Quantafuel ASA

OSE:QFUEL

Earnings Call Transcript

[Kjetil Langland Bohn, Chief Executive Officer]

Good morning, everyone, and welcome to the third quarter report of Quantafuel. Sorry that we're a little bit late. We had some challenges here, but now we have moved. I hope that everyone can hear me. We are going to go through our plans for future plans. We have announced this evening that we're looking at Esbjerg in Denmark, and we're going to go through a couple of acquisitions that we have done recently. We're starting to show you some [ pictures ] from the plant in the Skive. What is important to understand and see when it comes to Skive is that the Quantafuel technology works fine. We are able to reduce impurities, upgrade our products. All the products that we have produced to date is within the specifications that we have received from BASF. And [ we said that ] to them, they are within the specification, and they can be used with this new project.We are very happy to see how the plant works. Both system works very well, but we're still in the process of ramping up the first line. And I want to go to that in a little bit detail, what we're doing. Actually, we wrote a lot about it this morning in the third quarter report. Here on the picture is the reactors, pyrolysis reactors. As all of you know, the plant in Skive exists over 2 different separate systems. First of them is the reactor itself, where we see the plastic, creates gas, pyrolysis gas. And after the reactor, our technology where we upgrade and purify straight through products that come in.We are struggling a little bit with these reactors. Basically, we have, since the beginning of using plastic in the system in -- it was the 8th of September, if I'm not mistaken, that we started to send plastic through the system. We have produced too much noncondensable gas, basically too much gas in the C1, C2, C3 fractions. And the reason for this, we start -- it's too hot or too warm with the plastic and just the reactor. This means that it's too much cracking. It's too much gas production in the early phase when we turn to plastic into the system.We know that when we have full load, when we have the capacity of one reactor, then we had the 600 kilos each hour, it will correct itself. We know that at full capacity, we will have the right mass balance. But we have some challenges in timing [indiscernible] and the reason for this is that when we have a low amount of plastic, there, we don't have enough plastic crew in the first part of the reactor. It gets too hot. Second -- the second part of this is that when we produce this amount of gas and we don't have enough plastic feeding into the system, there is a too long residue time within the reactor. I know that this is a little bit technical and I know that this might be difficult to understand, but I'll try to explain this in detail. So when we are entering plastic into the system, we have produced too much noncondensable gas because of the time within the reactor, it gets time to produce also difficult hydrocarbons, and it did produce a little bit too much gas at the moment. When we started back 6, 7, 8 weeks ago, we've reduced as low as 80% gas and only 20% liquids. We have now taken a number of steps and we have now, over the last 5 to 6 weeks, reduced the amount of gas from 80% to 40%. And for the last period, we've also rebuilt the line to allow for more gas in this build-up pace. First of all, we have installed a system to cool reactor, to cool the first part of the pyrolysis process. We have changed operation to decrease time within the reactor, and they're changing several premises to allow for better conditions within the reactor. So we are in the process now. We build up our operations to get to full capacity. And we wanted to show you a little bit in details where we are. So to repeat this, I know that this is a little bit difficult, but we started at 80% gas and 20% of liquids. They now come down to 40%. We've taken a number of steps the last couple of weeks and come down to 40%. Over the next couple of weeks, we aim to get down to 20% where we can then go for maximum capacity at one line. And this is the clear goal and a clear ambition on what we're doing to get one line at full capacity, to show ourselves and everyone else that we are capable of running one line and then show the properties of the Quantafuel system. We will get there, but we are now in the middle of this process. As we have said before, it's time consuming because every time they make a change, it takes days to monitor. And every time, we need to make physical changes to the lines, we have to cool it down. We have to make the lines and then they have [ reheat ] up the gas. And this process takes 4 to 5 days. This is why this is a time-consuming effort. But more importantly, than where we are when it comes to the amount of plastic that we are running, is how the Quantafuel technology is working. Again, the system consists of 2 separate part. First part is the reactor. We have some challenges with the mass balance in the reactor today. We are working to get it up to full capacity. But what we have seen is that the Quantafuel technology works. We are capable of reducing impurities like sulfur, ash and chlorine. We have the right distribution within the different fractions. And the output is within the specifications that we have received from BASF. Here is the picture of the products that they have produced at Skive. On the left side is the pyrolysis oil. It's black because there are some heavier fractions in it. But then we distill it. We have in the middle here, a diesel fraction. And at the right side, we have a naphtha fraction. And if you look at this, it's totally clean. It's free of any impurities and it has tremendous [indiscernible] portion. So the important part on this slide now is that we are ramping up production. We have some challenges when it comes to the mass-balance in the reactor. We have taken several steps to break that. We are walking up that hill, and we will get to the top of that hill. It's a Quantafuel technology, the steps to purify the products and change the products have worked [ hard ].Now we have made a number of acquisitions lately. You have seen before that we first bought 49% of Replast in Kristiansund. And we have now agreed to purchase 100% of Replast. And then you might wonder why are we doing this? First of all, Replast is today mechanically sorting plastic waste. They have their own infrastructure. They have access to logistics. They have a lot of technology and a lot of knowledge on mechanically sorting of plastics. So why are we entering this market? First of all, we need and want the knowledge they have and the technology they have in sort receiving and sorting plastic material. They receive plastic waste from households in Norway through Grønt Punkt and others. And they have been able now, over the last couple of years, to sort this and get high-quality material in the [indiscernible]. Secondly, they have also proven that they can take this material and sort it to a degree that is usable for us for chemical recycling. So there are some very other good reasons why we are doing it. First of all, in Kristiansund, we are now going to phase a combined mechanical and chemical production site. With this site, we're going to have the highest possible recycling rates in the world. We're going to have full control of the feed into the chemical reactor. We are also going to test some new technology. We have, for the last 1, 1.5 years, tested a number of reactors that would be an alternative to the reactor in Skive. We have found 1 reactor that we believe is better suited for our future. We are going to test this reactor in scale. And we are recently beginning a green light from the environmental department in Norway to establish a pilot in Kristiansund. We're going to do that over the next couple of months. We're going to have this pilots in production during the first quarter next year. This pilot will have a capacity of 10 tons per day. We are also, in this facility, going to test our new catalyst, our new naphtha catalyst that we have developed over the last year. When we started the relationship and the partnership with BASF, we also said that we wanted to, in the future, not only produce diesel in Antwerp, we'll also only produce [ gas ]. And we have then, together with them, developed a new catalyst. We're going to test this together with a new reactor in Kristiansund. So this is going to be a second Skive. It's going to have the same type of capacity, 20,000 tons. It's going to have the same type of revenue, NOK 150 million per year. NOK 50 million to NOK 60 million EBITDA per year, and we're going to use it then to test a new technology in scale that we will believe -- that we believe will be important in the future buildup of this company. They are also then, together with the Replast and our other partner, Geminor, started to receive household waste from Norway. We are sorting this and they're sending it to Skive. So far, we have received 3,500 tons of household waste, and they'll sort it this and prepare it for chemical research. And this is an important point because it's not difficult to recycle 1 type of plastic that is sorted that is washed. You can do that with a number of different technologies. But that's not what Quantafuel is all about. Quantafuel is all about taking the hardest and most difficult fractions in the market. That waste that you, me and everyone else, dropped in the bin every day, the waste that are contaminated and transform that into high-quality products. And we are doing that, together with Replast, they have the technology to do that and together with our partner, Geminor.And we have started this process, and we have received 3,500 tons from household waste in Norway. And we then get paid the same way as any mechanical sorting facility in Germany or other places would do. And what do we get paid if we receive this type of waste? Well, the market is in the range of USD 200 and USD 300, USD 350 per ton. This is important for the financial viability of Quantafuel as we are capable of using these fractions that have a huge negative financial, environmental impact on the society.So if you look at the climate, impact of what we're doing. There is a report from BASF that looks at the CO2 footprint of different ways of using the plastic waste. Incineration, of course, has the highest environment footprint. Mechanical recycling and pyrolysis on its own is more or less equal. The Quantafuel, when we do this in long operation, when we receive waste, then we transform, and we change the molecule structure and we clean this in one operation, we get to half of what is normal for a pyrolysis of what -- this means that we have a CO2 footprint that is much lower than mechanical recycling, of course, much lower than incineration. As most of you know and we have said many times before, we aim to get to the point where we take 80% of the plastic that are held into the system to become liquids, 10% will become ash, and 10% will become noncondensable gas, which is what I've explained earlier today that we have today, producing a little bit too much. All our liquids will be upgraded to a point where they can easily be transformed to new plastic, and they have proven, over the last couple of months, but this system of upgrading and removing impurities works fine, and the products that we have now produced in Denmark are ready to present to [indiscernible] BASF to be used for producing new plants. We have also now made an agreement with our partner, with our development partner, Hulteberg, that we have acquired now some certain IP rights and license rights to the catalysts that they're using and the new catalysts that we have developed both for producing naphtha and also for transforming biomass into liquid products. And we are now establishing, in June, outside Malmø in the southern part of Sweden, our own R&D team with dedicated resources to further improve our IP base and have focus, in the years to come, to further improve what is the core of the Quantafuel technology, the catalysts, the ability to just form this to high quality. We wanted to show you a little bit of how the future looks for Quantafuel. We are now in the process where we have this first rather small plant in Denmark. We are still in the ramp-up phase, as I've tried to explain to you. We are still going to take weeks, maybe also months to get into full production, but we will get there. Skive is the place where we showcase what we can do with our technology. Skive is the place where we demonstrate this in scale and intent before our operation where we show this in commercial scale, but still Skive is more. BASF alone uses 20 million tons of naphtha each year. We are going to produce a flow capacity in Denmark 16,000 tons. To be relevant to them and to be relevant to the world, we need to do this in industrial scale. And that is the plan for us to do this in a scale that matters. This means that we are going to establish large-scale production facilities, 80,000 tons, 100,000 tons, 120,000. And we have been now in cooperation with Rambøll, developed FEED study, the basis for a new factory of 80,000 tons, where we, of course, have taken all the learnings from Skive both in the construction phase and now in the operational phase into a new FEED. This is going to be ready in December this year. So that we can be able to take investment decisions on new large-scale plants during the first quarter next year. We have now also this week decided that the first plant in Denmark will be invested. We have, together with Rambøll, looked at close to 100 different sites. And we have found one in Esbjerg that we believe is the right one for us. It has the right infrastructure in terms of terminals, train and access with -- to a road. It has a superb infrastructure. It has a good availability, and it's also a huge plastic industry around this place in Esbjerg. And this is how the future for us looks. This is how an 80,000-ton production facility will look in the future. For more pictures of the set, and it is, of course, important for us when we make this huge scale-integrated process facility that we have our environment in -- as the first priority and that we optimize when it comes to the use of energy. Here, you can see also that we have integrated the solar panels and other measures to lower the environmental footprint as much as we can. This the ramp-up then. Skive first. To get this first plant up to a 20,000 ton per year capacity. As I said earlier, and tries to explain, I understand that it might be difficult to understand this technical terms and understand exactly where we are, but we will get there, and we will get to the capacity of 20,000 ton per year. We are then, going to now, during the next year establish a plant in Kristiansund. It will be, as I said, type of the same size as the Skive, but we will do that to test some new technology. And we will do that, together with BASF, as part of our development partnership with BASF that means also, if I didn't say that, that BASF will cover part of that investment. And then we're going to start our ramp up, then we're going to start our industrial scale rollout. We're going to start in Esbjerg in Denmark. We aim to take an investment decision late first quarter, early second quarter next year. And of course, we're working towards having the same kind of decision made for Antwerp, Amsterdam to get a bit [indiscernible]. It's also part of our agreement with BASF. It's also part of our plan with BASF. So we're going to start rolling out capacity together with them. But at the moment, it's not decided where that's going to be. And we hope that these when we come to the summer has: Skive, of course, fully up and running; that we are in the middle of the process in Kristiansund; that but we have a pilot up and running; and a mechanical sorting up and running; and they are in the process of ramping up 10,000 ton in Kristiansund; and that we have made FIDs in Esbjerg, Amsterdam, Antwerp and maybe 1 or 2 other places. So our main priority, of course, is to do the ramp-up in Skive. As I tried to explain and, again, this is a little bit on the technical side, we are in the process now where we are producing a little bit too much gas, but we are climbing that hill. They have gone from 80% to 40%. We have taken steps to increase the amount of noncondensable gas that we can take in ramp-up. We have taken steps to cool down the first part of the reactor, and we're going to apply in that field now over the next couple of weeks and months. Then in parallel with this, we start to establish the plant in Kristiansund, and they're going to complete the FEED study that I just showed you to be able to save an FID for the plant Esbjerg, and then further ramp up production throughout Europe in other places together with Vitol, BASF and most likely other similar partners. To be able to do that, we also need to ramp up the company. Just also this week, we launched a campaign to attract new talent. And we are planning to hire a total of 60 new employees over the next 13 months to be hired at the headquarter in Norway. Most of these people will be on the technical side. We are making teams of 5 to 6 people that are going to follow each of these new projects. And we are planning to have 5 or 6 of these things so that we have the capacity to build 5 or 6 of these large-scale plants in parallel.We have also been given a tool. And the tool is the value of the count of your share and the liquidity in stock. That is a tool that we aim to use the real value for our shareholders. We have now, this week, completed the purchase of Replast. We are using that to establish a second [ count ] with NOK 150 million in revenue and NOK 50 million in EBITDA. We have purchased the rest of Replast for a total of up to NOK 50 million, NOK 40 million now in shares in a total of NOK 10 million in earn-outs. We have the possibility to use the tool that we have been handed. The funds of your stock, our top market value to build on our value chain, they can improve our technology base. They can improve our value chain, and we can use this to make value for our shareholders. We're going to have a strategy. We will have an active acquisition plan to build value for our shareholders. Yes. That was to the end of my presentation today. And unfortunately, we are not able to have any questions today, but I hope that this was understandable to you. And of course, if you now have any questions, please send those e-mails to our team, and we'll do our best to answer your questions. Thanks for your efforts.