the Fundraise, including details of the Open Offer and the terms and conditions on which it is being made (including the procedure for application and payment) and convening the General Meeting to be held at 10.30 a.m. on 8 June 2023 at Magdalen Centre, Robert Robinson Avenue, The Oxford Science Park, Oxford OX4 4GA, is expected to be posted by 6.00 p.m. on 22 May 2023 and will also be available on the Company's website around the same time (www.velocys.com).

The capitalised terms used in this announcement have the same meanings as in the "Proposed Placing, Retail Offer and Open Offer" announcement published by the Company at 5.40 p.m. on 18 May 2023 unless otherwise stated.

Enquiries:

Notes to Editors

Velocys is an AIM quoted, international sustainable fuels technology company, providing customers with a technology solution to enable the production of negative Carbon Intensity synthetic, drop-in fuels from a variety of waste materials. Synthetic fuel is the only commercially available, permanent alternative to fossil aviation fuels. The Velocys technology is IP-protected in all major jurisdictions.

Two reference projects in the US and UK (Bayou Fuels and Altalto respectively) are designed to accelerate the adoption and standardise the Velocys proprietary Fischer Tropsch (FT) technology with an integrated end to end solution, including renewable power and sequestration.

Velocys is enabling commercial scale synthetic fuel production in response to the clean energy transition, with significant additional positive air quality impacts.

www.velocys.com

IMPORTANT NOTICE

The information contained in this announcement is for information purposes only and does not purport to be full or complete. The information contained in this announcement is given at the date of its publication (unless otherwise marked) and is subject to updating, revision and amendment from time to time. No reliance may be placed for any purpose on the information contained in this announcement or its accuracy, fairness or completeness.

Neither this announcement, nor any copy of it, may be taken or transmitted, published or distributed, directly or indirectly, in or into any jurisdiction where to do so would constitute a violation of the relevant securities laws of such jurisdiction. This aannouncement is for information purposes only and does not constitute an offer to sell or issue, or the solicitation of an offer to buy, acquire or subscribe for any shares in the Company in any state or jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation. Any failure to comply with these restrictions may constitute a violation of securities laws of such jurisdictions.

This announcement is not for publication or distribution, directly or indirectly, in or into the United States of America.  This announcement is not an offer of securities for sale into the United States. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration. No public offering of securities is being made in the United States.

This announcement has been issued by, and is the sole responsibility of, the Company. No undertaking, representation, warranty or other assurance, express or implied, is made or given by or on behalf of the Company, Panmure Gordon (UK) Limited "("Panmure Gordon"") or Shore Capital Stockbrokers Limited "("Shore Capital"") or any of their respective directors, officers, partners, employees, agents or advisers or any other person as to the accuracy or completeness of the information or opinions contained in this announcement and no responsibility or liability is accepted by any of them for any such information or opinions or for any errors, omissions or misstatements, negligence or otherwise in this announcement.

Panmure Gordon is authorised and regulated in the UK by the FCA and is acting as nominated adviser and joint broker to the Company. Panmure Gordon is not acting for, and will not be responsible to, any person other than the Company for providing the protections afforded to its customers or for advising any other person on the contents of this announcement or on any transaction or arrangement referred to in this announcement. No representation or warranty, express or implied, is made by Panmure Gordon as to, and no liability is accepted by Panmure Gordon in respect of, any of the contents of this announcement. The responsibilities of Panmure Gordon as the Company's nominated adviser under the AIM Rules for Companies "("AIM Rules"") and the AIM Rules for Nominated Advisers are owed solely to London Stock Exchange plc and are not owed to the Company or to any director or shareholder of the Company or any other person, in respect of his decision to acquire shares in the capital of the Company in reliance on any part of this announcement, or otherwise.

Shore Capital is authorised and regulated in the UK by the FCA and is acting as joint broker to the Company. Shore Capital is not acting for, and will not be responsible to, any person other than the Company for providing the protections afforded to its customers or for advising any other person on the contents of this announcement or on any transaction or arrangement referred to in this announcement. No representation or warranty, express or implied, is made by Shore Capital as to, and no liability is accepted by Shore Capital in respect of, any of the contents of this announcement.

The information in this announcement may not be forwarded or distributed to any other person and may not be reproduced in any manner whatsoever. Any forwarding, distribution, reproduction, or disclosure of this information in whole or in part is unauthorised. Failure to comply with this directive may result in a violation of applicable securities laws and regulations of other jurisdictions.

This announcement contains (or may contain) certain forward-looking statements with respect to certain of the Company's current expectations and projections about future events and the Company's future financial condition and performance. These statements, which sometimes use words such as "aim", "anticipate'', "believe", "may", "will", "should", "intend", "plan", "assume'', "estimate", "expect' (or the negative thereof) and words of similar meaning, reflect the current beliefs and expectations of the directors of the Company, Panmure Gordon and/or Shore Capital and involve known and unknown risks, uncertainties and assumptions, many of which are outside the Company's control and difficult to predict, that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement. The information contained in this announcement speaks only as of the date of this announcement and is subject to change without notice and the Company does not assume any responsibility or obligation to, and does not intend to, update or revise publicly or review any of the information contained to this announcement, whether as a result of new information, future events or otherwise, except to the extent required by the FCA, the London Stock Exchange or by applicable law.

Any information in this announcement in respect of past performance (including without limitation past performance of the Company, its group, shares in the Company and/or the Company's portfolio) cannot be relied upon as a guide to future performance. The price of shares and the income from them may fluctuate upwards or downwards and cannot be guaranteed.

This announcement contains inside information as defined in Regulation (EU) No. 596/2014 on market abuse which is part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR") and is made in accordance with the Company's obligations under article 17 of MAR. The person responsible for arranging the release of this announcement on behalf of Velocys is David Bate, General Counsel of Velocys.