The volume of disposed end-of-life tires has been steadily growing to reach 3.5 million tons per year in Europe alone. While growth in end-of-life tires 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.
Enviro and Antin Infrastructure have formed a joint venture that's supported by Michelin to establish end-of-life tire recycling plants across Europe. The plants will produce sustainable raw materials, including recovered carbon black and oils, that will be reused in the tire and petrochemical industries.
The joint venture will focus on European plants that will significantly contribute to solving waste handling challenges from growing volumes of end-of-life tires, while at the same time increasing Europe's autonomy of valuable raw materials that currently are facing growing supply constraints.
A secured multi-year supply agreement
Michelin is planning to join the joint venture as a partner as the future plants are built. The joint venture has also secured a multi-year supply agreement with Michelin for the first plants to be established. The agreement with Michelin includes the delivery of recovered carbon black and tire pyrolysis oil (TPO).
The financial upside for Enviro
Enviro's ownership in the joint venture will ultimately correspond to approximately 30 percent, while the initial investments will be financed by Antin. The Board of Enviro intends to review Enviro's long-term capital needs and capital structure to fund Enviro's ownership of the venture as soon as practically possible over the coming 24 months. Enviro will be represented in the joint venture's Board of Directors already from launch.
Enviro's technology will be licensed exclusively to the joint venture throughout Europe. Enviro will also be responsible for research and development as well as act as the market-facing agent for sales.
Enviro will receive service fees as well as an asset fee, the latter of which will be calculated based on the profitability of each plant. In the joint venture, Enviro will have the opportunity to build long-term value through its ownership.
The first plant in Uddevalla
The first full-scale commercial plant will be built in Uddevalla, Sweden, with an initial capacity to recycle 34,500 tons of tires, equal to 40 percent of the annual volume of end-of-life tires in Sweden. Plant construction is scheduled to start in the first half of 2023 and the plant is expected to be fully operational by 2025. Following the successful commissioning of the Uddevalla plant, acceleration of the European roll-out will commence.
Other sites for the tire recycling plants haven't been finalized yet. Enviro is currently selecting sites in other European countries with the goal of building a tire recycling capacity for up to approximately one million tons of end-of-life tires by 2030. The goal of one million tons of end-of-life tires recycled corresponds to around one-third of all tires disposed of in Europe each year.
Sustainability commitments drive strong demand
Industry leaders have committed to using 100 percent sustainable materials in tires by 2050. The joint venture aims to meet this increasing demand for sustainable materials to help fuel a circular, more sustainable, tire production ecosystem.
By replacing virgin carbon black with Enviro's recycled carbon black, carbon emissions can be reduced by over 90 percent. Based on the targeted volume of 1 million tons of end-of-life tires, carbon dioxide emissions would be reduced by 670,000 tons. The pyrolysis oil extracted would have an energy content of 6 TWh, which can be used to replace fossil fuels, or as a substitution for fossil oils for multiple purposes in non-fuel sectors.
