The volume of disposed end-of-life tyres has been steadily growing to reach 3.5 million tons per year in Europe alone. While growth in end-of-life tyres 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. This announcement to establish a sustainable solution to recycle end-of-life tyres on an industrial scale marks a world first.
The JV formed between Enviro and Antin, supported by Michelin, will establish end-of-life tyre 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 end-of-life tyres, while at the same time increasing Europe’s strategic autonomy of valuable raw materials that currently are facing growing supply constraints.
Secured multi-year supply agreement
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 tyre pyrolysis oil (TPO).
Substantial financial upside for Enviro
Enviro’s ownership in the JV 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 JV as soon as practically possible over the coming 24 months. Enviro will be represented in the JV’s Board of Directors from launch.
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. At this early stage, it is not possible for the Company to make more detailed assumptions about the potential impact on Enviro’s results and financial position.
First plant in Uddevalla
The first full-scale commercial plant will be built in Uddevalla, Sweden, with initial capacity to recycle 34,500 tons of disposed tyres, equal to 40% of the annual volume of end-of-life-tyres 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, with an aim to build recycling capacity for up to approximately one million tons of end-of-life tyres by 2030, corresponding to a third of all tyres being disposed of in Europe each year. The establishment of individual plants is subject to various regulatory approvals.
Strong demand driven by sustainability commitments
Through the creation of the JV, the parties are responding to the increasing demand for more sustainable solutions for end-of-life tyres following the industry’s ambitious targets for a circular and more sustainable tyre 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 tons end-of-life-tyres, carbon dioxide emissions would be reduced by 670,000 tons. 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 tyres. With Antin’s successful track record in scaling infrastructure platforms and its strong industrial understanding, and Michelin’s world-leading position in sustainable tyres, we have found excellent partners to jointly accelerate our pan-European plant expansion and contribute to making the tyre industry circular. We will now be able to focus on our core business and competencies such as technology and material development, optimisation and quality control.”
Anand Jagannathan and Rodolphe Brumm, NextGen Partners at Antin Infrastructure Partners, commented: “Antin is very excited to partner with Enviro and Michelin to create the world’s first large scale tyre recycling business. Enviro’s patented pyrolysis technology and its highly experienced management team, combined with Michelin’s world leading position in sustainable tyres, makes this an ideal platform. Antin has always been at the forefront of identifying key areas of tomorrow’s infrastructure and we believe this JV will play a critical role in accelerating Europe’s circular economy. We look forward to working with Enviro, Michelin and the JV’s management team to quickly scale the JV to its full potential.”
Maude Portigliatti, Executive Vice President, High Tech Materials – Member of the Group Executive Committee at Michelin, commented: “This announcement is a significant step in our ambition to achieve a circular and more sustainable tyre production. And is further proof of Michelin’s ability to step up to achieve its 2050 strategic ambitions and reduce the tyre’s overall environmental impact by forging innovative partnerships for an ever more circular industry.”