Demand for bio-based plastics in packaging and related applications will grow substantially over the next decade as pressure builds on retailers and brand owners to replace oil based plastics and reduce carbon footprint. This trend will be reinforced by regulatory pressure, as the European Commission is setting targets for adoption of bio-based products. Furthermore, when energy is generated from packaging waste at end of life, bio-based content will be valued more highly than oil-based content.
Therefore new bio-based polymers are needed to replace oil based polymers. Poly Lactic Acid (PLA) provides a solution, but hitherto first generation PLA failed to satisfy performance and quality requirements. Nuplas intends to develop, supply and ultimately manufacture Second Generation PLA (G2 PLA) under licence from the world leader in Lactic Acid. G2 PLA has the properties required to replace oil-based plastics in packaging applications, and will sell at a significant premium to both oil based plastics and first generation PLA.
Through NNFCC, Peter Reineck CEO of Nuplas conducted detailed studies funded by two UK government departments DEFRA (Department for Environment, Food & Rural Affairs) and DECC (Department of Energy & Climate Change) relating to building a PLA plant in the UK. The know-how accumulated during this commission convinced Peter of the enormous potential presented by G2 PLA, and he therefore assembled a management team to produce a detailed plan to exploit the opportunity.
The proposed UK PLA Plant will produce commercial quantities of non-GM PLA to meet growing demand for bio-based content in packaging film, thermoformed sheet and injection moulded packaging, and for fibre for carpet and textiles.
Initially, feedstock will be Lactide produced from Lactic Acid obtained by fermentation of sugar from sustainable sources offshore. The modular PLA plant will start up in early 2013: it will be located on a site which provides favourable logistics for supply of feedstock and sales of PLA, and use best available technology. This competitive advantage is expected to continue for at least 10 – 15 years.
Operating at capacity from 2015, output of the plant will be 5,000 tons per year (tpa) of PLA: this figure represents less than a 3% share of the projected EU market of 180 ktpa PLA in 2015. It is anticipated that with strong PLA market growth there would be every opportunity to expand this business profitably by modular additions to manufacturing capacity over subsequent years.
Towards the end of the decade, there would also be opportunities to reduce feedstock cost and carbon footprint by backward integration into production of Lactide and Lactic Acid from locally available crops. The longer term vision is for an integrated complex producing biorenewable polymers derived from UK crops and crop by-products.
However, before any of this can happen, Nuplas needs to develop the market for specific formulations of G2 PLA. In the product and market development stage starting in early 2011, Nuplas will complete development work and obtain key customers’ approval for its unique G2 PLA products for specific packaging applications. An investment of £1,200k is required to complete this stage.
Nuplas plans to outsource PLA development work to FaraPack Polymers Limited, a contract research organisation owned by Sheffield University. Nuplas expects that this arrangement will enable it to develop proprietary high value PLA products, resulting in the strongest possible market position.
The Company intends to start sales in Q4 2011, by reselling up to 1,000 tpa PLA sourced under a tolling arrangement. By early 2012 the Company expects to have established a sound market position with formulated products based on its own IP, which together with ongoing customer commitments for commercial supply quantities will create a business of substantial value even before investment in manufacture. This will be sufficient to attract potential buyers and next phase investors. Early stage investors will thus have the opportunity to exit with an acceptable return on their investment.
When Nuplas moves into PLA manufacture it will therefore be based upon secure IP and growing customer demand. The capital investment required for the 5,000 tpa plant will be in the region of £10 million. The plant is projected to reach capacity operation in mid-2015, with annual sales of £17.7 million and EBITDA of £3.9 million.
Peter Reineck (CEO)
Phone: +44 (0)7792 985 164
14 Clifton Moor Business Village,
James Nicolson Link,
York YO30 4XG,
30 November 2010
Nuplas Limited, press release, 2010-11-30.