Aduro Clean Technologies: MOU With GF Building Flow Solutions

An overview of what this MOU means for Aduro.

---

---

Transcript

Aduro Clean Technologies, developer of a novel plastic recycling technology, is up 11% just today and over 100% over the last year… sitting at a $143 million market cap on the news of signing an MOU with GF Building Flow Solutions Americas

In this video, we will review what this agreement entails, and what it could mean for Aduro.

Now, GF Building Flow Solutions is the provider of the Uponor piping and plumbing brand for water transportation.

This piping product is made out of cross-linked polyethylene (PEX), which is incredibly difficult to recycle through the existing technologies in the recycling space right now. We’ll get into that more later in the video.

But something important to take note of is that this was one of the unnamed multi-billion dollar companies that had begun testing with Aduro approximately eight months ago. Given positive results in their phase 1 technical evaluation phase of Aduro’s customer engagement program… GF decided to proceed to collaborate further.

So, we have now named Shell, TotalEnergies, and GF Building Solutions. There are still three other potential multi-billion valuation firms that are unnamed and in the customer engagement program, and could decide to continue testing with Aduro. And those six companies are just the ones we know of that are testing. Even more are watching Aduro’s results to see if they might want to collaborate as well.

Of course, a memorandum of understanding with GF is not a very sticky collaboration agreement yet, but this is another sign that Aduro’s technology works on hard-to-recycle plastics. And it’s good to see GF wanting to test even more.

Cross-linked polyethylene is almost entirely made out of high-density polyethylene (PE-HD here). Which, as of 2019, made up approximately 12.4% of the total plastic production. So, that’s around 50 million tons of the plastic produced per year, as there is 400 million tons made in total.

A little more about who Aduro is working with here:

GF Building Flow Solutions is a subsidiary of Georg Fischer AG, the building materials conglomerate listed in Switzerland. The company trades at an approximate $5.8 billion market cap in USD.

After their acquisition of Uponor, the company has added piping, fitting, heating & cooling, fire safety, among other product lines. Obviously, our focus is on the piping here, but this is another significant potential partner for Aduro.

It’s worth noting that this isn’t the only technology that GF is testing with. In 2023, Uponor, Neste, Wastewise, and Borealis announced the companies had collaborated to successfully circularly recycle PEX plastic.

Wastewise is a company that has managed to successfully recycle PEX waste with their novel form of pyrolysis. Which is typically unable to recycle this type of plastic, but their version can.

Wastewise recycled the plastic into pyrolysis oil, which was processed in Neste’s refinery in Findland, that feedstock was taken to Borealis stream cracker to form new polyethylene… and finally, Uponor took that polyethylene and created new PEX piping. So, these four companies managed to complete a whole lifecycle of a PEX pipe, from recycling, to new plastic again.

So, there are other technologies that can recycle this plastic as well, but there is no confirmation that Wastewise is even doing this at scale. I couldn’t find any production or recycling numbers from them. Or even what the capacity of their recycling facility in Nokia, Finland is.

But yes, this is another partnership that Uponor has with a plastic recycling company. With that said, we have no idea if this partnership has continued after this point. I can’t find any details.

As a thought exercise, let’s go through what this MOU might mean for Aduro in terms of revenue.

GF Building Solutions Americas, which was GF Uponor North America previously, had total capacity to produce 875 million feet of piping. Let’s say they managed to produce that number. It could be even more than this since this presentation is from 2023, but let’s just go with this confirmed number.

The most common sizing for PEX piping is 1/2 an inch , 3/4 of an inch, or 1 inch. Taking the average of that in pounder per foot. We get about 0.12.

875 million x 0.12 gets us 105 million pounds of PEX piping. Convert that into tons and that gives us a total of 52,500 tons of PEX plastic.

We don’t know exactly how much of that ends up as waste, and they have a goal of recycling 100% of their plastic waste through closed loop recycling into new plastic.

So, for the sake of argument, let’s just say that they want to recycle 100% of that 52,500 tons of PEX plastic that they produce. They want to recycle as much as they produce.

Then we can move to Aduro’s financial projections here. When recycling 8,500 tons  of polyethylene annually, Aduro would generate $1.5 million in revenues. Multiply that by six to get them close to 52,000 tons, and Aduro would generate approximately $9.5 million in licensing revenues to recycle that plastic.

So, if we are just going off of GF Building Solutions and what piping Uponor produces right now, the amount of revenues from this potential partnership is not anything crazy. With that said, $10 million in revenues is nothing to scoff at, either, when we’re currently generating near zero. 

I think the larger takeaway with this deal is proving out that Aduro’s technology can recycling these difficult plastics, and that the larger PEX, also called XLPE market, has 2.5 million metric tons of new plastic produced annually. Hardly anyone is addressing all of the potential waste.

Anyway, you can see how the numbers would scale rapidly when we’re talking about companies that produce millions of tons of plastic waste like Shell or TotalEnergies, among other petrochemical firms.

In fact, in a recent interview that Eric Appelman, Aduro’s CRO, did with the Chemical Show, he mentioned that the company has at least 10 petrochemical majors all over the world watching their progress closely. Which is absolutely insane.

He also mentioned that the waste management companies are getting interested, among other sectors. And as I mentioned earlier, there are still three unnamed multi-billion valuation companies testing with Aduro already.

So, the interest in this company from various industries is through the roof, and they’re proving it as more and more of these firms are willing to enter more solid agreements and tie their names to Aduro publicly. Things could get very interesting once the company finishes its final pilot recycling unit, which is expected to happen early next year.