A hectic and eventful year is coming to an end
I have now had the privilege of serving as CEO of Scandinavian Enviro Systems for almost a year, and as the year draws to a close, I want to summarize some of what we have achieved and what I have had the privilege of being a part of. At the same time, I take the opportunity to address some of the many questions I receive from our active and engaged owners and stakeholders.
Looking back on the past year, it’s hard to believe that I have only been with Enviro since the beginning of February. The English phrase “hit the ground running” provides an apt description of my experience—a full sprint from day one. Just a week after I took on the role, the final investment decision was made, paving the way for the construction of the first full-scale plant in Uddevalla, built on Enviro’s unique pyrolysis technology. Barely a week later, we received the go-ahead to begin construction. On what looked like a gravel heap in a forest outside Uddevalla, we gathered for a symbolic groundbreaking ceremony while snowflakes danced around us.
In the 10 months since, the plant has taken shape and is largely complete on the outside. The next phase involves the critical task of installing all the equipment inside the plant to prepare for initial production tests. However, the visible aspects of the building do not reveal the immense amount of work that has gone into its construction. As the first full-scale plant, it will serve as a blueprint for all other plants that our joint venture with Antin aims to establish. This requires a highly extensive documentation process. While Enviro has learned a great deal from the company’s smaller plant in Åsensbruk, the plant we are now building in Uddevalla is an entirely different project. In this sense, Enviro itself has had to “hit the ground running” and subsequently operate at full speed. We have had to make many adjustments but have also learned an extraordinary amount that will serve both the joint venture company and Enviro well moving forward.
I receive many questions from shareholders and other interested parties about how the goal of achieving one million tons of processing capacity by 2030 can be met. This goal, set by the joint venture company, involves building and operating the necessary plants. The goal has not been modified and remains firmly in place. It is clear that this will require a significantly expanded organization within the joint venture company and a highly aggressive execution plan. Nevertheless, the goal remains unchanged, and as I noted in the third-quarter report, work to identify sites for new plants is already underway.
The joint venture company’s communicated rollout plan for Europe is, however, contingent on our success in Uddevalla. Since this plant is intended to serve as a blueprint for future plants, it must first demonstrate that it can produce recovered materials in volumes and with a quality that the partners consider sufficient to justify rapid scaling. Given the scale of the investments this will require, it is understandable and prudent that a checkpoint has been built into the process. Anything else would be highly unwise.
The fact that this is the first full-scale plant and the creation of a blueprint for all future plants means, of course, that it is more expensive to build than subsequent plants, which will be more of straightforward copies. Questions about the costs of the Uddevalla plant are frequent, and various figures with different references are circulating. I want to clarify that the investment cost previously communicated for an example plant referred to the cost for a series-produced plant, not for a first plant where everything needs to be customized, documented, and tested. Additionally, the figure for the example calculation was based on a smaller plant than the one in Uddevalla and did not include costs for land ownership or the plant itself, both of which are included in the Uddevalla project.
A crucial condition for the final investment decision for Uddevalla was the fact that several major companies in the tire and oil industries were willing from the outset to sign long-term, binding supply agreements for the recovered materials from the plant. Their willingness to do so was due to their confidence in the quality of our recovered materials, which in turn stemmed from extensive testing that demonstrated the materials met their high standards. The Åsensbruk plant played a key role in these tests, as it supplied the recovered carbon black and pyrolysis oil that were tested. Over the past year, we have continued to develop our technology and made improvements that we are now incorporating into the Uddevalla plant.
From Åsensbruk, we have also continued to deliver smaller quantities of recovered materials for testing, which is essential for building the commercial foundation for both the Uddevalla plant and future plants. Finnish company Neste’s successful use of our pyrolysis oil to process raw materials for plastics and chemicals during the year is a prime example of how the plant contributes to broadening the commercial potential of our pyrolysis technology. In parallel, the Åsensbruk plant has continued to deliver recovered oil to AnVa Polytech, which has been used for commercial production of chassis components for the automotive industry. This has been ongoing since 2016, and we are now approaching a total of 2 million chassis plugs produced using recovered oil from Åsensbruk.
Regarding our earning capacity, I want to repeat what I stated in the third-quarter report: we are currently in a phase where capital needs are high, while returns, profitability, and dividends lag behind during the period it takes to establish the joint venture company’s plants. Of our four potential revenue streams, only milestone payments for progress on Uddevalla 1 are currently generating revenue. While these payments have undoubtedly contributed positively during the year, they are not of a size that makes them sufficient on their own. This is why, as noted in the third-quarter report, we are conducting a review of the company’s long-term capital structure.
Finally, I would like to thank you, whether you are a shareholder or simply someone following our company, for your interest in Enviro. A great deal has happened during the past year, and much more is yet to come. Despite the intense work and constant pace, being CEO of Enviro has been a great privilege. I look forward to continuing this journey and maintaining an ongoing dialogue with all our engaged stakeholders.
Best regards,
Fredrik Emilson
CEO, Scandinavian Enviro Systems