Q3 2023 Summary
Published Jan 27, 2025, 9:00 PM UTC- PureCycle's core purification technology is working well, successfully processing various feedstocks and producing high-quality recycled polymers, with only pelletization issues being addressed through the installation of an automated screen changer.
- The company expects to achieve the 4.45 million pound production milestone in December, confident in running the plant continuously at higher rates post-outage, which supports their expansion plans.
- Operational learnings from the Ironton plant are expected to significantly reduce capital expenditures (CapEx) and improve efficiency in future plants, leading to potential CapEx reductions and faster startups, enhancing project economics for expansion.
- Operational challenges at the Ironton plant, including mechanical issues like bead contamination and seal failures, have limited production output and required additional capital expenditures for fixes such as the installation of an automated screen changer costing up to $1 million. These setbacks have delayed meaningful production progress and could impact profitability.
- Financing for the Augusta facility is likely delayed to 2024, as consistent operations at Ironton are necessary before proceeding. This delay could impact the company's expansion plans and cash flow projections.
- The company is involved in ongoing litigation and potential contractual disputes, including withheld payments to contractors like Koch Modular until certain production levels are achieved. This could lead to additional costs or operational delays.
-
Financing for Augusta Delayed Q: Is Augusta's project debt financing expected by year-end or in early 2024?
A: Financing for Augusta is now more likely a 2024 event due to challenging market conditions and the need for consistent operations at Ironton. Consistent performance at Ironton after the outage is crucial before proceeding with financing discussions. -
Monthly Cash Burn and Shutdown Costs Q: What are the current monthly cash burn and shutdown costs?
A: The corporate burn rate, excluding Ironton operations and allocations, is about $10 million per quarter. The shutdown costs are limited, with the screen changer expense between $0.5 million to $1 million, and total outage costs under $2 million. -
Production Ramp-Up Post-Outage Q: Can the facility achieve run rates above 50% after the outage?
A: The facility has already reached 77% on the feed extruder and 110% on the final product extruder (absent the bead issue). Post-outage, they plan to start at 50% and ramp up to 100% or beyond, feeling confident in hitting high rates across the plant. -
CapEx Reduction from Learnings Q: Will learnings from Ironton reduce CapEx for future plants?
A: Yes, operational learnings from Ironton are expected to significantly reduce CapEx for future projects by allowing reductions in key unit operations and optimizing equipment, potentially increasing rates with minimal changes. -
Addressing Short Seller Claims Q: How do you respond to the recent short report's claims?
A: The report contains inaccuracies. The solvent used is critical and operates at supercritical temperature and pressure, not just "a bunch of butane." They've faced mechanical challenges typical for first-generation technology but are progressing. Environmental impact studies show a significant reduction in carbon usage compared to virgin polypropylene production due to solvent recycling and lower-than-expected energy utilization. -
Resolution of Bead Issue Q: Is there a plan if the screen changer doesn't resolve the bead issue?
A: Screen changers are standard technology, and they are confident it will resolve the bead problem. They are also upgrading the adsorber column internals and adding downstream filters to prevent bead leakage, ensuring continuous operations. -
Outage Impact on Bondholder Agreement Q: Does the two-week outage affect the bondholder agreement milestones?
A: The outage was anticipated during negotiations. They plan to resume operations, run continuously at higher rates post-outage, and achieve the 4.45 million-pound milestone as per the original agreement. -
Ability to Produce Consistent Products Q: Can you maintain product consistency with different feed inputs?
A: Yes, they are comfortable producing consistent, high-quality pellets across various feed materials and melt flow rates, ensuring desired product specifications are met. -
Faster Startup for Future Plants Q: Will learnings from Ironton accelerate startup times for new facilities?
A: While construction timelines may remain similar, commissioning and startup phases for future plants will occur much faster due to the experience gained, reducing time to full operation. -
Environmental Impact Q: Is your environmental impact similar to producing virgin polypropylene?
A: No, third-party life cycle analyses indicate a significant reduction in carbon footprint compared to virgin production. The process recycles solvent and uses less energy than expected, enhancing environmental benefits. -
Relationship with Koch Modular Q: Are there payment holdbacks to Koch Modular due to production levels?
A: There are contractual considerations related to performance measures, but both companies are committed to solving issues, achieving goals, and finalizing the contract. Koch Modular remains a strong partner. -
Transition from Third-Party PreP Q: Who manages PreP operations now, and does this impact costs?
A: The company has taken over PreP operations from equipment vendors, leading to optimization and improved performance, which may positively impact operational efficiencies and costs. -
Seal Issues and Process Stability Q: Are seal issues permanently solvable without major redesigns?
A: Yes, seal issues, particularly with the Scheibel column, have been addressed with implemented solutions. The facility maintains temperature and pressure effectively, evidenced by 97% uptime, with no fundamental process concerns. -
Feedstock Mix and Yields Q: What feedstock mix is used, and what yields are expected?
A: They started with virgin feedstock, quickly transitioned to Post-Industrial Recycle (PIR), and recently added Post-Consumer Recycle (PCR). Post-outage, production will be effectively 100% PCR, using a blend of agglomerate and PCR flake. They've seen good yields and pelletized over 100,000 pellets. -
Adjustments Leading to Optimization Q: How will adjustments during ramp-up affect future operations?
A: The adjustments and learnings will lead to smoother operations, allowing them to optimize processes, reduce operational headaches, and improve reliability in the long term.