Zero-Carbon Materials Coming Into Their Own, What That Mean

Zero-Carbon Chemical Start-Up Origin Materials Signed A Deal With South African Chemical Company AECI To Develop Apparel And Automotive Fibers

By Al Root

Zero-Carbon Chemical Start-Up Origin Materials Signed A Deal With South African Chemical Company AECI To Develop Apparel And Automotive Fibers That Have A Negative Carbon Footprint. That’s quite a target for the companies since most commodity chemicals are made from fossil fuels such as crude oil and natural gas. Origin can be so bold because it is, essentially, a green chemical company. “We’ve spent 12 years developing a very proprietary and unique technology that converts sustainable plant-based feed stocks into a whole range of materials,” co-CEO Rich Riley tells Barron’s.

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Instead of fossil fuels, Origin starts with feedstock, or raw material, that it grows. No net carbon dioxide is emitted from its process because no fossil fuels are used. Its products are further processed, by companies such as AECI (ticker: AFE. South Africa), and end up with the same chemical composition as any plastic bottle made out of PET, short for polyethylene terephthalate, or a polyester fiber.

Then, the cycle starts all over—the feedstock, or biomass, grows back and the company can sell its variety of intermediate products to companies that make bottles, fibers, or whatever. That’s why Origin tags itself as a zero-carbon company that leaves a negative carbon footprint. Companies such AECI are becoming more interested in low-carbon options as more governments start to worry about their carbon footprints. And companies, too, are making zero carbon pledges. General Electric (GE), for one, has committed to emitting zero-net carbon from all its processes by 2030.

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For its part, AECI sees an opportunity in supplying sustainable products. Right now, the company uses fossil fuels to make a chemical product called PET. Under the deal, AECI will buy Origin’s zero-carbon PET. “[AECI] Technical Fibers [business] is committed to converting at least 80% of PET raw material to green and environmentally friendly sources by 2025, to serve the demand of the major apparel brand names,” said CEO Zach Zacharias in the company’s news release.

AECI’s realization that carbon-neutral manufacturing is the future is the nature of Origin’s opportunity—supplying the chemical industry with products that replace fossil fuels. Woven fibers for apparel and car markets are just one example of applications that Origin management is targeting. The company projects about $475 million and positive Ebitda—earnings before interest, taxes, depreciation and amortization—in 2025 coming from two new plants. Origin’s first plant is slated to be finished in late 2022 and will operate in Sarnia, Ontario. The company is based in California.

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Origin is paying for its capacity by merging with special-purpose acquisition company Artius Acquisition (ticker: AACQ). The deal will bring about $800 million into company coffers and is expected to fund Origin until it becomes profitable around 2025. There will be about 184 million shares outstanding after the merger is completed, essentially giving Origin a market capitalization of about $1.9 billion.

Artius stock is up 0.3% in midday trading Monday. The S&P 500 and Dow Jones Industrial Average, by comparison, are both up more than 1%. AECI stock is up 0.3% in overseas trading. For the year, AECI shares have gained about 19%, giving the company a market capitalization of about $780 million. One analyst, Fermium Research’s Frank Mitsch, covers Artius stock, according to Bloomberg. Mitsch rates shares Buy and has a $30 price target for the stock.

This news was originally published at Barrons.

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