A Great New Technology Is Born

8-8-2013

Dr. John L. Faessel

ON THE MARKET

Commentary and Insights

A Great New Technology Is Born

GlyEco (GLYE) $1.27OTCQB(fully reporting)

"This proprietary technology" represents "a multibillion-dollar market opportunity."

~ John Lorenz ~

GlyEco Chairman and CEO

GlyEco now in commercial production of Type 1 compliant recycled glycol

Link here for press release

In Tuesday's press release sustainable glycol technologies leader GlyEco, Inc. (GLYE) announced that they have completed initial technology upgrades and begun producing Type 1 compliant recycled glycol for commercial use.

This premier new technology was born after 12 years in development and while having multi-billion dollar "opportunity" it suddenly has the ability to not onlyremove a colossal amount of toxic waste from the environment, but it will allow the hazardous glycol waste material to be used, recycled and used again indefinitely. It just doesn't get much better than this – hence it's a Top Pick for 2013 and beyond.

The Technology

At the heart of the GlyEco recycling process is the patent-pending technology that can process and clean all five types of hazardous waste glycols to meet or exceed ASTM standardsindistinguishable from refinery grade glycol and is the only known process able to do so. The technology removes challenging pollutants, including esters, organic acids, cadmium, lead, high dissolved solids and high un-dissolved solids, oil/hydrocarbons, additives and dyes to produce a recycled glycol indistinguishable from refinery grade glycol.

Glycol right out of the refinery costs about $5.60 a gallon and the world uses over 5 billion gallons a year ($25 billion a year plus) to make, polyester fibers, antifreeze, plastic bottles,containers etc… To make all of this about 20% goes to waste and is currently disposed of with miniscule recovery; both the disposition and transportation of the waste is costly and they go with forceful regulatory statutes that must be followed.

The volume of waste feedstock generated per-year from the USA and Canada is about one billion gallons. Multiply those billion gallons by the cost of virgin glycol at roughly $5.60 per gallon and you start to see the revenue potential, especially considering that the waste feedstock costs GlyEco about nothing. Now add what they see coming from the Euro zone and then from Asia where a huge volume of plastic and polyester manufacturing takes place, and you get the cumulative picture short of one non-negligible detail:GlyEco owns the market 100%.

The central problem going forward is capacity to process: in other words, there is so much feedstock out there that "supply" is not a problem and selling into the glycol market is also not a problem. The restraint will be capacity expansion of all facilities and building out more capacity to process.

According to the original SEC filing (GLYE) plans to increase processing capability in New Jersey to at least 10 million gallons per year during the initial installation of its patent-pending GlyEco Technology™. The facility also has over 3 million gallons of glycol storage capacity with space available for expansion of storage and processing capacities.

My analysis indicates that the company will reach the break-even point at about 1 million gallons; importantly (GLYE) can increase production to a prospective 20 million gallons at the New Jersey facility. In addition the company is in the process of preparing some of their other facilities for Type 1 production.

Of strategic importance is that the New Jersey plant has extensive rail and port facilities and will connect to the wide rail network in the heavily industrialized northeast. The New Jersey location is in the heart of a hub of rail freight distribution. The location and shipping capabilities of this facility also position it to take in very large quantities of non-antifreeze waste for processing ̶ a first anywhere in the world.

Also noteworthy is that GlyEco has completed initial plant upgrades at its South Carolina plant and has already successfully processed and sold several thousand gallons of waste glycol sourced from the local textile industry.

The worldwide textile industry is the largest consumer of monoethylene glycol, with demand exceeding 3.8 billion gallons annually. Glycols are used to create polyester fiber chips, the base material in plastic food and beverage containers, as well as polyester fabrics, carpets, and upholstery.

Approximately 35% of all ethylene glycol produced in the world is used to make PET solid-state resins, 26% is used in antifreeze, 24% is used to make polyester fibers, 4% is used to make polyester film, 3% is used in PET chip resin exports, and 8% is used in surface coatings, polyester and alkyd resins, chemical intermediates, and other miscellaneous industrial applications.

The breakdown on USA waste glycol feedstock produced from the five major sources available for GlyEco to process: Antifreeze - 28%, Polyester - 29%, Aircraft deicing - 5%, HVAC - 34% and Medical sterilization - 4%.

Conspicuously the US Environmental Protection Agency [EPA] requires most federal agencies buy antifreeze with the highest recycled content level practical. Most agencies report a lack of supply to meet their demand.

The glycol waste data I use is compiled and verified by several sources including the U.S. government, reporting from each of the five industries, as well as distributors and customers, e.g. Dow Chemical (the world's largest producer), MEGlobal and SABIC within each industry. ICIS Chemical News is arguably the most reliable source for allocation breakdowns of global glycol distributions as it is the world's largest petro chemical information provider.

Disclosure: I am long GLYE - I have purchased shares on the open market and will likely buy more.