Scandinavian Enviro Systems (Enviro) – a Swedish tire pyrolysis equipment designer and operator – and a global tire manufacturer Michelin have signed three definitive agreements that form the basis of the companies’ strategic partnership. The agreements regulate the terms for a jointly owned plant for the end-of-life tire pyrolysis in Chile, the terms and conditions for Michelin’s use of Enviro’s patented technology, and payment for this, and the terms and conditions for payment to Enviro for deliveries of technology and services to the jointly owned plant in Chile.

Before the agreements can enter into force, they must be approved by Enviro’s owners at an Extraordinary General Meeting (EGM). Notice of the EGM will be published separately.

The agreements that have now been signed form the foundation of the strategic partnership that the two companies have now entered. The three agreements and their main content are as follows:

  • A shareholder agreement concerning a joint venture the purpose of which is to establish a jointly owned recycling plant in Chile based on Enviro’s patented technology. The pyrolysis plant will be able to recycle 30,000 tons of tires a year.
  • The agreement entails that Enviro will own a 10 percent stake in the joint venture while Michelin will own the remaining 90 percent. Under the agreement, Enviro will also make a capital contribution of approximately MSEK 20 to the joint venture and will receive royalty payments in accordance with license agreement described below.
  • A license agreement that extends through 2035 and which entitles Michelin to establish its own tire pyrolysis plants based on Enviro’s technology. When establishing such plants, Michelin will pay Enviro with a fixed amount per plant and pay royalties to Enviro based on a percentage of the plants’ sales.
  • An agreement that regulates the conditions and the payment to Enviro for design, as well as engineering and project services in connection with the establishment of the plant in Chile. In total, Enviro will receive payment for this of approximately MSEK 15. The 4 MSEK order communicated in January is part of that total amount.

Achievement of central strategic goals

With the agreement and the strategic partnership in place, Enviro has achieved 3 of 4 central strategic cornerstones and established decisive prerequisites for an aggressive expansion phase. “Through the partnership with Michelin, we will achieve our first full-scale recycling plant, which is decisive for our ability to scale up and commercialize our technology. The partnership with a leading tire manufacturer also gives us unsurpassed opportunities to improve our recovered carbon black and pyrolysis oil, which will naturally further strengthen our position on the market,” says Alf Blomqvist, Chairman of Enviro.

Strong base for aggressive expansion phase

Since the letter of intent on a strategic partnership was communicated in April last year, Enviro has been met by a strong increase in interest in establishing collaboration with the company on various levels, from both tire manufacturers and rubber and carbon black producers, but also from operators in the oil industry.

“This partnership has validated our leading technology position in a way that we would never have achieved by ourselves. We are now receiving inquiries from players in more industries relating to everything from purchasing to the establishment of various forms of collaboration. The oil that we recover from the tires is attracting growing interest from the oil and chemicals sector, which regards it as crucial in managing a transition to a more circular economy and our assessment is that, in the long term, oil will be our single most valuable end product,” says Thomas Sörensson, CEO of Enviro.

Virtual information meeting in conjunction with the Extraordinary General Meeting

Since Michelin, due to its large shareholding in Enviro, is to be regarded as a closely related party, the approval of an Extraordinary General Meeting is required before the agreements now signed can come into force. As facilitation for the shareholders and the capital market in evaluating the agreements and their effects for Enviro, the company will arrange a virtual information meeting for owners and the capital market ahead of the EGM. At this meeting, representatives of the company and its Board of Directors will answer questions about the agreements with Michelin and provide information on the opportunities that the partnership entails for Enviro’s development going forward. In this context, the company will also report on its view of the development of the global market for recovered materials from end-of-life tires and the opportunities these offer. A compilation of the most important points in this report will be distributed to the capital market in the form of a press release in direct connection with the virtual meeting.

Notice of the EGM will be published separately. The notice of the EGM will also contain detailed information regarding the virtual information meeting, including details of how to register to participate. Participants who wish to have questions regarding the agreements answered at the EGM, will have to submit these in advance. Additional information about how to do this will be provided in the notice to the EGM.

Original press release by Enviro.