Tyre recycler Scandinavian Enviro Systems and private equity firm Antin Infrastructure Partners have established a joint venture to, based on Enviro’s technology, create what they say is the world’s first large-scale tyre recycling group. The jv plans to establish plants across Europe with a total capacity of up to 1 million tonnes/year of end-of-life tyres (ELTs) recycled by 2030.
The jv partners have agreed on a plan for the financing of the new plant expansion. Antin, a private equity firm focused on infrastructure, will finance the initial investments. French tyre maker Michelin supports the jv by signing multi-year supply agreements regarding recycled materials from the first plants established. Michelin is planning to join the jv as a partner, as the future plants are built.
Enviro has no initial ownership in the jv but has an option to acquire an ownership in the jv that will ultimately correspond to approximately 30%. The Board of Enviro intends to review, as soon as practically possible within the next 24 months, the long-term capital requirements of the company to finance Enviro’s ownership of the jv. Enviro will be represented in the jv’s Board of Directors already from launch.
Enviro will receive revenue through service fees as well as an asset fee, the latter which will be calculated based on the profitability of each plant, whilst having the opportunity to build long-term value through its ownership in the jv.
The first full-scale commercial plant established by the jv will be the plant previously planned in Uddevalla, Sweden. The jv combines Enviro’s patented technology for extracting carbon black and pyrolysis oil from ELTs with Antin’s expertise in developing and scaling tomorrow’s infrastructure platforms.
The volume of disposed ELTs has been steadily growing to reach 3.5 million tonnes/year in Europe alone. While growth in ELTs is forecasted to further accelerate in the next decade due to consumer and regulatory trends, the recycling technology, infrastructure and processes necessary to properly dispose of them at scale have not yet been effectively implemented until now.
The jv is expected to establish ELT recycling plants across Europe to produce sustainable raw materials, including recovered carbon black and oils to be re-used in the tyre and petrochemical industries. The jv will focus on European plants that will significantly contribute to solving waste handling challenges from growing volumes of ELTs, while at the same time increasing Europe’s strategic autonomy of valuable raw materials that currently are facing growing supply constraints.
Michelin is planning to join the jv as a partner, as the future plants are built. The jv has also secured a multi-year supply agreement with Michelin for the first plants to be established. The agreement with Michelin includes delivery of recovered carbon black and tire pyrolysis oil (TPO).
As part of the jv, Enviro’s patented technology will be licensed to the JV exclusively throughout Europe. Furthermore, Enviro will be responsible for R&D as well as act as the market-facing agent for sales. In addition, Enviro will provide certain technical services and support to the JV and its group companies. As remuneration, Enviro will receive service fees from the jv as well as an asset fee, the latter which will be calculated based on profitability of each plant. Furthermore, Enviro will have the opportunity to build long-term value through its ownership in the jv.
The first full-scale commercial plant will be built in Uddevalla, Sweden, with initial capacity to recycle 34,500 tonnes/year of disposed tyres, equal to 40% of the annual volume of ELTs in Sweden. Plant construction is scheduled to start in the first half of 2023, subject to a final investment decision by the jv, and the plant is expected to be fully operational by 2025. Following successful commissioning of the Uddevalla plant, acceleration of the European roll-out will commence.
Site selection in other European countries has been initiated to ensure a rapid roll-out. The establishment of individual plants is subject to various regulatory approvals.
Through the creation of the jv, the parties are responding to the increasing demand for more sustainable solutions for ELTs following the industry’s ambitious targets for a circular and more sustainable tire production, with industry leaders committing to using 100% sustainable materials by 2050.
By replacing virgin carbon black with Enviro’s recycled carbon black, carbon emissions can be reduced by over 90%. Based on the targeted volume of 1 million tonnes of ELTs, carbon dioxide emissions would be reduced by 670,000 tonnes. Further, the pyrolysis oil extracted would have an energy content of 6 TWh, which can be used to replace fossil fuels, or as substitution for fossil oils for multiple purposes in non-fuel sectors.
Alf Blomqvist, Chairman of Scandinavian Enviro Systems, commented: “I am very proud and pleased with today’s announcement which represents a significant recognition of Enviro’s technological and market leadership in recycling of tires. With Antin’s successful track record in scaling infrastructure platforms and its strong industrial understanding, and Michelin’s world-leading position in sustainable tires, we have found excellent partners to jointly accelerate our pan-European plant expansion and contribute to making the tire industry circular. We will now be able to focus on our core business and competencies such as technology and material development, optimization and quality control.”