Evergreen adds recycled PET capacity as it positions itself in top tier of suppliers

Evergreen Plastics Inc. is continuing a rapid expansion, creating one of the largest food-grade PET recyclers in the United States.

Thanks to another two acquisitions, the company now figures to be one of the three biggest producers in the United States with a total of four facilities and an appetite for even more growth.

Evergreen, owned by private equity firm Sterling Group LP of Houston, revealed Feb. 9 the company purchased UltrePET of Albany, N.Y., and Novapet of Amherst, Nova Scotia, from wTe Corp. and Tomra of North America Inc.

They join existing locations in Riverside, Calif., and Clyde, Ohio.

Evergreen has now spent about $200 million during the past year or so to quickly rise to the top of the U.S. recycled PET market through a series of moves, including spending "just north" of $22 million for UltrePET and Novapet, CEO Omar Abuaita said in a Feb. 9 interview.

"We're constantly out looking for both organic opportunities to grow internally as well as through acquisitions. This opportunity presented itself, phenomenal location, Northeast, which we were lacking," he said.

Evergreen approached owners wTe Corp. and Tomra last summer about a potential transaction, struck a deal in September and closed in November.

Tomra had a 49 percent share of the two PET recycling sites with wTe Corp. holding the other 51 percent. Tomra has indicated its share of the proceeds was approximately $11 million and profit was approximately $5 million.

Tomra of North America is a unit of Tomra Systems ASA of Asker, Norway, which is known in the plastics industry for its reverse vending machines and resin sorting technology. And that portion of the business is an important consideration in the deal for both sides.

Evergreen has reached a long-term supply agreement with Tomra, which will direct PET bottles to the recycling facility through a network of reverse vending machines used in New York, Abuaita said.

The Nova Scotia site also is important as that location provides a secure supply of baled PET into Evergreen's recycling system. "That's fairly critical in today's [recycled PET] world; security of supply of bales is absolutely paramount to the future. That was just the icing on the cake. It made for a great acquisition," he said.

Evergreen has been in the PET recycling business since the 1980s as a way to provide raw material for its plastic strapping business. These years of experience are allowing the company to now aggressively expand across the country, Abuaita said. The company hopes to add PET recycling capacity to the Southeast to help complete a national footprint.

The company made a big swing last year when it purchased CarbonLite Holdings LLC's Riverside, Calif., PET recycling facility out of bankruptcy court. CarbonLite, which also had locations in Dallas, and Reading, Pa., collapsed after not being able to sell recycled PET at a high enough price to cover costs.

Evergreen will not make that same mistake, Abuaita said. While CarbonLite was getting squeezed on price, Evergreen has aligned itself with customers who want the reprocessor to succeed.

"We've got a phenomenal customer base that's behind us. They are rooting for us. They know what's happening," he said. "They are essentially rooting for us. I would say the vast majority of CPGs [consumer packaged goods companies], as well as bottlers, are rooting for our success. There are still a few that are still continuing to beat you up on price," he said.

The downfall of CarbonLite was a bit of a wake-up call for some firms that have promised to increase the use of recycled PET in their packaging.

"The vast majority are getting it. CarbonLite's bankruptcy was an eye-opener for most. They were riding that horse and that horse died because they were just doing silly stuff," he said, regarding pricing.

CarbonLite CEO Leon Farahnik said as much last year when his firm was going through bankruptcy court. "We're fighting a battle here that we need higher pricing," Farahnik said at the time. "The return on your investment is disastrous with this pricing in the market."

The $200 million being spent by Evergreen for its growth includes the purchase price for CarbonLite's Riverside plant near Los Angeles as well as improvements being made at that location. Money also is being spent on expanding the firm's original Clyde location, and more cash will upgrade the newly acquired New York site, Abuaita said.

"We've been in this business for more than two decades and are excited to take a leadership role in its transformation. Evergreen has the expertise to help customers close the loop on PET plastic," Evergreen General Manager Greg Johnson said in a statement. "We have the network and volume to really make an impact."

Abuaita figured his company is now among the top three food-grade recycled PET makers in the United States, placing with both DAK Americas Inc. and Indorama Ventures Public Co. Ltd. on the podium. Exactly where all three companies stand depends on who you talk to, he said. Indorama purchased CarbonLite's Texas location and DAK Americas purchased the Pennsylvania site during bankruptcy court proceedings.

Evergreen is bullish on the recycled PET business because of the relationships it has been able to create with its own customer base.

"They are looking for more and more supply as they make commitments to the consumer. We are constantly looking both on the inorganic [acquisition] as well as organic side for growth. We're out there. We're in the marketplace looking for acquisition opportunities. We've got multiple studies for multiple locations for greenfield facilities," the CEO said, under consideration.

Evergreen has seen its recycled PET capacity expand dramatically since the start of 2021 to 11.6 billion bottles annually. That is up from 2 billion in January 2021.