管理層發言
Thank you, Marvin. Welcome to PureCycle Technologies Fourth Quarter 2025 Corporate Update Conference Call. I am Eric DeNatale, Director of Investor Relations for PureCycle. And joining me on the call today are Dustin Olson, our Chief Executive Officer; our incoming Chief Financial Officer, Donald Carpenter. Our retiring CFO, Jaime Vasquez, will also be joining the call. This evening, we will be highlighting our corporate developments for the fourth quarter 2025. The presentation we will be going through on this call can also be found on the Investor tab at our website at purecycle.com. Many of the statements made today will be forward-looking and are based on management's beliefs and assumptions and information currently available to management at this time. The statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control, including those set forth in our safe harbor provisions and forward-looking statements that can be found at the end of our fourth quarter 2025 corporate update press release filed this afternoon as well as in other reports on file with the SEC that provides further details about the risks related to our business.
Additionally, please note that the company's actual results may differ materially from those anticipated, and except as required by law, we undertake no obligation to update any forward-looking statements. Our remarks today may also include preliminary non-GAAP estimates and are subject to risks and uncertainties, including, among other things, changes in connection with quarter end and year-end adjustments. Any variation between PureCycle's actual results and the preliminary financial data set forth herein may be material. You're welcome to follow along with our slide deck or if joining us by phone, you can access it at any time at purecycle.com. We are excited to share updates from the previous quarter with you. With that, I will turn it over to Dustin Olson, PureCycle's Chief Executive Officer.
Thank you, Eric. Fourth quarter was another period of progress from PureCycle. We ramped our operations in Denver and Ironton, advanced our customer pipeline and made meaningful progress on our growth plan in Thailand. As we announced in the press release, effective March 1, Donald Carpenter will be stepping into the CFO role. I want to first thank Jaime for his service in the last couple of years, wish him well in his retirement. And now I'll turn it over to him for a couple of words. Jaime?
Thank you, Dustin. I appreciate the opportunity and the time that PureCycle has provided me. This is a company with a great mission and talented people that should allow the company to accomplish that mission. And with Donald stepping into the CFO role, there will be continuity among the finance and accounting teams. Donald's time at PureCycle, combined with his depth of finance knowledge, should allow him, along with the senior management team, to help continue moving the company forward. To you, Dustin, Donald, and the rest of the PureCycle team, I wish you the best as you continue to commercialize and grow PureCycle. Back to you, Dustin.
Don, would you like to say a couple of words?
Yes. Thank you, Dustin, and thank you, Jaime, and thanks, especially for all of the support and opportunities you gave me to grow into this role over the past two years. I share your thoughts on the PureCycle team, and I'm incredibly fortunate to have such an exceptional group supporting me through the transition. I am so excited for the future of this technology and our company. While the role is new, the mission I committed to four years ago remains the same, and I truly believe our company has an amazing solution to help end the threat of plastic waste to our environment, both safely and responsibly. With that, Jaime, I wish you the best in retirement, and I'll turn it back over to you, Dustin.
All right. Thanks a lot, Don. I wish you both the best and I'm very excited about the path forward. Additional to this announcement, we previously announced we added two distinguished board members to our team, Dr. Siri, who serves as the Independent Director and Chairman of the Audit Committee at the Bangkok Bank and previously served as Thailand's Minister of Energy and Chairman of IRPC. And most recently, Valerie Mars, who retired as Senior Vice President and Head of the Corporate Development at Mars Inc. We're very fortunate to have both of them. Now to the business highlights in the quarter. Before I get into the details, I want to frame where we are. We are producing high-quality food-grade recycled polypropylene at scale, something no one else in the world can do. We've qualified our materials in flexible packaging, wrappers, stand-up pouches, closures, thermoform containers, bumpers, and numerous fiber applications.
Branded pricing is on track with prior guidance and our pipeline has grown to over 170 active projects. The market continues to struggle integrating large amounts of post-consumer recycled polypropylene content into consumer products. Recycled content is new, especially in the FDA space. And companies are challenging decades-old processes to make them work for this emerging space. PCT is helping them. As our brand continues to rise and other brands get more familiar with our product, we dramatically reduced the adoption challenges. When a brand puts our material into food-grade packaging on a retail shelf, they're doing something that's never been done before at PCT scale, at PCT quality, and with PCT flexibility. And while customers are extremely excited about our product and how it simplifies their lives, the adoption process, which includes things like lab, pilot and industrial scale qualifications, lots of trials, regulatory reviews, packaging design, line validation, supply chain insurance, and internal approvals, it still takes time.
But here's what I want you to take away from this call. The underlying demand is very strong and growing. It's clear to me that the recycled content and consumer products is coming, the regulatory environment is naturally moving in PureCycle's direction and probably the most important thing of all, consumers continue to value sustainability, and it is driving their buying behaviors. The question is not whether brands will buy recycled PP at scale, but when. And we are positioned to be the premier global supplier. 2026 is about converting our technical success into accelerated commercial revenue growth quarter-over-quarter, and I'll walk you through exactly where we stand on that. In the fourth quarter, we successfully added a third shift to Denver, which had previously been a constraint on production. As a result, Denver processed 44% more feed versus the third quarter, ramping to 14 million pounds, a 35% increase over its prior quarterly high.
We are actively buying from more than 15 different feed suppliers, including most of the largest players in the market and have reduced procurement costs by $0.06 per pound over the last 12 months. Denver has fundamentally improved our feedstock flexibility and cost structure, and I have never felt better about our ability to reliably and economically supply Ironton as we ramp to full rates. Ironton also successfully ramped production in the fourth quarter with a production of 7.5 million pounds. We not only hit a quarterly record for production but also new daily records as well. This doesn't tell the whole story as we continue to manage production levels ahead of the commercial ramp. We are routinely running Ironton with higher reliability and at higher watermarks. In the last few quarters, I've spoken about how we ran successful rate tests at about 12,500 and 14,000 pounds per hour. We have a lot of data from those tests, which we've analyzed and see some very specific improvements that should allow us to push towards nameplate capacity in '26.
The original design for Ironton contemplated an annual maintenance average. We didn't take one last year, but plan on taking one between mid-April and mid-May this year. There are lots of standard maintenance activities that are expected to occur, spanning inspections, cleaning, repairs, and improvements. I expect this outage to have really positive outcomes for PureCycle. If you look back at every planned outage we've had at Ironton, the reliability, top end rate and quality has always improved on the other side. It is our expectation that the same will be true this one. We always incorporate the lessons learned into our procedures and activities, but outages give you the unique opportunity to make changes that are not possible when the plant is running. Reliability matters to our customers. As we've demonstrated consistent product quality and uptime, we've seen those conversations evolve.
Several of our largest pipeline opportunities are now moving toward multiyear supply agreements, which is a direct reflection of the confidence that they have in our operating performance. Phase I of our on-site compounding started up last quarter. This enables CP2 to be compounded on site and sold to the market. This project allowed us to reduce carbon footprint and cost to produce and improve our final sales price. We're very excited about this addition. And Phase II should be mechanically complete in March and commissioning will continue in parallel to the planned outage. Phase II coincides with the demand planning for these grades and commercial offtake profiles. The Phase II on-site compounding line will be primarily focused on producing compounds for BOPP film, which is used in flexible packaging and thermoform applications, which is used in things like coffee lids to the highest value, fastest-growing segments in our pipeline.
Having this capability on site complements existing third-party compounding assets, improves turnaround times for customer trials, and gives us direct control over the formulations. We have built and will continue to build inventory ahead of the outage and across the planned application launches, and we expect to ship while our intent is engaged in turnaround. On the other side of this outage, Ironton should be well positioned to service the expected ramp to much higher levels of production and sales later in '26. Turning to the commercial update. We booked $2.7 million of revenue in Q4, our fourth consecutive quarter of sequential revenue growth. We are actively shipping to 11 customers, roughly half of the branded and half are unbranded with additional conversions expected to begin in early March. While 2025 had real commercial delays relative to our original projections, the technical progress was substantial, and the setup for '26 is strong.
On the positive side, 2025 was a year of real technical success. We qualified our material across food grade applications that no mechanical recycler can touch. Flexible film packaging, wrapper, stand-up pouches, closures, thermo containers, are all applications where qualification delays are frustrating and noisy, but they only impact the short term. The real long-term value is created through the application technical successes. The other big positive was that branded margins continue to be in line with our previous guidance. While branded sales have a longer sales cycle than non-branded sales, branded sales are the core focus for this company and where we see the most value in the market. Co-product sales have been positive for us, and we've begun to monetize both co-product 1 and co-product 2, and are seeing prices in the $0.25 to $0.30 per pound range. Fiber technical successes provided a lot of confidence to the market early on, but the adoption was slow due to fragmented demands and extremely long sales cycles.
We de-prioritized it in the near term. And while it does remain a real market for us, we're not going to concentrate our resources there today. The regulatory landscape has been broadly positive. Our material is accepted in Oregon, Colorado, California, Washington, and Europe. New Jersey has been slower. We partnered with the DEP on how our dissolution technology fits within the recycling framework, which has delayed some approvals. The good news is New Jersey has excluded chemical recycling and ISCC Plus mass balance credits, which positions us as the only supplier at scale for food-grade recycled content under the mandates. Large CPGs are lobbying the DEP on our behalf, and our relationship with them is strong. I personally respect the position the New Jersey Department of Environmental Protection has taken, and we'll continue to partner with them as they integrate the legislation into action.
2025 was a challenging year for many of our customers. Tariff uncertainty, inflation hangovers, commodity spikes, and converter consolidations forced them to redirect their focus on cost savings and reorienting their supply chains domestically, which lengthened approval time lines across the board. We think those high headwinds are largely behind them. The key public message from senior brand leadership is clear. 2026 is about reinvigorating organic growth and investing in innovative packaging. That's directly relevant to us. It's been publicly reported that multiple Fortune 100 CPGs announced significant increases in R&D spending with a focus on product superiority, premium positioning, and sustainable packaging formats. After a year of playing defense, these brands are now playing offense. That's directly relevant to us because offensive brands invest in differentiated packaging. And food-grade recycled content is a differentiator.
Despite the commercial progress, the revenue ramp has been delayed compared to our earlier projections for 2025. Last quarter, we indicated that we had a demand run rate of 40 million to 50 million that we are actively shipping or expect to ship soon. That figure remains unchanged. New Jersey has postponed some of our ramp-up, and we estimate that applications representing 15 million to 30 million pounds of near-term demand will require approval from them. Overall, New Jersey applications account for about 300 million pounds of demand per year. While this situation has been frustrating, the demand continues to exist, and the fact that key brands and converters have contacted New Jersey on our behalf shows their eagerness to proceed once this is resolved. On a positive note, we've managed to pivot to other applications that do not require New Jersey's approval, and we have visibility on applications that can contribute to our revenue in 2026.
In addition to the previously mentioned 40 million to 50 million pounds, we have identified another 20 million to 25 million pounds at full ramp-up. These could potentially convert as soon as next month, with one of the most immediate opportunities representing about 10 million pounds of annual demand. Our pipeline remains robust, expanding from roughly 100 projects a year ago to over 170 today. Much of this recent growth is due to our achievements in film, where we continue to discover large, high-value opportunities. I also want to emphasize that we have been successfully qualifying pouch applications. Stand-up pouches are currently one of the most exciting trends in innovative packaging. They are lighter, more efficient, and are gaining market share from rigid containers and cardboard boxes. Brands are making significant investments in flexible packaging formats, and our ability to produce food-grade recycled polypropylene film for pouches places us at the forefront of this trend.
BOPP film and thermoform applications remain the core targets for our compounding operations, and we focused our commercial teams on brands with the highest growth potential. Here are some examples of the end markets that we're actively engaged. We spoke about QSR coffee lids last quarter, and the interest continues to be strong and is growing. We continue to make progress with our first QSR coffee lid project, good product fit, excellent trials, and good relationship building between the end brand and converter. We're also in discussions with four additional brands following our recent quarterly announcement about coffee lid innovation. But these same customers also manage a growing cold beverage category that is taking market share. Brands are launching more products in this high incremental margin category. Additionally, brands are also transitioning to PP in 12 states that have already passed single-use polystyrene bans.
This will give us additional tailwind to our product in the beverage containers. The net result is north of 300 million pounds of additional TAM in North America, and it's growing in the high single digits each year. Beyond cold beverages, premium pet food is a 130 million-pound polypropylene market for BOPP film packaging, growing 4.6% annually as pet owners trade up to higher quality brands. Jerky and meat sticks represent 40 million pounds of BOPP film demand, growing 6% to 7% with protein snacking trends. Dermocosmetics, think CeraVe and SkinCeuticals, is a 55 million-pound market growing at 7% to 9% as clinical skincare brands shift the PP packaging for recyclability. In household goods, things like storage bins, kitchen utensils, laundry baskets, is a 700 million-pound polypropylene market where Walmart and Target sustainability mandates are creating demand for recycled content. From a base of only 3.3% to 5% penetration today, that segment alone has 150 million pounds of addressable pounds for recycled polypropylene growing at 8% to 12% as the mandates ramp.
These aren't hypothetical markets. These are specific applications where we are engaged with brands in our pipeline and where growth trajectory works in our favor. Let me take a moment on the regulatory landscape because I think it's important to frame this in concrete terms. Every EPR and PCR mandate that's been passed in New Jersey, California, Washington, Oregon, Colorado, and Europe translates directly into pounds of required recycled content. These aren't voluntary targets. They are law. New Jersey requires 10% recycled content today, 20% in '27 and 30% in 2030. California SB 54 requires 25% source reduction by 2032 with a stair-step approach requiring 10% by '27 and 20% by 2030. We have received post-consumer resin certification from the Association of Plastic Recyclers or APR, which is the standard that most state regulators referenced for recycled content compliance. That certification allows our material to be categorized as recycled content across numerous states, effectively clearing the regulatory path for brands to count on PureCycle material toward their targeted mandated targets.
The EU's packaging and packaging waste regulation requires 10% recycled content by 2032. When you add it all up, there are literally hundreds of millions of mandated volume coming online over the next 5 to 7 years. And for food-grade polypropylene applications, we're the only global solution emerging at scale. The regulatory framework is laying the groundwork for the future. There's a lot of really strong progress in Rayong, Thailand project. I was in Thailand for a week in January and had many meetings with government officials, commercial offtake partners, feedstock suppliers, local banks, as well as IRPC and our very strong local team. A few key developments are worth calling out. First, we see a supply of feedstock well in excess of our needs. We have already signed nine LOIs with regional feedstock suppliers, six domestic and three across Southeast Asia, that, even at a minimum annual levels, exceed our needs for the first purification line.
We are working to expand our feedstock network in Thailand, but we are also finding feed in abundance across Southeast Asia. Thailand generates approximately 2.5 million tons of plastic waste annually, of which an estimated 400,000 to 450,000 tons is mismanaged. With about 70% of that leaking into the ocean each year, making Thailand the sixth largest source of ocean plastic globally. We're finding a lot of willingness from the government and the commercial sector to partner with us to solve this challenge. The commercial conversations have also been very favorable. Our original assumption was that all products would be exported to North America and Europe. And while we still expect to directly export significant quantities, a strong dialogue is evolving with domestic packaging companies, including a major film producer that sees our material as a way to grow their export business, as well as Fortune 100 CPGs with manufacturing operations in Thailand.
We see key markets in automotive, flexible rigid packaging, appliances, and fast-growing hygiene market and expect to sign multiple LOIs with domestic customers during 2026. We had multiple meetings with the Board of Investment or BOI and submitted our application to them. If successful, we would reap many benefits, including an eight-year 100% tax holiday followed by five years of tax holiday at 50%. This equates to roughly $100 million of avoided cash taxes. We also had many good meetings with local banks and our other banking partners in Thailand, which Donald will touch on later. The relationship with IRPC is solid, and they have helped us build a remarkably strong domestic team in Thailand. We hosted a community forum with over 250 residents to explain the project, which was very well received. We have been purchasing equipment and expect to break ground in the second half of 2026, with project completion still expected in 2027.
Our Antwerp, Belgium project also continues to move forward per plan. We expect permits in the second half of '26 with construction still scheduled to begin by 1Q '27 and mechanical completion by the end of 2028. Global brand discussions are accelerating as the Thailand and Antwerp projects advance. Many of the Fortune 100 CPGs we're working with have operations across all three regions. We last mentioned last quarter that we expected to complete our initial engineering work for Gen 2 purification design in the first part of 2026. While there is still work to be done here, the initial findings are very encouraging. First, we see no technological constraints on building the higher end of this capacity scale than what we discussed previously or closer to the 500 million pounds of capacity that we mentioned in the range. This is important because costs do not scale linearly. And in fact, the initial design analysis suggests that the incremental cost difference between the 500 million and 300 million pounds is relatively minimal.
As a result, the initial look indicates greenfield costs on the Gen 2 lines approaching $1.50 per pound of capacity and for brownfield sites should approach $1 per pound for expansions. This is a really big deal. This cuts down the capital intensity of our business, meaningfully improves future IRRs and puts us back in the ballpark for what it costs to build virgin polypropylene lines. It is also a lower CapEx intensity than what we estimated in the business plan last summer associated with our capital raise. Scale also benefits us on the production cost side. And while it's too early to give definitive numbers, we see a clear line of sight to Gen 2 cash cost to be below virgin on-purpose PP production lines. While the majority of our focus today is on selling out and ramping Ironton in executing our Thailand expansion, this news on Gen 2 is incredibly important to the long-term value of PureCycle.
We've known for years that our process consumes significantly less energy than virgin production. But now we are seeing the cost efficiency translate into a permanent cost and return advantage in the market. A market that I remind you represents 200 billion pounds per year of annual demand and a market that is expected to continue to outgrow GDP for the foreseeable future. Look, I know the commercial ramp has been slower than we projected. But I'd ask you to look at our history. Every time that we've said we've solved that technical problem, we have. Every time that we've taken a planned outage, the plant came back better. The challenges that we face today are principally out of commercial adoption timing, not commercial demand, not technology, not operations, not feedstock, and now we have the product, the production, and the pipeline. The conversion is happening, it's a matter of when, not if.
When I take a step back, every year during my tenure has had its own theme. 2023 was about completing Ironton. 2024 was about making the plant work. 2025 was about technically qualifying our product, especially in the high-value parts of the market. In 2026, it will be about the commercial ramp and selling out the plant. Our future is bright. We have a strong foundation supported by tech and teams that know how to build. The market opportunity continues to grow in front of us, and the company is ready to lead. With that, I'll turn it over now to our new CFO, Donald Carpenter for the financial presentation.
Thank you, Dustin. Our revenue goal is unchanged: reach Ironton breakeven, then Corporate breakeven. Revenue ramp has been delayed by customer adoption timing, but we built and staged inventory for product launches later in the year. Core operations costs across Ironton, Denver, and Corporate remain largely in line with prior guidance. I'll put more specifics around that on the next slide. On warrants, we have two series of warrants that were extended. The Series A, which represents 15.7 million of potential shares, and the public and private warrants that represent 5.7 million potential shares. We have obtained agreement with the Series A warrant holders to extend through March 17, 2027 at a reduced redemption price of $14.38 per share, representing approximately $205 million of potential proceeds. The public and private warrants have been extended for three months with further details in the 8-K filed today.
These represent approximately $68 million of potential proceeds. On capital structure. During Q4, we repaid $20.3 million of high-cost equipment finance debt and retired $9.8 million of principal on the Ironton bonds. We continue to spend on projects across Ironton, Thailand, Antwerp, and our Gen 2 development. On operations, we previously said ongoing operational and corporate cash burn were in the range of $8 million to $9 million per month, and this was prior to significant feedstock and free processing costs. Now that we're incurring more of these costs as Ironton ramps, we're still trending within that range with $24.5 million of operational and corporate costs for the quarter. The incremental production-related costs have been offset by managing discretionary spend and capitalizing on efficiencies elsewhere in the organization. Revenue timing reflects the customer adoption delays I mentioned.
We currently expect improvement as Q2 product launches begin converting our staged inventory. The debt service line includes the nonrecurring equipment lease payoff and bond retirement I referenced on the prior slide. Looking ahead, for Q1 2026, we expect total project-related spend of $19 million to $20 million with $7 million to $8 million for Ironton-related projects, primarily related to the on-site compounding project. The remaining $11 million to $13 million is spread across our growth projects. For full year 2026, total project-related spend is expected to be $39 million to $45 million, with $14 million to $16 million for R&D, which includes the cost of our planned shutdown in Q2 and completion of our on-site compounding project. The balance is spread across our growth projects, a majority of which remains discretionary. Q1 2026 debt service is expected to be approximately $11.1 million, which includes our semiannual convertible bond interest payment and some equipment leasing payments.
Regarding financing, we are excited about our prospects for Project Finance given the progress we're making with both Ironton production and our future commercial ramp. Our first area of focus is on securing local financing for our Thailand project. The project data room is open with a large Thai bank. Critical site agreements with IRPC are in place, the EPC contractor is advancing through final design and cost estimates. In parallel, we are advancing discussions for our Antwerp project and finding a lot of synergies between the two efforts. Antwerp continues to be a strong project as evidenced by our recent success securing the EUR 40 million EIF grants. Additionally, we have approximately $75 million of revenue bonds that we will look for opportunities to monetize. The warrant extensions preserve approximately $273 million of potential proceeds, and together with the revenue bonds and project financing I described gives us multiple paths to fund the business through the ramp. With that, I'll turn it to the operator for Q&A.
分析師問答
And our first question comes from Hassan Ahmed of Alembic Global Advisors.
I understand you provided a lot of information. There are many components regarding the commercial progress and ramping up. I’d like to explore this further. Let's start with the 40 million to 50 million pounds ramp you mentioned for Q2/Q3, followed by an incremental 20 million to 25 million pounds ramp. Can you clarify how much of this is forecasted versus contracted? Any additional insights into your confidence level and the structure of that ramp would be helpful.
Yes, Hassan, it's great to speak with you again. Thank you for your question. Ultimately, we have strong confidence in our commercial growth. What we’re working on is challenging and has been a struggle for recyclers for many years. We have introduced new technology and products, and it takes time to inform the market about our capabilities. Each technical success we achieve allows us to expand our possibilities. While we recognize the challenges in predicting exact timelines, we are confident that growth is on the horizon, even if it’s not entirely within our control. The number of customers we are shipping to is increasing, revenue is rising, and trial volumes are getting larger. It's essential for us to build strong relationships with our customers, which requires obtaining certifications, showing life cycle assessments, completing trials, and proving that Ironton can reliably meet their supply needs.
We have clear visibility on these applications, and the volumes you mentioned are promising. We are actively discussing both single-year and multiyear contracts for those 40 to 50 million pounds, as well as the 20 to 30 million pounds. We continue to see success with technical developments in film, pouches, wrappers, and more. Our collaboration with Toppan is significant; research shows a major consumer shift from boxes to pouches. We believe we will be the only recycling company able to serve that market effectively. The market was tough last year, and looking back at 2025, it’s easy to see the distractions that impacted every company, including inflation, tariffs, and other concerns that shifted the focus of consumer packaged goods companies from innovative packaging designs to sourcing production locally rather than overseas. However, now, CPGs are focusing on growth for 2026 and discussing how to differentiate themselves. They have limited options: they can change their product formulations, which is labor-intensive, or they can enhance their packaging and marketing efforts, which is what we are currently observing.
Understood. Very helpful. And just to wrap up on the commercialization side, and then I have a follow-up. I mean the New Jersey opportunity looks quite large, right? I mean I was just wondering if you could give more details around the timelines associated with that. I mean, this could be a pretty large opportunity for you guys, and it seems fairly imminent.
Yes. I think you have to take a step back. First of all, I think New Jersey is doing a really good job. They're being extremely thoughtful. They're digging into the details of the space. If you think about it, and you reset five years ago, the terminology used five years ago is completely different than the terminology used today. And for a regulator, gathering information, it's a lot of work to tease out all of the nuances associated with how to regulate a certain thing. What we know for a fact is that chemical recycling in the majority of these regions is out. They don't like the idea of plastic to fuel. They don't like the idea of ISCC Plus credits, and they love the idea of plastic to plastic solutions. And when you're interpreting the law written by regulators and trying to put it into practice, it takes a lot of education by us to the New Jersey Department of Environmental Protection as an example, and we've been doing it.
The process is painstakingly slow, and we understand that. But we're making really good progress. I think we have a very good relationship with New Jersey. We have active dialogues with them. We meet face-to-face. And I think it's really about progressing the education for this topic broadly. In many ways, PureCycle and New Jersey are kind of at the point of the spear. We are leading the industry in terms of where we're going on recycled content and our ability to do things. And New Jersey came out early and led in many ways the recycled content legislation. And so I think that as these things get clarified and move forward, I think that it's going to provide a lot of clarity for our customers, but quite frankly, a lot of clarity for other regulators as well. Since then, the other regulators have come in, and like I mentioned, the APR certification is a really big deal. That means that we are considered to have recycled content in many other regions.
And at the end of the day, we think that New Jersey will get to the same place. And when that happens, you're right. There's a lot of demand that's out there ready to go. And we'll get to New Jersey, and then we'll start working with those customers to get our products qualified in and ramping up into 2026.
Very helpful, Dustin. And just as a follow-up, the Gen 2 design work obviously seems very impressive. Just trying to get a better sense of what sort of key assumptions are behind achieving sub-virgin sort of cash costs, maybe in terms of assumptions around energy, scale, yields, et cetera.
Yes, we are excited to operate our new technology at a commercial scale in Ironton successfully. I have mentioned in previous calls that the technology is performing beyond our expectations in certain aspects. We are applying these insights at our Durham research facility to understand the foundational elements of the technology and how to scale it effectively. In some areas of the Gen 2 design, we find that we only need to slightly increase the size of certain equipment, while in other parts, we will need to add parallel processes. The findings indicate that our technology is highly scalable, which also leads to a decrease in costs. As we scale, we expect to lower the capital expenditure per pound and significantly reduce operational costs as well. Regarding operational costs and yield assumptions, our technology provides a plastic-to-plastic solution with nearly 100% yield recovery on polypropylene.
Our objective is to eliminate everything except polypropylene from the process to create two co-products, ensuring a high yield that remains consistent as we scale, giving us a significant advantage over other technologies. For operating costs, many steps in our process require only a slightly higher number of staff, as well as incremental increases in energy and steam. This means that the operational costs, when divided by a larger output, will decrease considerably. Currently, we estimate the cost structure for Ironton at fee plus $0.35 per pound, while the Gen 2 facility should have a much lower figure that we have yet to disclose. However, if we consider feed costs around $0.05 to $0.10 per pound and a yield adjusted figure of about $0.15 per pound, adding smaller amounts below $0.35 can quickly lead to costs that are below virgin polypropylene prices. The polypropylene market is growing, and as the demand for this polymer increases, new facilities will be built.
The question is whether they will opt for traditional virgin polypropylene facilities or adopt a proven scalable technology like ours at Ironton, which could potentially yield better margins. We are very enthusiastic about the future of PureCycle.
Our next question comes from the line of Andres Sheppard of Cantor Fitzgerald.
This is Anand for Andres. Congrats on the quarter. And Donald, congrats on the promotion to CFO. It sounds like you're making good progress on the Thailand debt financing with the data room now open. So I was wondering if you could give us an update on the latest developments there? And then how do you see that project progressing?
Yes. Thank you for the kind words. I'm really excited about the opportunity, and I'm also really excited about this particular project. We've made a ton of progress so far. We've put together a comprehensive data room, and our team and the bank's team have been working collaboratively. We're meeting frequently, and we're working through this project together. There's a significant amount of documentation that goes into a project financing of this scale, and the critical agreements with IRPC are in place, and I'm really pleased with the progress on the site design and initial cost estimates thus far. Both teams are really excited and working hard on this. It serves a really critical need for Thailand, and it's a strategic growth location for PureCycle.
Anand, just a follow-on on that. I mean, Donald brings a lot of really good project finance experience. And I think that's going to really set us up nicely for both Thailand and Antwerp and everything that we do in the future. But I'd like to get back to a point that he made about Thailand. I mean, think about this. PureCycle could come into Thailand. When PureCycle comes into Thailand, we will fundamentally change their performance on plastic waste. That is such a compelling story, not only for us because it's a great market and it's a great location and we've got the great tax holiday and all these things we've talked about. But it's exciting for Thailand too, because think about Thailand's core industry, it's tourism. Think about how negatively tourism can be impacted by plastic waste. I mean, in a way, there are a lot of existential benefits to Thailand by adopting a technology like ours, and we couldn't be more excited to get going there and get this project up and running. It's a great question, Anand.
Got you. And maybe as a follow-up, on the call and on the presentation, there was lots of great macro commentary on the TAM, whether it's cold beverages or cosmetics. And so I was wondering which verticals you see as the most promising with respect to your customer pipeline, whether it's automotive or snack bar wrappers and what should investors be focusing on here?
Yes. Look, I think this is going to develop over time. I think short term, we'll be heavily focused on closures and injection molder projects. These are very much in our wheelhouse. We've got a lot of experience, and those run really well. I think that what you'll see as we commission the Phase II of compounding at Ironton and get that compounded facility up and running, you're going to see a tremendous amount of benefit arising from that project into the thermoforming and film activities. Film and thermoforming have been very elusive for recyclers. This is very difficult to do, and it's difficult to get the quality needed to make those projects. And I think that while short term, we'll be focused on something a little different, I think that we're really going to grow into this concept of thermoforming and film, and I think that's going to be an extremely strong market for us because not many people can participate in it, and it's one of the largest growing segments on the macro side.
Our next question comes from the line of Gerry Sweeney of ROTH Capital.
When we consider everything, it seems that when you're working with brands, they are looking for a couple of key things. First, they want reliability, which I gathered from your remarks. Second, there is a focus on brand testing of the product. It appears that brands are becoming increasingly confident; they can observe the improvements in Ironton and the reliability is on the rise. Additionally, they're going through brand testing. Is this the direction we are headed in? Is this an accurate depiction of the current situation?
Yes, I believe you are correct. Both points you mentioned are indeed accurate. The improvement in operations at Ironton has instilled confidence in the brands. We regularly host tours of the plant, and visitors are consistently impressed. With our testing, the more we qualify different products, the easier it becomes. We can physically show people what we can do with our film, which helps them make immediate connections. This, in turn, lowers the barriers for them to start using different applications. Both of these factors are significant. However, I want to emphasize the careful approach that brands take in this process. We can’t control it, but we have become quite adept at addressing their recurring questions. Brands are methodical; they have spent a lifetime building their reputation, and they must feel confident in their partnerships. That's why we emphasize the trust established between the supplier and the customer.
Relationship building and product quality are crucial, and there are numerous steps to go through before securing a commitment from customers. This process can be frustrating, both from the outside and inside, as it requires time. However, if you take a moment to acknowledge the progress made, you will see that we are making significant advancements with major brands that are enthusiastic about our direction. I believe these foundational elements will benefit us for many years to come.
In that respect, does this process really help you kind of, for lack of a better term, crack the code, speed up additional opportunities going forward?
The answer to that is 100% yes. But as it eliminates the need for every single brand to go through some qualification process on their side. I mean the reality is that when we get into a lot of the techie stuff, such as contaminant removals and contaminant validations and things like that, we performed very, very well, and we're stacking a database that we can show customers a trend line that says, 'Wow, you really passed all of these different things in a good way.' That kind of data is based on history and gives brands immediate confidence in what you're doing. But then they still want to test it on their machines, and they still want to make sure it looks right on their material. And so they're going to do some of their own testing. But every time we do something, we prove that we can do it, and then the brand gets comfortable with it, and the next brand coming in has a bit of a shorter ramp to get started.
One more quick question. Regarding Ironton, rather than referring to it as an outage, I prefer to think of it as a turnaround. It seems you are quite confident about the increase in utilization after the turnaround. Are there specific improvements or adjustments you foresee that would reinforce that confidence in the anticipated increase?
Yes. This is a typical turnaround. When we initially established the company, we expected to perform one turnaround each year for 30 days. Last year, we didn't need to do that, which I believe is encouraging for the future regarding how frequently we will need to undertake this process. We plan to carry out many standard and straightforward tasks, along with a few more exciting initiatives. Running a facility consistently for several years, as we have, comes with its challenges. While we have experienced fluctuations, our reliability continues to improve. Overall, this plant is fully operational, but there are certain pieces of equipment that become inaccessible during operation and need to be addressed. We will be performing several simple tasks like replacing and upgrading instrumentation. However, the most significant aspect of this turnaround is the data we've gathered from our two test runs.
We conducted one test at 12.5 and another at 14, both of which highlighted constraints within the facility. We will focus on addressing those issues, getting the plant back online, and pushing it to achieve higher performance levels. As we progress, we will learn more and grow, integrating those insights into our operations at Ironton. I'm genuinely excited about this turnaround because, every time we access the equipment and gain insights into our technology, it enhances our capabilities. We have a strong team, and I am confident we will emerge from this turnaround with an improved facility.
Our next question comes from the line of Jeffrey Campbell, Seaport Research Partners.
Dustin, I don't want to gild the lily, but my understanding is that there is no other DP recycling method, including chemical recycling that is qualified for BOPP application suites to PureCycle's level. So just to confirm, when you're talking about thermoforming and the compounding capabilities that you're going to develop this year as a long-term driver, this is related to PCT's BOPP technical capabilities, correct?
I agree that’s a good way to approach it. I don’t want to speak for other technologies, as there are many nuances to consider when discussing chemical recycling. There are different methods like incineration, pyrolysis, and ISCC Plus credits, which fall into a separate category because most customers prefer plastic-to-plastic solutions over mass balance or plastic-to-fuel options. Regarding our capabilities in BOPP, we currently have a unique position in the market. BOPP production can be thought of simply as taking a piece of plastic and stretching it very thin, which is used for applications like chip bags or meat packaging. If there are contaminants in the pellet, stretching it can create blemishes, akin to stretch marks, which can cause operational issues like breakage during production. These are significant concerns for BOPP manufacturers. Our purification technology works at the molecular level, allowing us to effectively remove solids, ash, colors, and other contaminants to a level that is suitable for BOPP production.
This is no longer just a theoretical concept. A few quarters ago, we discussed our pilot project with Bruckner, and since achieving success there, we have scaled up to an industrial level. We have conducted several successful trials on large industrial lines, including machines that are 6.3 meters wide producing film with our product. This is very exciting and represents a promising future for us.
Great. When you speak about the percentage of recycling the states are increasingly requiring, are they specifically requiring certain plastic types? Or are these sort of broad statements of the amount of recycled content they want, however it's arrived at?
Yes, that's a good clarification question, Jeff. The answer is kind of both. I mean, if you look at that slide, we mentioned the percentage, but there's a small note below it that says those percentages apply to lots of different things. In some cases, they apply to specific categories of plastic like PP or PE or PET, in other cases, it applies to specific types of applications like rigids or bottles or something like that. And so you really have to dive into the details. I will tell you that we've done a lot of research on the regulatory front. I think we're getting smarter here. It's a very dynamic market that's very nuanced, but we're learning more and more about it every year. And I think that the general trend is two things. One, broadly speaking, regulations fall into two buckets. One is recycled content and the other is EPR. And two, it's coming. Like the regulations are real, and they're coming.
And in many ways, they're coming faster in the U.S. I mean, everybody talks about Europe and the PPWR is really coming in Europe for 2030, and our Ironton facility is going to be online just in time for that, which is going to be great for brands over there. But actually, states are leading quite a lot, and we're starting to get a lot of inbounds from customers on how to handle different regulations that are coming. The SB-54 in California is a very real thing. And a lot of times, California regulates, and the country moves that direction, we saw that with fuel standards a decade, one and a half decades ago, and we could see that happening here as well. And I think that we're well-suited for the future.
The reason I asked the question is that I was curious about the concept of circularity in comparison to the reality of mechanical recycling, which often only allows for a few recycling processes before the material degrades. Are you having any discussions about this with the regulators?
I would say that while the idea of circularity exists in theory, it hasn't been officially legislated yet. People are definitely interested in circularity. For example, in New Jersey, we purchased over 10 million pounds of feed last year, and there's a strong enthusiasm about this concept in the state. I'm particularly excited about our plans in New Jersey, where we will take waste from the state, demonstrate its impact, transform it into valuable products, and enable continuous purchasing by customers. This represents New Jersey's journey toward circularity, which both we and the state are thrilled about. Regarding recycled content and circularity, brands definitely see the value in this area, resulting in many inquiries about feedstock. They often ask whether we can use certain feedstock and then convert it back into products for resale. There are numerous discussions happening around this, but it's not yet formalized in legislation.
Yes. Well, it's not surprising because you're the only ones that can do it. But my last question is kind of a one that I get a lot from investors. And I just kind of wanted to give you a chance to put your $0.02 in. We continue to see PET recyclers pulling back on production and even shuttering facilities in the U.S. and the EU. Can you help investors understand why demand for PCT's recycled PP will continue to grow while recycling of other types of plastics appears to be languishing?
Yes, we offer a premium product. Many recyclers are facing challenges in tough economic times because they compete with virgin materials or sell at lower prices, which makes profitability difficult. Our differentiated product positions us well for the long term. As market dynamics change, I expect to see a decline in feedstock pricing, which benefits us. Additionally, as we enhance our compounding abilities, we'll be able to capitalize on the value of coproducts derived from our feed, improving both margins and overall system performance. We are continuously qualifying new product applications, which increases our options for customer sales. Our supply to customers is limited, so it’s essential to maximize our flexibility in determining where to sell our product based on qualifications and demand. The technical qualifications we are pursuing open up numerous opportunities for us in the future.
Our next question comes from the line of Eric Stine of Craig-Hallum Capital Group.
This is Luke on for Eric. So first, is there a time line for when you might finalize the site for your Gen 2 facility? I know Thailand has mentioned in the past as a potential suitor since it's a really appealing market. But could you just talk about some of the factors that are going into this decision?
Yes, I think the first step is to fully understand the overall technology and cost for Gen 2. We're improving in this area, but there's still more work ahead. We want to ensure we complete everything before moving forward. We're very enthusiastic about Augusta, which has been a great partner for us in Georgia. It's an excellent site for building the facility, and we have publicly stated that Gen 2 will be the first there. In fact, I believe every site we've announced previously is a strong contender for Gen 2. The determination of where the first one will be is still open for discussion. While we're excited about Augusta, Thailand is also a fantastic location. We're uncovering numerous opportunities on the feedstock side to support that facility, and the integrated brownfield prospects there will aid in overall capital efficiency. Interestingly, I didn't mention this on the call, but the required footprint for a Gen 2 at $500 million is not drastically different from Ironton.
It does increase slightly, but as we make the Gen 2 construction more efficient and upgrade equipment, we can enhance capacity at each site. For example, Augusta may be able to accommodate eight lines, potentially all Gen 2 lines. We need to calculate the specifics, but with sites like Augusta, Antwerp, Thailand, and our collaboration with Mitsumi Company in Japan, each of these locations offers great potential for expansion, and you'll likely see us pursue that with Gen 2 in the future.
Got it. That's helpful. And just as a quick follow-up here. So, what are your plans for prioritizing which customers will get capacity at Ironton since you really only need a small percentage of the pipeline that you're engaged with to fully scale before you booked out?
Yes, we are currently evaluating that. To be honest, our priority is to fill the pipeline first and then we can make a decision after selling it out. We have significant flexibility in this approach. I want to emphasize that we are keeping our options open regarding contract flexibility, as we do not want to be locked into a long-term contract that may limit us in the future. This will allow us to optimize our strategy over time. Typically, polypropylene contracts are renewed annually, and as we enhance our flexibility, we will be in a position to improve our operations continuously.
This concludes the question-and-answer session. I'd like to turn it back to CEO, Dustin Olson for closing remarks.
Yes. Look, I appreciate everybody dialing in on a late day today. We've had a lot of prepared remarks. I know there's a lot that you're going to have to go through. We are always very available for your questions. So sleep on it tonight, calls back tomorrow and we'll do more. I think you can tell from our comments how excited we are and how confident we are about 2026. So buckle up, enjoy the ride. 2026 will be a great year for PureCycle. Thanks, everybody.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.