Federal
Recycling Technologies, Inc.
3750 West Main Street Suite AA
Norman, Oklahoma 73072
Description
This document provides an overview of a tire recycling project as it
relates to an
owner/ operator of that project.
The project
will require approximately $26.3 Million in Capital with annual
earnings on an
EBITDA basis of $18,905,067 (Earnings Before Interest, Taxes,
Depreciation,
and Amortization)
In brief, we have taken a proven tire recycling technology, applied
advanced systems
control for quality control and enhanced the properties of the product
stream to produce two
high grade commodity products: carbon black similar to N-326 and a
solvent oil with the
properties of ASTM 104A. The applied technology is commonly used
in petroleum refining
and cosmetics manufacturing.
Our technology recovers approximately 6 pounds of a commodity grade
carbon black and
1.3 gallons of a commodity grade plasticizer (solvent) oil from each
scrap tire. Annual plant
capacity, operating at 80% uptime, will be approximately 8,136 tons of
carbon black and 3.7
million gallons of plasticizer oil.
As we proceed in marketing this technology, our goal is to make the
process of recycling
scrap tires completely free of any dependence upon governmental subsidy
support. Since
just about every state has tire recycling activity (mainly confined to
shredding of tires) the
raw material (shreds) may be purchased on the open market at prevailing
prices. However,
tires can be shredded at the plant and receive approximately $20.00 per
ton in tipping fees.
For raw material quality control, we prefer on-site shredding
operations.
Our process breaks down the polymer structures in the rubber to allow
us to produce high
grade commodities: carbon black and a water-white solvent
(plasticizer oil).
In brief, processing costs are estimated at $456 per ton, the commodity
products have net
revenue of $1,131 per ton of shreds. The net operating profit is
$675 per ton, excluding taxes
and debt service.
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An important factor to consider in your analysis of this material is
that the addition of a
drum filling facility to sell the oil in 55 gallon drums will add
singificantly to the plant earnings.
The annual earnings stated earlier of $18,905,067 are the
result of approximately
$7,290,000 per year of net income derived from selling the
plasticizer oil in drums lots
rather than in 6800 gallon tanker loads.
Our plants will process 28,000 tons of shreds in a four reactor plant
or about 2.8 million tires
per year and, consequently, generate net operating income
of $18,905,067 annually,
before taxes and depreciation and debt service.
Pyrolysis
technology has been applied for over 75 years in many chemical
processing activities.
Pyrolysis
was used in Germany during World War II to supply 90% of their aviation
fuel.
After
the war, an engineer-scientist on the team, Mr. Franz Rotter, designed
a similar system to
recycle
scrap tires to recover oil, carbon and steel. Twenty years ago Rotter
moved to Portland,
Oregon where he continued his work. The technology was developed
and installed in
Pennsylvania
in 1985 where it has operated commercially since installation.
Over a several year period, it has become apparent that for a tire
recycling plant to be
successful it should not rely on tipping fees. It was very clear
that a national trend in scrap
tire legislation would encourage the development of fee supported
shredding operations
whereby scrap tires would be plentiful as raw material for pyrolysis
plants.
Consequently, FRT asked Gilbert Denison to join the company as senior
vice president.
Dr. Denison is the chemical engineer who is responsible for today's
auto and truck tire. Dr.
Denison developed EPDM rubber in 1962 while working for Exxon.
Dr. Denison's expertise
in building tires is applied in our recycling efforts. His
extensive experience as a polymer-
manufacturing specialist provides the patented and proprietary values
to the enhancement
technology for the output of our tire pyrolysis plants.
As a result our research and tests, it was determined that a pyrolysis
(depolymerization)
system can produce very high grade products if these products are
depolymerized and
extracted properly during the process. The solvent oil from a
tire has a market value of
$2.72 per gallon; sold in bulk quantities and $5.15 per gallon in drum
lots. The carbon
black has a market value of $0.80 per
pound. Two major U.S. manufacturers of carbon
black have closed down their U.S. facilities
because of environmental restrictions.
The U.S. auto industry has mandated
25% recycled content in all materials going into new
cars and trucks. This will have a
positive effect in marketing "recycled" carbon black and
increasing the demand for recycled content
in tires and other rubber goods.
The technology we utilize is well-proven, the pyrolysis of tires
produces consistent,
commercial grade products equivalent to N-326 carbon black and ASTM
104A plasticizer
oil. The market for these products is large and growing. If
we recycled every scrap tire
produced annually in the U.S., 281,000,000 tires, we could supply only
one half the
annual U.S. demand for carbon black.
Pyrolysis is a continuous depolymerization process that heats shredded
tires in the
absence of air and converts the shreds into oil, carbon black, steel
and gas as
marketable commodities.
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Our research and market analysis cast a new light on tire
recycling. It is now affordable to
buy shreds as raw material from shredding companies if, for some
reason, whole scrap
tires were not available. At the least, the profitable recycling
of scrap tires is not dependent
on tipping fees.
A typical four-reactor plant will employ 39 skilled and professional
full-time people. The tire
recycling equipment operates 24 hours per day, seven days per
week. The pro-forma is
attached. The numbers are conservative and assume 80% uptime for
a plant.
It takes a population of 3,000,000 people within a 300-500 mile radius
of a plant to
supply scrap tires. The basic information is as follows.
Plant capacity is 4 tons/hour
(400 tires/hour). The payroll requirements are 39 people.
The plant equipment cost is $10.6
million. It will have annual net operating profits of $15.7 million.
In addition to the $8.64 million investment in plant processing
equipment, plant facilities
require a 5-10 acre site, fencing, truck scales, office and plant
building, air and waste
disposal permits, utility services to the site, working capital and so
on. A generalized cost
estimate for these additional items is approximately $13.7 million.
For an estimated total investment of $22.4 million, a plant will earn
an internal rate of
return of 60% based on a 12 year life. Cash on cash payout is 20
months.
The SEC PV 10 for a plant is $92.0 million.
FRT guarantees the design and operation of its equipment to meet
quality and quantity
specifications. This coverage
is through a national insurance
company in the
amount of $50,000,000.00 per
plant.
Lead time to build a plant is six months; this normally allows
sufficient time for site specific
improvements, including permits, to be done.
The commodities are easily transported by truck; strong markets exist
throughout the
United States. The world wide demand for rubber products is
growing at the rate of 3.5%
annually.
The payment schedule for the 4 tons/hour capacity plant equipment is
30% with purchase
order, 30% due 30 days after the purchase order date, 30% due 60 days
after purchase
order date, 5% to be paid when plant is tested for production capacity
at manufacturer's
facility. The remaining 5% is paid when plant is accepted at permanent
location.
A suitable performance bond can be provided, to support the engineering
and construction at
the plant site with a turn-key installation. Through two of our
affiliated design/construction
team members, C.H. Guernsey & Company and Scott Guernsey Solutions,
L.L.C., all site
related work can be bonded within their $80,000,000
limit.
Since FRT has been asked to staff and
operate plants for its clients, the analysis
presented in this document provides for FRT plant management and
marketing
responsibilities.
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FEDERAL
RECYCLING TECHNOLOGIES, INC.
Financial Pro-Forma for a 4-Reactor
(Four Ton/Hour Capacity)
Tire Pyrolysis and Recycling Plant (1)
Annual Cash Flow Summary
REVENUE
PRODUCT
QUANTITY UNIT
REVENUE GROSS
YEARLY REVENUE
(per
year)
(2)
Tire Pyrolysis Oil
3,720,000 gal
$5.15/gal
(3)
$19,158,000.
Carbon Black
8,136
tons
$0.80/lb.
13,017,600.
Steel
358
tons
$0.10/lb.
71,600.
Methane Gas
112 Million Cubic Ft.
$6.70/thousand CF
250,400.*
TOTAL
$32,247,200.
Less License Fee @3.5%
1,128,652.
Add tire tipping fee @ $20 per
ton(28,000 tons)
560,000.
NET
$31,678,548
EXPENSES
DIRECT COSTS
Direct Labor (Pyrolysis)
$ 1,168,133
Direct Labor (Shredding)
443,456
Direct Labor (Drumming)
216,320
Maintenance
2,339,000.
SUBTOTAL DIRECT
$4,166,909
INDIRECT COSTS
Operating Supplies
$240,000.
Office & Misc.
180,000.
Facilities
560,000.
SG&A
639,884
Purchased Gas &
Elec.
685,000
FRT Operating Fee
6,301,688.
SUBTOTAL INDIRECT $8,606,572
TOTAL
$12,773,481.
NET YEARLY CASH-FLOW (Before Tax and Debt Service)
$18,905,067.(4)
*All gas is used to fuel pyrolysis units and engine/generators
for plant electrical power. No revenue realized.
Note 1: Total Capital investment for a 4-reactor
plant is estimated at $26.3 million ($10.6 million complete pyrolysis
plant
equipment plus $15.7 million for land and facility design, buildings,
site improvements, permits, shredding
equipment, engine generator, fire protection, tank battery, laboratory,
office building, truck scales, utility services,
office furniture, computers, working capital, and other items too
numerous to list.
Note 2: These cash-flow projections are based on
operating the plant at 80% up-time, or 7,008 annual hours running time.
The following costs assumptions were used in the projections.
Direct Costs Include:
Labor-$58,964 per man year, includes 30% for
FICA and benefits.
Indirect Costs Include: SG&A-details for
Sales, General and
Administrative are available.
Note 3: Oil can be sold @ 2.72/gallon or 5.15/gallon
in drums. Use drum price
Note 4: Based on a 12-year life of equipment and the
associated cash-flows, this $26.3 million project has a cash-on-cash
payout of 20 months. The internal rate of return for the project
is71.7%. The SEC PV 10 is $128.8 million.
Revenues and expenses are based on conservative estimates and market
conditions as of 8/22/06.
Rev:3-15-97(8):(C)FRT\trp12-9-97/2/26/99:9/27/99/2/21/02/5/19/03,6/22/04,8/24/2004,4/20/06,8/22/06