Carbios-Chef Ladent: "We can recycle 100 percent of the waste "

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by Julia Groß, Euro am Sonntag

Plastik has fallen into disrepute, too much of it ends up in the environment, and production based on petroleum does not appear to be sustainable enough. Not only bottles and packaging are a problem, but to an even greater extent textiles that contain synthetic fibers. The flood of clothing that is produced every day is a one-way street from a sustainability perspective. This is because the fiber mixture has so far hardly been able to be recycled economically. French company Carbios has technology that can change that, says CEO Emmanuel Ladent.

€uro on Sunday: Mr. Ladent, Carbios has just entered into a large-scale partnership with shoe and sportswear manufacturers On, Patagonia, Puma and Salomon. What is it about?

Emmanuel Ladent: Carbios’ main activity is the bio-recycling of PET. PET is a type of plastic found in bottles and packaging, for example food industry and found in the cosmetics industry. However, two-thirds of global PET consumption is made up of polyester fibers for textiles, clothing and sportswear. We have already proven in the past that our recycling technology works with packaging with L’Oréal, Nestlé Waters, Pepsico and Suntory, major partners from the beverage and food industry. Now we are entering the textile industry. That means at least doubling our market size. The goal of this two-year agreement is to prove to our partners that our bio-recycling technology works. We collect textile waste, process it and are able to produce polyester fiber with the same qualities as virgin polyester.

What is the financial structure of the agreement?

To be part of this consortium, the brand manufacturers pay an annual fee. We have agreed not to disclose the amount, but it is not a “free lunch”. The corporations pay because they believe in the technology. So it’s not an investment on our part.

And have the members of the consortium committed to continue working with Carbios if they are satisfied with the outcome of the collaboration?

We do not have an exclusivity agreement with them, but of course we will speak to them as a matter of priority, this also applies to our plastics consortium. Our first industrial plant in north-eastern France will process 50,000 tons of waste per year, there will be no exclusivity guarantee for the partners in the consortium.

How does that work specifically? So you use products like shoes, jackets and t-shirts?

Yes, we can process anything made of polyester. We have already done this on a laboratory scale and now we will do it in our demonstration plant.

There is already recycled polyester. What is the difference to the Carbios method?

Today’s recycled polyester fibers are recycled from bottles. Instead of making new bottles out of it, a polyester fiber is made. The main disadvantage here is that this process is not a cycle. Because it only works two or three times, then the product goes to waste. Carbios’ technology allows for much more recycling and a wide range of different PET waste. The second big disadvantage of conventional technologies is that the price of the used PET bottles increases very rapidly. Because there is competition between the plastics industry and the textile industry for these bottles, because they are basically the only waste that is really recycled today.

Why is that?

Mechanical, traditional conventional methods can very easily recycle transparent bottles. Very few companies recycle food packaging and there is no serious effort in textiles today, so all recycled PET comes mostly from clear bottles. For Carbios it doesn’t matter if it’s textiles, colored bottles or food trays, our process always works the same way. The nice thing is that because of this we go from 25 percent of the waste that can be recycled to 100 percent of the waste.

Could you please explain the two different processes a bit.

In mechanical recycling, you take the plastic bottles, heat them up, and create a kind of resin that you use to make a new bottle. You do that two or three times, and then the plastics lose their strength, among other things. With our technology, we take the waste and break it down into its individual building blocks, we depolymerize the plastic. The result is the starting components of the plastic, from which new goods can be produced, as in the original synthesis from petroleum, over and over again. There is a fairly old chemical method using solvents and heat for the depolymerization process. At Carbios we use enzymes and it’s a much more environmentally friendly technology because we need low temperatures and no solvents for it.

So they just need the clothes or bottles, water and enzymes?

Yes, we prepare the waste in a specific way. Then we put it in a big container. Today it is 20,000 liters in our demonstration plant, in the future it will be 100,000 liters. Then water and enzymes are added, one kilogram of enzymes for one ton of plastic to be recycled. That sounds very simple, but of course we did a lot of research on the enzymes before we got to this point.

Where did you originally find the enzymes?

They come from a sample of microorganisms from leaf compost, but have been optimized by our researchers for years since then. Today we have over 50 patents for the enzyme and the process.

What is the business model?

We estimate the global market for PET at 100 million tons per year. Only ten million tons of it are recycled. The market is growing at an average rate of four percent each year. The recycled content will increase from 10 percent to around 2035, 2040 to 50 percent. So there is a huge shift in the market away from virgin plastics derived from petroleum to recycled plastics made from waste. With our model, we will claim the lion’s share of this growth. We expect to open six to ten facilities over the next three to four years, primarily through the licensing of our technology. So there will be no costs, our business model is based on license fees and the income for the enzymes. Also, we believe that we can generate additional revenue through the Carbios brand because Carbios’ technology is biological and unique in the world today. We believe this has value that brands will pay a premium for.

Licensing means a company licenses your technology and then deploys it on an industrial scale for customers?

Exactly. The first investors would probably be the plastics manufacturers. Our partner for the first project is Indorama. The company is the world’s largest PET producer and has announced an investment of $8 billion in recycling by 2030. We are also in talks with waste disposal companies and with some brand manufacturers who want to collect and recycle their own waste. So there will be different models.

And this is all driven by regulation?

In fact, in Europe, 25 percent of textile waste will have to be recycled by 2025. That’s practically tomorrow. For plastics it is a bit country dependent. But broadly speaking, the EU has a commitment to achieve 25 percent recycled content in all plastics by 2025. Even more important, however, are the pressure from consumers and investors and the voluntary commitments made by brand manufacturers. All the big brands like Nestlé, Pepsico, Nike, adidas have made commitments. Some are very aggressive.

Commitments can be broken.

Yes, but not that easily. When it comes to ESG criteria, investors check very carefully whether you have obligations and whether you are complying with them. So companies take it very seriously.

Carbios recycled PET is qualitatively comparable to newly synthesized PET. How will they differ in price?

We calculate a premium of 20 to 35 percent compared to mechanically recycled PET because mechanically recycled PET is less pure and the quality is much lower. We deliver food grade quality with no contamination in the plastic and a much higher recyclability. That has value. However, many of the brand manufacturers are not that price-sensitive anyway, because the PET in a cosmetic, water or beer bottle only costs a few cents.

Last year you raised a lot of money. How long will that last?

Yes, we have a good cash position thanks to the EUR 114 million capital increase in May 2021. Which is good because the market today would be less receptive to such a large funding round. We also got a loan from the EIB, the European Investment Bank, which is great because it was negotiated on favorable terms. We can work with these cash funds until the end of 2023. Our plants will start production in 2025, so we have to bridge the time in between. So we could do a capital increase or try to get more loans.

So the first income will flow in 2025?

We’re going to start generating revenue from licensing as early as 2023 and 2024, but the lion’s share of the revenue would come from production starting in 2025.

Meanwhile, research and development go on. What is Carbios planning next?

There are other sectors that are interesting for us. The tire industry uses almost a million tons of PET every year. Michelin is one of our partners and also holds four percent of Carbios shares. In the last two years we have also worked intensively on finding solutions for polymers other than PET. PET makes up 20 to 25 percent of plastics. We are not yet ready to go into industrial production of other polymers, but we will do so in the future. My dream is to use our solution for all plastics. But that is probably a long way off.

INVESTOR INFO

carbios

A superior technology and well-known partners – at the moment Carbios is way ahead when it comes to plastics recycling, especially when the enzyme method also proves its worth with textiles. Nonetheless, there are still hurdles to be overcome on the road to commercialization, and Carbios would not be the first pioneer to be overtaken on the home stretch. The stock is cheap thanks to the risk-averse environment. Buying opportunity for long-term investors with the courage to take risks.

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Image sources: Carbios