Encore Plastics catches the wind

SUREnergy plans to manufacture 33-kilowatt windmills, like the one above, as part of a licensing agreement with Juhl Wind Inc. of Woodstock, Minn. (SUREnergy LLC photo)

SANDUSKY, OHIO (Sept. 28, 12:35 p.m. ET) -- A windmill that soars 100 feet above its corporate headquarters near Lake Erie has helped move Encore Plastics Corp. in a new direction.

 The Sandusky-based supplier of paint sundries is adding wind energy to its portfolio of plastics injection molding, extrusion and thermoforming — as a means of saving energy and as a side business.

Encore last spring became a partner in SUREnergy (which stands for Sustainable Use of Renewable Energy) LLC, a Sandusky-based venture to oversee the selling, financing, installing and servicing of a range of wind-driven turbines from 1 kilowatt to 1 megawatt in size. SUREnergy plans to manufacture a 33-kw model and become the U.S. market leader in windmills of that size.

Encore President Craig Rathbun said wind energy was an interest of his father, John Rathbun, Encore’s chairman who died suddenly March 1 at age 71, about two months after a 50-kw wind turbine began spinning above the building.

“He was in a rush to get it installed and operational,” Craig Rathbun said during an Aug. 28 tour of the corporate headquarters. “It’s almost like Dad was leaving us a legacy — that last whisper in your ear — that said, ‘I can’t help you from this day on; this is where you need to be.’ ”

While struggling like other plastics processors to cope with the economic downturn, Encore — whose three top officials are brothers Craig and Tim Rathbun and their sister Jodi (Rathbun) Conley — has grown in 2009.

Encore has acquired a new line of metal-lidded polypropylene seafood containers from a Maryland firm, and introduced a new line of PET paint trays and liners made with an additive designed to enhance biodegradation and a color that company officials call “Encore earth brown.”

The firm’s Ohio operations include the head office in Sandusky, the primary injection molding plant in Cambridge, and its main warehouse in Byesville.

Encore’s primary thermoforming plant is in Remer, Minn., and in 2008 the company opened a plant in Clearfield, Utah, that does some injection molding and secondary distribution for its customers in the West.

Although they wouldn’t give details, officials said Encore has added a handful of employees to its Utah site this year, bringing the total company workforce to more than 220. That’s a particular point of pride for management, given that Encore had just finished spending $5 million on capital improvement projects when the U.S. banking industry hit the wall in September 2008.

“Our people started to panic in November [2008],” CEO Timothy Rathbun said. “The first thing that we did to our employees, we said to them, ‘There will be no layoffs in 2009 — guaranteed. Whatever it takes, we will do.’

“Starting almost immediately, we hit the market with more aggressive pricing. And people responded.”

A combination of discounted prices for existing customers and the landing of new sales accounts — plus increased efficiencies from machinery upgrades and a 10-day company shutdown at the end of 2008 — mitigated the effects of the recession, officials said: Encore’s sales for 2008 were about $30 million and for 2009 are expected to be about $29 million.

The company’s share in SUREnergy came about as a result of the Jan. 8 installation of Encore’s original 50-kw windmill in Sandusky — a move designed to reduce utility costs that officials said has lowered the head office’s electricity bill by 40 percent.

After the turbine’s manufacturer, Entegrity Wind Systems Inc. of Charlottetown, Prince Edward Island, fell into near-bankruptcy beginning late in 2008, the Rathbun brothers contacted northwestern Ohio wind-energy experts John Fellhauer, owner of Felhauer Mechanical Systems Inc. in Port Clinton, Ohio, and Curtis Stokes of Oak Harbor, Ohio, to get help completing the installation and maintaining the machine.

The Rathbun family came away from the experience sensing a new market opportunity. After discussions with Fellhauer and Stokes, who had formed SUREnergy in January 2008, Encore in May became a partner. “Our investment was seven figures,” Tim Rathbun said.

“We think that there’s a correlation between plastics and energy. When the price of oil goes up, it becomes a lot harder to make a dollar in [manufacturing],” Craig Rathbun said. “I still think $100-per-barrel oil is coming back. The difference now is that the wind is our back.”

Encore’s headquarters is the de facto head office of SUREnergy. The first 100-kw wind turbine that SUREnergy sold, manufactured by Northern Power Systems Inc. of Barre, Vt., will be installed in December for the Huron, Ohio, school district.

SUREnergy is nearly ready to begin assembling 33-kw wind turbines designed by Juhl Wind Inc. of Woodstock, Minn., whose founder, Dan Juhl, is renowned as a pioneer of the U.S. wind-energy industry since the 1970s. A $1 million licensing and distribution agreement between Juhl Wind subsidiary Next Generation Power Systems and SUREnergy was announced Aug. 27, and includes Indiana, Michigan and Ohio.

Parts for the windmills will come from a various Ohio firms, SUREnergy officials said. While Fellhauer plans to move some of his employees into a building at his company that’s being converted for production of the windmills’ steel control units, the partners are scouting for future manufacturing sites in the Great Plains — an area stretching from North Dakota to Texas and spanning the distance from the Rocky Mountains to the Mississippi River — which U.S. wind experts refer to as the “wind corridor.”

SUREnergy may replace the fiberglass nacelles which cover the 33-kw turbines’ mechanicals with a plastic version that Encore could produce, Fellhauer added.

SUREnergy eventually may employ as many as 200. “We already have $8.5 million in sales. We’ve sold 12 turbines already,” Tim Rathbun said. Clients include nearby schools, farms, wineries, orchards, and at least one large manufacturer in the rubber industry, he said.

SUREnergy is getting early sales help from government incentive programs. The 33-kw wind turbine that is expected to be the company’s biggest seller costs about $225,000 — but after a 40 percent grant from the state of Ohio and a 30 percent federal rebate, the buyer would end up spending $67,500.

“Ohio’s the ripest state in the union right now for grants in wind energy,” Fellhauer said. In addition to writing grant applications for potential buyers, SUREnergy founders are working with an unnamed lender to provide short-term financing to their clients — and hoping other states and the federal government will increase subsidies for wind energy.

Stokes is a member of a storied political family that has produced former Rep. Louis Stokes, D-Ohio; the late Carl Stokes, Cleveland’s first black mayor; Cleveland Municipal Court Judge Angela Stokes; and Lori Stokes, a reporter at WABC-TV in New York.

Curtis Stokes’ lineage will be an asset in getting SUREnergy broader exposure, the partners said. They’ve already contacted Rep. Marcy Kaptur, D-Ohio, their local congresswoman, to schedule a fall meeting, and are seeking to expand their contacts in Washington.

A core element of SUREnergy’s business plan is to stay ahead of the curve when it comes to the Obama administration’s support for carbon emissions reduction by U.S. industry — a position reflected in the American Clean Energy and Security Act of 2009 (H.R. 2454), which contains a cap-and-trade system to address greenhouse gases, that the House of Representatives passed in June and sent to the Senate.

“This administration — whether you believe in what it stands for or not — says, ‘If you’re not listening, you will pay the penalty.’ We’re listening,” Craig Rathbun said. “We can foresee a day when [Encore] will be carbon neutral and [SUREnergy] can help other companies get credits.”

SUREnergy also has partnered with the University of Toledo (Ohio), whose small-business incubator provided startup advice to the company. The university has a well-known alternative-energy program that includes wind-energy research that SUREnergy officials hope to tap into as they refine their machines.

Meanwhile, the Rathbun family is investigating whether wind turbines could provide a viable cost savings at Encore’s Minnesota and Utah plants.

They’ve already determined that Cambridge doesn’t get enough of a breeze to make the windmill they’re planning to set up at Encore’s factory there more than a token of the firm’s commitment to renewable energy sources (though Encore is planning to tap a natural gas well on that Ohio property to help with utility costs).

As for “greening up” the Minnesota and Utah operations, the Rathbuns said they’re keeping their options open, depending on access to better sources of wind and solar power than they now have. “We don’t want to scare our employees — we’re not closing plants,” Craig Rathbun said. “To move [Utah], logistically, is not going to be a benefit to us. But when you’re running $50,000 a month in utilities, you’ve got to shave it.”

The brothers expect to make strategic decisions about their Western operations sometime in spring 2010.

Even as it moves into new territory with wind energy, Encore remains “somewhat off balance” by the events of this year, Craig Rathbun said.

John Rathbun died on a Sunday — the day before his sons were to close on the acquisition of the oyster cup division of Independent Can Co. of Belcamp, Md.

“[Independent Can] was a customer of ours, and they gave us time [to grieve], before we had to do the deal,” Craig Rathbun said. “They had been making the [seafood] cups for years, and they originally came to us to buy the line.”

After that acquisition, Encore bought two Husky Hylectric 250-ton presses and a heat-transfer labeling machine to make the containers at the Cambridge plant. 

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