In the virtual information disclosure published by Scandinavian Enviro Systems in March 2 pm the company addressed questions on subjects that include the license agreement with Michelin. In the information disclosure, Enviro also reported on how the partnership with Michelin is relevant from a strategic perspective and what the company’s long-term plans are.
The virtual information disclosure has been arranged to provide Enviro’s shareholders and the capital market the opportunity to ask questions and obtain additional information ahead of the Extraordinary General Meeting on 9 March.
Several questions have been submitted regarding the license agreement with Michelin and in this regard, the company’s observations included the license agreement that will be in force until the year 2035; the agreement entitles Michelin to establish their own recycling plants based on Enviro’s technology in ten specified markets. No establishment may be made in markets other than these without the express permission of Enviro; When establishing its own plants, over and above the future jointly owned plant in Chile, Michelin will compensate Enviro with a fixed amount per plant and pay percentage-based royalties to Enviro based on the plant’s sales. Calculation of the sales will be based on market terms.
Through the agreements signed with Michelin, Enviro has limited its guarantee commitments in relation to Michelin and the guarantee risk is up to MSEK 300 lower than the demands made of Enviro in earlier negotiations with other parties.
Apart from the company responding to questions regarding the agreements with Michelin, Enviro’s Chairman, Alf Blomqvist, also reported on how the partnership with Michelin is relevant from a long-term strategic perspective and for the company’s expansion going forward.
Accordingly, the partnership provides decisive conditions for the company’s expansion phase. The demand for virgin carbon black is expected to amount to more than 16.5 million tonnes this year and that recovered carbon black has a long-term potential to replace half of the virgin carbon black.
The company, in addition to the plant jointly owned with Michelin is planning to establish additional recycling plants based on the company’s patented recycling technology. To succeed in this endeavor, the company needs to build up the necessary in-house organisation, establish new collaborations with industrial operators and identify new ways of financing the new plants.
Should the company succeed in these respects, the ambition over time is to establish four new recycling plants per year over the next ten years, which could bring the total to approximately 30 by 2030. The prioritised markets are initially West Sweden and Central Europe.
The company is conducting dialogues with several players in the tyre, chemical, and oil industries on collaboration regarding the establishments of such plants. It is also conducting dialogue with various players in the capital market on potential alternatives for financing the establishment of these plants, as well as their initial operation. As a calculation example, the company has assumed that the establishment of a full-scale recycling plant entails a theoretical investment cost for the company of approximately SEK 300 million per plant.
The increased interest in recycled materials from end-of-life tyres, including carbon black and oil, entails that a full-scale plant with an annual capacity of 30,000 tonnes, at current price levels, could theoretically achieve an EBITDA margin of approximately 60%, and that the investment in such a plant could thus be repaid in four years.
The meeting on 9 March underscores Michelin as a closely related party due to its large shareholding in Enviro. To enable the agreements that form the basis of the strategic partnership with Michelin to take effect, they must first be adopted by an Extraordinary General Meeting. Notice of the said meeting was published separately on 16 February and is available on the company website.