Securities analysts with Baltimore-based Stifel Financial say a strategy by Phoenix-based Republic Services to build and operate plastic recycling facilities in the western United States looks prescient with the signing of SB 54 in California.
In a July 5 report prepared by Michael E. Hoffman and colleagues who analyze waste and recycling firms, the Stifel team writes, “We reiterate our ‘buy’ rating and $156 target price on Republic Services.”
The Stifel team describes SB 54 as mandating that “all plastic packaging be recyclable/compostable by 2032” and as requiring “65 percent of all single-use packaging be recovered/recycled by 2032,” leading to “an extended producer responsibility (EPR) program for single-use plastics.”
Stifel continues, “This legislation, in our view, further validates the basis for Republic’s investment in the Polymer Center in Las Vegas.” The analysts note Republic has stated it intends to open four or five more such plants.
The analysis cites Republic’s collection and material recovery facility (MRF) infrastructure as an advantage, saying the firm “has 100 percent of the polyethylene terephthalate (PET) scrap volume to support Las Vegas, and the future growth [is] on its trucks today.”
Additional feedstock, Stifel writes, will result as SB 54 helps to “drive more third-party volume to Republic’s Polymer Centers to support upselling recycling/circular economy goals of consumer products group companies.”
Stifel and Republic describe the latter’s Polymer Center as being a $50 million capital investment that can process 50,000 pounds of PET scrap annually. The first facility, to start running next year, may yield $50 million per year in saleable products and offers a margin in the “low to mid 30s” percent range, Stifel says.