Safety-Kleen Plots Growth


Rerefiner Safety-Kleen outlined plans to continue expanding its blending capabilities, including a blending plant at a third rerefinery it intends to open in the Gulf Coast by fiscal year 2015, in a recent initial public offering of up to $400 million in common stock.

Safety-Kleen filed its registration statement with the U.S. Securities and Exchange Commission for the proposed IPO on Aug. 14.

The company wont receive any proceeds from the sale. Safety-Kleen spokesman John Kyte said the companys SEC filing contains everything it can say about the IPO at this time, and that the shareholders who will sell are not listed. Kyte clarified to Lube Report that, No proceeds would go to the company because only the shares of existing shareholders [known as secondary shares], rather than the company [primary shares], would be offered for sale – the proceeds would go to the shareholders who offer their shares for sale.

Safety-Kleen outlined its ongoing effort to expand its blended volume and blending capabilities. We have increased our blended output as a percentage of total sales volume from 32 percent in 2009 to 46 percent in 2011, and we intend to continue to increase this percentage, the company stated. We intend to continue generally migrating our product mix to blended products, specifically to our green engine oil brand, EcoPower, in order to capture higher value, enhanced volumes and the benefits of more stable pricing due to the more differentiated nature of blended products.

In July, the company began blending engine oils at its new $15 million East Chicago, Ind., facility, which was completed in late June. We currently blend a majority of our blended lubricating oils, with the remainder blended by third parties, the company said.

Plano, Texas-based Safety-Kleen noted it was in the planning stages of building a third rerefinery and blending facility in the Gulf Coast region, which when complete will have approximately 50 million gallons of used oil rerefining capacity and blending capability for most of the rerefinerys lubricating oil production.

We expect total capital expenditures associated with the project to be approximately $100 million, a majority of which we expect to invest in fiscal years 2013 and 2014, the company said. We expect the rerefinery to become fully operational in the first half of fiscal year 2015. We expect our third rerefinery and blending facility to enhance our base and blended lubricating oil sales opportunities and the productivity of our operations due to logistical improvements enabled by the new rerefinerys geographic location.

The firm also said it intended to pursue complementary acquisitions. Since we generally compete in a highly fragmented market with many opportunities for consolidation, we believe there is potential to capture synergies through acquisitions of other providers in the industries in which we compete, Safety-Kleen said. We also intend to evaluate and execute acquisitions that provide assets or services that will enable us to capitalize on high-growth, complementary market opportunities.

Safety-Kleens East Chicago, Ind., rerefinery has an 800 b/d of API Group I and 4,200 b/d of Group II capacity. The company also has a rerefinery in Breslau, Canada, with capacities of 700 barrels per day of Group I and 1,200 b/d of Group II.

We are currently expanding capacity at our Breslau facility by 10 million gallons of used oil, which we expect to complete in the fourth quarter of 2012, the company noted in its SEC filing, saying it expects total capital expenditures associated with the project to be about $30 million. Our oil rerefineries represent approximately 60 percent of the total oil rerefining capacity in North America.

Among other rerefineries in North America are Heritage-Crystal Cleans 2,000 b/d plant in Indianapolis; Heartland Petroleums 1,500 b/d Group II plant in Columbus, Ohio; Evergreen Oils 1,150 b/d Group II plant in Newark, Calif.; and Universal Lubricants approximately 783 b/d Group II plant in Wichita, Kan.

Universal Environmental Services expects to bring a 1,200 b/d Group II rerefinery into operation in Peachtree City, Ga., during 2013s second quarter. NexLube Tampa plans to commission a 1,100 b/d Group II rerefinery, including an on-site blending plant, in Tampa, Fla., in the fourth quarter of 2013.

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