SK Global Chemical partners with Loop to bring sustainable and circular plastics to Asian market
Loop Industries intends to form a strategic partnership with SK Global Chemical (SKGC) to accelerate the commercialization of Loop's sustainable polyethylene terephthalate (PET) plastic and polyester fibre manufacturing technology throughout Asia.
Loop's patented technology allows for waste PET plastic and polyester fibre to be upcycled into virgin-quality PET using low heat and no added pressure. This low-energy process allows Loop to eliminate contaminants, such as dyes, additives, and other impurities, preventing otherwise unrecyclable materials like coloured and contaminated plastics or textiles from ending up in landfills and natural areas.
Joint venture partnership
Loop and SKGC intend to form a joint venture with exclusivity to build sustainable PET plastic and polyester fibre manufacturing facilities throughout Asia, which accounts for approximately 60 percent of the world's population, making it a key market in terms of plastic manufacturing, consumption and waste.
Under the terms of the Memorandum of Understanding for the proposed joint venture, SKGC will own 51 percent of the joint venture and Loop will own 49 percent. Loop will also receive a recurring annual royalty fee as a percentage of revenue from each facility for the use of its technology.
According to SKCG, initial discussions between the partners contemplate beginning preparation on a first facility located in South Korea in the first half of 2022 and the construction of four facilities in Asia by 2030, with projected combined consumption of waste PET plastic and polyester fibre amounting to approximately 400,000 tons.
Once fully operational, these four facilities could claim an annual savings of 632,100 metric tons of CO2, which is the equivalent of more than 2.5 billion kilometres driven by an average passenger vehicle or ~270 million litres of gasoline consumed.
Strategic equity investment
In addition, Loop and SKGC have concluded a definitive agreement for SKGC to become a strategic investor in Loop. SKGC will purchase 4,714,813 new treasury common shares of Loop at a price of $12 per share, for total consideration of $56.5 million.
Loop intends to use these proceeds toward the funding of its planned Infinite Loop manufacturing facility at its recently acquired site in Bécancour, Québec.
SKGC is also being granted options to acquire an additional 461,298 common shares at $11 per share within the next 12 months, 4,714,813 common shares at a price of $15 per share, within the next 3 years, and a further 2,357,407 shares at $20 per share, conditional upon the timing of construction of the first Asian manufacturing facility.
SKGC is being granted a seat on Loop's Board of Directors and is expected to provide valued input into the continuing development of Loop's global commercialization strategy.