Republic Services’ materials recovery facility in North Las Vegas will send bales of scrap plastics to Republic’s new nearby Polymer Center, which will recycle PET and sort and ship PE and PP to Blue Polymers. | Courtesy of Republic Services
Republic Services expects to invest about $160 million over the next five or six years into building four polyolefins recycling facilities around the country. When completed, the plants could bring the company up to $32 million in annual earnings. Lotrene Ldpe
The financial projections were recently disclosed by Republic Services executives during a second-quarter 2023 conference call with investment analysts. The July 31 conference call came only hours after Republic, the second-largest garbage and recycling company in North America, announced it would form a plastic recycling joint venture with polymers producer Ravago.
The joint venture, called Blue Polymers, will include construction of four plants that will produce polyethylene and polypropylene pellets for sale into various markets. Republic’s new Polymer Centers will supply scrap PE and PP to the Blue Polymers plants, which will be operated by Ravago.
“This groundbreaking partnership further supports our efforts to lead in a plastic circularity. Blue Polymers will utilize recycled olefins from our Polymer Centers to create blended pellets for use in manufacturing sustainable packaging,” Jon Vander Ark, president and CEO of Republic Services, said during the call.
Republic operates 74 recycling centers around the U.S. Called materials recovery facilities (MRFs), the industrial plants take in residential and commercial mixed recyclables and sort them into different materials, sending the unprocessed commodities to end markets or intermediate processors.
In early 2022, Republic announced it would vertically integrate by building a series of Polymer Centers, which will take mixed-plastic bales from the MRFs and clean them up. The Polymer Centers will produce hot washed PET flake for sale into packaging markets. The PE and PP scrap will go to the Blue Polymers Centers.
The following are recently released financial projections for the Polymer Center and Blue Polymers:
Republic plans to open four Polymer Centers, with the first, in Las Vegas, expected to come on-line late this year. Another Polymer Center, at an as-yet-undisclosed Midwest location, will come on-line in late 2024.
The facilities will be owned and operated by Republic Services.
“Demand for recycled plastics remains strong as the consumer goods industry continues to work toward achieving their sustainability goals,” Vander Ark said. “For example, we are partnering with a Coca-Cola Company to supply recycled PET from our Polymer Centers for use in sustainable packaging.”
In response to a question during the call, Vander Ark said Republic expects to generate roughly $15 million worth of earnings before interest, taxes, depreciation and amortization (EBITDA) from the Las Vegas Polymer Center in 2024.
“You can then think of about an incremental $20 million per year thereafter, right, as we bring other centers online, ultimately getting to about $80 million worth of EBITDA at run rate in 2028,” Vander Ark said.
The business case that the Polymer Centers are based on is that they’ll take material generated by Republic, and they won’t be dependent on outside suppliers to pencil out, he said. As a result, “ we don’t have supply risk, which is great,” he said.
That being said, the Polymer Centers will be built with the capacity to take other companies’ scrap plastic bales over time, Vander Ark said. Over time, if demand from outside plastic scrap suppliers continues to grow, “ we could imagine five or six centers.”
Noting that the Polymer Center will be located in different regions on a hub-and-spoke model, Vander Ark said, “We’ve got the flexibility in the network over time that if the demand outstrips the capacity of the four, that we’ll continue to invest.”
Blue Polymers expects to build four facilities around the country, with the last of them coming on-line by 2028.
During the Q&A portion of the call, Vander Ark noted that the Blue Polymers centers will provide a guaranteed contractual price for the polyolefins produced by the Polymer Centers (Ravago will also be marketing a portion of the PET flake produced by the centers). In that way, the Blue Polymers joint-venture reduces the offtake pricing risk that the Polymer Centers will face.
He also noted that Republic will benefit not only as a supplier but also as a 45% owner of the Blue Polymers joint-venture, sharing in the profits.
During the call, Brian DelGhiaccio, Republic Services’ chief financial officer, said that Republic Services’ allocable share of Blue Polymers’ capital expenses will be about $40 million per facility, or about $160 million total for construction of the four facilities over the next five or six years.
In terms of profits, Republic Services is forecasting each center will generate $7 million or $8 million in EBITDA per year. As a result, in 2026, when two of the Blue Polymers centers are expected to be finished, Republic should enjoy about $15 million of EBITDA from Blue Polymers.
“Ultimately, we see $30 million to $32 million worth of EBITDA for all four at run rate in 2029,” DelGhiaccio said.
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