Co-owned recycling plants: Enviro setting up USA holding company
Instead of just approving the use of its technology under license, Scandinavian Enviro Systems (Enviro) intends to introduce its technology worldwide by participating in joint ventures. To facilitate the setting up of such plants in the USA, Enviro’s board of directors has founded a holding company in that market.
“Our new strategy means that Enviro wants to become part-owner of plants based on our technology as it provides good revenue opportunities,” says Thomas Sörensson, chief executive officer of Enviro. “However, becoming a partner places other requirements on company structures, and it is from this perspective that the decision to establish a holding company in the US market should be seen.”
This latest move follows the recent signing of a term sheet with Buffalo, New York-based firm TreadCraft Carbon LLC. This term sheet agreed the main conditions for establishing a jointly-owned plant for recovering raw materials from end-of-life tyres. Enviro and TreadCraft Carbon are now using it to negotiate the terms for a definitive agreement. At the same time, work is also underway to obtain supplementary agreements for the terms of the joint venture and license agreements.
Enviro’s technology for recycling end-of-life vehicle tyres enables the recovery of materials such as oil, steel and carbon black. As evidence of recycled carbon black’s virtues compared with its virgin counterpart, the company points to an analysis carried out by IVL Swedish Environmental Research Institute that shows the use of recycled carbon black can result in a 79 to 84 per cent reduction in of greenhouse gas carbon dioxide compared to the production and use of virgin carbon black.
“The ever-growing interest in sustainable technology and the increasingly decisive questions about how greenhouse gas emissions should be reduced means that there’s also an increasing interest for our unique technology in the tyre and rubber industry”, says Sörensson.
TreadCraft deal expected in second half of year
Enviro is negotiating to sell TreadCraft a recycling plant worth approximately 25 million to 30 million euros, and any deal would also cover license revenue and future profits. Sörensson: “We altered our strategy a year ago and have since focused on plant projects where we can share future revenue by being part-owners. With this agreement, we have passed an important milestone, as it both confirms Enviro’s new strategy and constitutes the first plant outside Sweden where we become one of the owners.”
The signed term sheet sees the two parties agree on key terms such as the scope of delivery, construction cost, payment and delivery terms, guarantees, contractual penalties and applicable law. Based on this agreement, the parties are now negotiating the terms of a complete and definitive construction agreement regarding a recycling plant in Buffalo. Enviro stresses that “all negotiations are conditional on financing.” The financial side of the planned collaboration is being nutted out parallel to the other agreements.