Origin Materials Inks Second ESG-Related Deal

Origin Materials Inks Second ESG-Related Deal

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For the second time in two days, zero-carbon chemical start-up Origin Materials signed a deal with South African chemical company AECI, expanding Origin’s addressable market, eventually putting more of its carbon negative products into the marketplace. Carbon negative for Origin means less carbon dioxide is left in the earth’s atmosphere after Origin makes a product. The company accomplishes that feat by starting its chemical making process with wood residue. Eventually, the wood grows back, sucking up carbon as it grows.

On Monday, Origin signed a deal with

AECI

(ticker: AFE.South Africa) to develop apparel and automotive fibers that have a negative carbon footprint. The Tuesday deal with AECI is for asphalt. The pair are developing a novel, low carbon asphalt using Origin’s technologies. Asphalt that people drive on is essentially bitumen and aggregate. Bitumen is what’s left over in an oil refining process after the lighter products are taken out of the oil. Companies such AECI are becoming more interested in low-carbon options, and getting oil derivatives out of their products, as more governments start to worry about their carbon footprints. 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. “AECI has formalized its strategy to 2025, which has sustainability at its core,” said AECI group executive Dean Mulqueeny in the company’s news release. “Roll-out of the strategy includes our commitments and targets in terms of carbon intensity reductions.” Companies’ commitment to a lower carbon footprint is the nature of Origin’s opportunity. “Companies now realize they can’t get to carbon neutrality with only energy efficiency and renewable energy,” co-CEO Rich Riley tells Barron’s. Using a carbon negative input helps further reduce any company’s overall carbon footprint. Origin’s approach is new, from an investor perspective. The company isn’t a publicly traded entity yet. That’s changing. It plans to merge with special-purpose acquisition company Artius Acquisition (AACQ). The deal will bring about $800 million into company coffers and is expected to fund Origin until it becomes profitable around 2025. By then, Origin projects about $475 million and positive Ebitda—earnings before interest, taxes, depreciation and amortization—in 2025 coming from two new plants. The first plant is slated to be finished in late 2022 and will operate in Sarnia, Ontario. The company is based in California. 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 dropped 0.9% in Monday trading. The S&P 500 and Dow Jones Industrial Average, by comparison, both closed up more than 1%. AECI stock closed up 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. Write to Al Root at [email protected]

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, 2021-04-06 13:52:30