The global plastics economy is largely linear. Plastics are produced, used and more than half of them are disposed of with no recovery. It is on record that, about 95% global of plastics are sent to landfill and only 13% recycled. Moreover, some 1m tones of plastic consumption per annum is single-use plastics, with Australia one of the world’s biggest users, generating around 60kg of single-use plastic waste per person, every year. “Closing the loop” between new and recycled packaging is critical to increasing circularity of the economy.

Over a 12-month period, amid the height of Covid-19, the two financiers led complex negotiations that focused on a fundamental shift in the financing structure that was required to meet the requirements of Circular Plastics and its investment-grade corporate sponsors. Dissimilar to a pure-play SPV project financing, the structure has unique features that changed the approach to risk allocation and mitigation, and has implications for the way these smaller scale but hugely significant projects can continue to be developed to create the recycling infrastructure of the future.

Project Overview of Plastic Recycling Plant

Global plastic Recycling Plants will process over 270,000 tonnes of recycled plastic, 2bn PET bottles, into food-grade PET bottles at an estimated project cost of $1b. The project is also supported by US$4.8m in grant funding under the Commonwealth Government’s Recycling Modernisation.

The plant will draw on the expertise of each member of the joint venture through its collection and sorting network, Pact will provide technical and packaging expertise, while companies will buy the recycled plastic from the facility to use in their packaging with contracted minimum offtake volumes.

Mechanical recycling

Mechanical recycling has to do with the processing of plastic waste into secondary raw material without significantly changing the chemical structure of the material. In principle, all types of thermoplastics can be mechanically recycled with little or no quality impairment and it represents “best practice recycling”, almost the sole form of recycling in Europe. In contrast, chemical recycling refers to processes that turn plastic polymers back into individual monomers, allowing post-consumer plastic materials to be re-used.

The initial input is PET plastic bottles, which have been baled and collected from waste collection sites. Bales of PET bottles are placed onto an infeed conveyor to begin the recycling process. The initial part of the process involves state of the art colour and near infrared bottle sorting technology targeting natural coloured PET required for the manufacture of food grade rPET resin . A de-labelling machine assists in removing the existing labels from the bottles. Hoppers are placed along the process flow line in order to collect waste and other non-natural PET byproducts that are consolidated separately and send to other recycling plants within Pact Group for further recycling.

Once processed, the re-cycled pellets are used in the bottle manufacturing process by Asahi and Pact.

Financial structuring

The first step for the Financial structuring of recycling business owner or manager is to put on paper what they know about their business and why it should succeed. The risks that potential investors and lenders are concerned about are real. The entrepreneur has to have both the industry experience and the background research to help assure potential partners that risks can be minimized and opportunities realized

A business plan, written by the company founders, should address the company’s history, its products or services, target markets, competitors, and financial projections. Perhaps most importantly, the plan should provide information on the management team — explaining why these individuals have the unique strengths to make the enterprise a success. In addition to showing how the business will grow and repay investors and lenders if plan assumptions are realized, the plan should give a realistic assessment of the down sides and how risks can be mitigated.

One of the important conclusions of a well thought out business plan will be the amounts of money needed for specific uses during different stages of the business’s growth. The next step for attaining financing is to match each intended use of funds with the appropriate source of financing. Important characteristics about the investment needed include the amount, the use, the duration, the risk and the projected returns.

The most basic distinction between financing sources is between debt and equity. Debt financing is essentially borrowing money for a fee. Typically, regular payments are required and interest rates are charged based on the perceived risk to the lender. Usually the uses of the funds are for fixed assets which have a collateral value which can help the lender recoup losses if the business fails. Sources of debt can include commercial banks, credit unions, suppliers, customers, factor companies, leasing companies, credit card companies, and governmental loan funds.

Angel Investors

Angel investors belong to a variety of associations. These associations can provide referrals to active members in a geographic area and information on the general investment criteria of their members. For example, the National Association of Small Business Investment Companies, Alexandria, Va., represents financial institutions which invest equity capital and long term debt in small, independent businesses.

The Social Investment Forum, Boston, is an organization of more than 1,000 organizations and individuals involved in socially and environmentally responsible investing. The National Venture Capital Association, Arlington, Va., represents venture capital firms. These firms typically invest equity capital in companies with high growth rates and the potential of eventually making a public offering of stock. Finally, the Community Development Financial Institution Coalition, Morrisville, Pa., represents more than 300 community development credit unions, loan funds, investors, and venture funds.

Another strategy for entrepreneurs seeking to find investors is to participate in investment forums or fairs. Many events have been organized around the country by entrepreneurial or venture capital associations to allow promising businesses to make presentations to audiences of interested financiers. The National Venture Capital Association maintains a list of investment fairs around the country.

RECYCLING VENTURE FORUMS

A recent study concluded that investment forums focused on recycling ventures could help strengthen the capital markets for those companies.

The Recycling Venture Forum Study, available through The Northeast Recycling Council, Brattleboro, Vt., and the National Recycling Coalition, Washington, noted that although there are many individual investors, investment firms, finance companies, intermediaries, or other capital sources that are interested in financing strong recycling ventures, reaching these investors is a costly and difficult proposition.

Similarly, investors are looking for new ways to efficiently find new investment opportunities and accurate information on companies, to reduce their marketing and due diligence costs.

Two recycling venture forums are currently planned, based in part on the positive results of this study (see sidebar).

The choice of an investment strategy development for large business should always be considered in close connection with a number of external and internal factors of business activity, including production, financial, personnel, marketing, environmental and others.

Havelet Finance Limited is available to provide financing and loan for implementation and constructions Plastic Recycling Plant. We also offer the following;

• Long-term loans for up to 20 years.
• Organization of project finance (PF) schemes.
• Operations with letters of credit or bank guarantees.
• Financial modeling and consulting.
• Investment engineering.

Website: https://www.havelet-finance.com
Email: credit@havelet-finance.com