Brian Lantier: As I look at the story, you’re structured as a holding company. That’s the way you want investors to view it. You’re not structuring it as a large recycling conglomerate necessarily. Kind of walk me through that strategy, why you chose that model.
Bertrand Laroche: That’s right. We think the investment holding platform is really attractive to be able to remain relatively in and invest in the best assets, both in Europe and the U.S. It’s a pretty small universe of buyers. You saw that on the value chain chart, in that second column, a lot of the companies acquiring feedstock are pretty big because those projects are expensive. So, they want to have feedstock providers that are global, because those companies are global. They have assets in Europe, they have assets in the U.S., and so I think having a relatively lean investment holding with significant participation in operating companies with assets on the ground gives us that opportunity to be a global company and to help our partners wherever they have assets.
Brian Lantier: What was the vetting process like working with Exxon and LyondellBasell to, I guess, vet the technology behind your recycling?
Bertrand Laroche: I mean, it was a very long process. We started working with Exxon, I think, in 2019, 2020. And at the time, our business model was to provide companies like Exxon with our technology under a licensing model. And Exxon decided to build their own technology platform. But they were very interested in our expertise on the feedstock side. And so, we worked with them to understand really the specs of that technology platform over 2021, 2022, when we really had a good handle on what kind of sourcing and processing effort would need to be built to be able to feed the operation. We decided to open it to other players, and we brought in LyondellBasell in 2023.
After many months of due diligence around the technology and the value creation that we were offering, we reached an FID in November 2023 for the first circularity center. At the beginning, Agilyx had 100% of Cyclyx, then Exxon came in for 25%. In November 2023, Lyondell came in for 25% and there was like a 135 million capital raise to fund the first circularity center. And so, it’s been great to work with those partners. They’re obviously a very big organization with a lot of expertise, very thorough, so it was a rather long process. But the scale of the opportunity and the scale of the investments require a strong building process.
Brian Lantier: Great. What excites you the most about the Green Dot investment? Is it access to their customers? What drove that? Was it a competitive bidding process? Were there other companies looking at that, making that investment?
Bertrand Laroche: So, I think it was, no, we’ve been working on the transaction for like 18 months. It’s kind of a natural partnership in the sense that there are not that many players. As you see in the value chain chart, there are Cyclyx and leaving GreenDot in that bucket. There are some other companies that have some assets in that bucket, but very few are fully focused on that. And you tend to see that a bigger waste management player is just too small for them; they don’t really have the know-how around the technology of recycling. So, it’s not really worse for them, you know. And their business is more about landfill, so they are not really interested in that at this point.
And then there are limited companies who had operations that really understand how the chemical composition of the plastic weight feedstock you’re going to use in your recycling project matter, for the yield, matter, for the contamination, matter, for the success of your project. And so naturally, because there are that many players who ended up talking and we are primarily focused in the U.S, they were primarily focused in Europe, so there was no competition really. We were talking to the same customers, so it kind of made sense. It was a bit slow to put together, but we’re very happy to, so we announced that in July, and we’re closing later this month.
Brian Lantier: That’s fantastic. You have a unique perspective with operations both in Europe now and then in the U.S. Maybe you could talk a little bit about the divergent, maybe regulatory paths that the two markets are on, and what some of the challenges are, maybe dealing with feedstock here in the U.S. versus the feedstock that you might be seeing in Europe.
Bertrand Laroche: Absolutely. There are some differences. Generally, the collection infrastructure is more mature in Europe. In Germany, especially, the collection processes are just better organized in a way which generates cleaner streams of plastic waste. Whereas in the U.S, depending on the state, it tends to be more mixed together and a little bit more contamination.
So, you require bigger processing facilities. That’s similar to the one Cyclyx is building; each facility takes in 180,000 tons of plastic waste inbound, and then 100,000 of that goes to advanced recycling, 50,000 of that goes to mechanical recycling. But you need scale because it is complicated, because it is very mixed, very contaminated. In Europe, you can access cleaner streams, so you still need that processing, sorting, and advanced sorting step, but it’s a little lighter in terms of capex. And the models are more integrated in Europe, where they have the EPR scheme.
So basically, the EPR scheme in Germany, extended producer responsibility, is that you ask the companies that emit packaging to pay a fee to cover the cost of collection, sorting, and recycling. And the German government sets the quota. So, they would say, this year or for the next three years, it’s going to be 80% of the glass needs to be recycled, 60% of the cardboard, 40% of the plastic. And then based on the cost to achieve those objectives, the companies emitting packaging need to pay a license fee to the operators, so like a dozen operators. And so, the system is very well funded. We’re seeing that happening in the U.S. Actually, there are many states in the U.S on the West Coast that are developing EPR schemes. But it is complicated, and it takes time to build it. But I think the U.S will follow that.
And then in Europe, you also have a stronger regulatory push towards recycled content. In the U.S, you still have a lot of companies that are interested in buying certified recycled resin, because they made some commitments with companies like Unilever, Nestle, Starbucks; those companies made strong commitments to their customers that they would use 30, 40, 50% of recycled content in their product by 2030, 2035. And so they still want to achieve those objectives. In Europe, it’s a bit stronger because you have a regulatory mandate to get there by a certain date, with some penalties if you don’t. So that kind of put a bit of a floor on the market. But we see an appetite for recycled resin on both sides of the Atlantic Ocean. It’s just the market dynamics are a bit different.
So I’d say, all in, the regulatory framework is a bit stronger in Europe. That’s why we see a stronger expected growth rate in the advanced recycling capacity in Europe. But we also see a lot of projects being developed in the U.S, because even without that regulatory mandate, the economics make sense because the CPG brands are willing to pay a significant premium to access high-quality recycled content. And that’s the problem that mechanical recycling cannot really solve because they are produced by nature, by the nature of the process of product that is a little bit lower quality, that cannot be used for, you know, shampoos or cosmetics or pacifiers or things where there is more usually brand value. And so that’s kind of the difference that I see between the U.S and Europe.
Brian Lantier: That’s interesting. You said it’s sort of a small market, a small number of players, where everyone knows one another. What’s the competitive landscape like right now?
Bertrand Laroche: On the feedstock side, on the conversion side?
Brian Lantier: Yeah, I guess on the feedstock side to start.
Bertrand Laroche: So the feedstock size is pretty limited. It’s like, you know, Cyclyx, GreenDot, and then you would have a lot of MERFs and PERFs, material recovery facilities that have a very clean stream. So they would sell that very clean stream to, like, off-takers, but they would sell it at a much higher price, and it’s not really scalable because you don’t have that much super clean stream.
It’s a very fragmented industry, so it’s hard to have the exact numbers and the exact players. So you have a lot of those small transactions here and there. But big platforms that can produce at scale, at spec, there are very few of those. TOMRA is building a couple of facilities in Europe, I think in Germany and Norway, but it’s not the core of the business model. And then you have a few other players. One of them is Freeport, and one source that did a partnership in Europe, but it’s mainly to solve their own operation.
Most of the big petrochem companies, they are very comfortable building those projects and running them, but they are not waste management companies, and they’d rather stay within their area of expertise. And so there is really a need for a player that can provide at scale, at spec.
Brian Lantier: That’s great. I think I kind of know the answer already, but if over the next 12 to 18 months, the milestones you’d be looking for as an investor, I think they’re probably going to be the GreenDot closing. But maybe you can sort of highlight a couple of those that we should be looking for as we watch the company.
Bertrand Laroche: Sure, so I mean, the closing of GreenDot is a big one. We’re expecting the first circularity center of Cyclyx to come online first half of next year. So it will also be a big milestone. The second one is coming online towards the end of 2026. And then we have, right now, the German business of GreenDot is doing really well, and it’s going to be relatively stable. As we see the advanced recycling capacity in Europe coming online, we expect the second bucket, which is the gross vector, the AR, advanced recycling feedstock business, to really ramp up. We expect to reach profitability on that bucket next year, so it would also be a big milestone.
And in terms of capital markets activity, on top of our OTC listing, we’re working to file for ⁓ a U.S dual listing as well in the U.S to give us a bit more liquidity. So that also could be an interesting catalyst. And then it’s going to be the growth beyond the first two. We want to reach our ideal of three, four. As I mentioned, we think we can access cheaper capital if potential lenders see the first facility up and running. I think it would give us a larger access to the debt capital market to fund the following.
Brian Lantier: I love a story like this where your costs are low, your inputs are low, there’s plenty of supply, and then you convert it with customers who are already locked in. They’re buying everything that you can produce. That’s fantastic. Are there any questions from the audience?
Audience Member: A key question is from your website. You show 110 million shares outstanding. Excluding the top 20 shareholders, this is all from your website; you’ve only got two and a half million shares in the float. 350 shares trade a day in the U.S., 10 grand trade a day in Oslo.
Bertrand Laroche: Yeah, it’s been a challenge. The liquidity has been limited because, as you mentioned, with a very concentrated holding structure, the top five represent more than 85%. That’s why we’re pursuing dual listing next year, another market in the U.S, to gain liquidity and, yes, the Oslo Stock Exchange. Liquidity has been a factor that has prevented a lot of investors from getting into the story.
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