Origo Partners Invests in Chinese Tyre Recycling Company

Investment house Origo Partners Plc paid US$6.65 million for a 20 per cent equity stake in Jinan Eco-Energy Technology Co. Ltd on 25 June. Jinan Eco-Energy, a Chinese waste plastic and scrap-tyre recycling systems provider, designs, develops, markets and operates pyrolisis-type recycling systems that convert scrap tyres into fuel oils and other by-products. According to Origo, the company benefits from proprietary technologies that are either protected by international patents or have patents pending and an experienced management team with significant industry and technical experience. Eco-Energy's systems are provided as turn-key solutions to third party project developers or operated in joint-ventures with selected local partners.

Eco-Energy's technology is already successfully deployed in a commercial scale recycling plant in Taiwan with a processing capacity of 20,000 tonnes of scrap tyres per annum, and the company reportedly has orders from customers in Europe, South East Asia, and China for the delivery in 2010/11 of recycling systems with an aggregate annual processing capacity of 90,000 tonnes of tyre and plastic residue. In addition, Jinan Eco-Energy is said to be co-developing two plants with joint venture partners in China and Germany with an initial aggregate annual production capacity of 30,000 tonnes per annum.

Under the terms of the recent share deal, Origo will subscribe to US$3 million of redeemable preferred stock for an equity stake of 10.5 per cent and maintain an option to invest an additional US$3.65 million for a fully-diluted equity interest of 20 per cent in the business. The proceeds of the fund-raising will be dedicated to sales and marketing, general corporate purposes and for funding Eco-Energy’s capital contribution to the development of its German joint venture. Origo’s investment in Eco-Energy will be held through Achieve Stars Development Ltd, a special purpose holding vehicle.

Capitalising on European and domestic Chinese markets

Commenting on the announcement, Origo CEO Chris Rynning said: “Dealing with growing landfills of waste plastic and scrap tyres is a growing problem in China and across the globe. We believe Eco-Energy’s recycling systems provide a compelling alternative to non-value added methods of disposal, especially in mature markets with well-established environmental regulatory regimes. At the conservative end, we expect that recycling plants based on Eco-Energy’s technologies will be processing in excess of 100,000 tonnes of scrap tyres and waste plastic per annum by end of 2011 with significant future potential for growth given the estimated 4 billion tyres in landfills around the world. Having worked closely with Eco-Energy’s management over the last year, we are confident that the funding and ongoing assistance from Origo will enable the company to quickly grow its operations in China and abroad to capture this opportunity.”

According to the latest data compiled by Tyres & Accessories, Chinese domestic market tyre arisings are likely to total 200 million units a year by the end of 2010. With total annual retread production amounting to just under 10 per cent of that (19 million tyres) there is clearly huge recycling potential to companies with the right technology and infrastructure.