Cleaning the rpet Stream Opportunities to strengthen the capital landscape for circular supply chains November 2017

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Cleaning the rpet Stream Opportunities to strengthen the capital landscape for circular supply chains November 2017

Closed Loop Partners is investing in circular supply chains $35 million deployed as of September 2017 End-markets 33% Integrated 21% Collection 20% $$ Impact to date: $90M+ co-investment 1.5 million households represented 250,000 tons diverted 20,000 tons of PET to endmarkets Processing 9% Sortation 17% 600,000 MTs of CO2E reduced $4.3 million in direct economic benefit to municipalities CLOSED LOOP PARTNERS PAGE 2

Capital Landscape Study Investment trends, needs, and opportunities in circular supply chains 130+ Municipal, state, and other local government representatives and agencies 440+ Private companies and industry associations across the value chain 260+ Investors representing the full spectrum of asset classes + CLF Advisory Board, Investment Committee, and Portfolio Partners CLOSED LOOP PARTNERS PAGE 3

Deep-dive into PET recycling How do we improve competitiveness of rpet? How much capital is needed? CLOSED LOOP FUND PAGE 4

Executive Summary Research led by RRS focuses on bottleto-bottle supply chain Although rpet pricing is closely tied to that of virgin PET, the cost structures for producing each are very different If interventions are implemented together, then we can lower costs by 10%, improve yield by 21%, and create other system benefits If implemented at scale, national recycling rate of PET could increase by 7% rpet findings can be instructive for considering solutions for PP and PE CLOSED LOOP PARTNERS PAGE 5

TABLE OF CONTENTS 1. BACKGROUND ON PET MATERIAL FLOWS AND PRICING 2. COST STRUCTURE AND DRIVERS 3. INTERVENTIONS 4. IMPACT 5. APPENDIX CLOSED LOOP PARTNERS PAGE 6

PET material flows in US: 2015 (in mm lbs) DAK Indorama Nan Ya M & G PET Processors Invista (Fiber only) Total PET production and availability in US (2015) rpet Food & non-food bottles and jars Fiber Sheet Total US bottles recycled Post-consumer bottle imports Non-bottle PET Export US reclaimer purchases THE LARGEST VIRGIN PET MARKET IS NEW BOTTLES, BUT SHEET AND FIBER ARE GROWING Canadian rpet Other imported rpet Clean flake Clean flake equi. export rpet use in domestic markets Disposal Fiber THE LARGEST RPET MARKET IS FIBER Sheet & Film Strapping Food and beverage bottles Non-food bottles Other Export PET and Fiber Import (Staple + Filament + Resin) Inventory Other Sources: RRS analysis of industry data; NAPCOR CLOSED LOOP PARTNERS PAGE 7

US Virgin PET Supply: 2010 vs. 2015 Virgin PET consumption is growing, though production is increasingly consolidated among a few market players 2010: ~7100 MM lbs 2015: ~8400 MM lbs DAK INDORAMA PET NAN YA INDORAMA EASTMAN PET M&G DAK IMPORT WELLMAN IMPORT NAN YA INVISTA M&G Source: RRS; volumes include only solid stated virgin PET; excludes some fiber applications CLOSED LOOP PARTNERS PAGE 8

Major PET assets today: Virgin & rpet production and end use US PET MFRS Majority of virgin and rpet infrastructure is in SE and MW US Source: RRS; http://rrsinc.maps.arcgis.com/apps/webappviewer/index.html?id=d0ea03d056934f94949700c63e0302a5 CLOSED LOOP PARTNERS PAGE 9

Recent investments in rpet are coming online CarbonLite Unifi Florida Plastic Recycling rplanet Earth Note: The industry has also recently seen closure of multiple facilities; net impact on capacity is positive CLOSED LOOP PARTNERS PAGE 10

Recent investments are adding 350mm lbs/yr of capacity Description Date of Operation Annual Nameplate Capacity* Investment Unifi (NC) Added reclamation capacity to vertically integrate production 2016 130mm lbs $28mm CarbonLite (TX) New reclamation capacity Late 2017 / Early 2018 100mm lbs $62mm Florida Plastic Recycling (FL) New reclamation capacity to rely on imported bales TBD 25mm lbs (estimated) $7mm rplanet Earth (CA) New reclamation capacity integrated with production of bottles and thermoforms using flake to preform technology Early 2018 100mm lbs $74mm Source: RRS. * Indicates published capacity for incoming raw materials (e.g., baled PET bottles) CLOSED LOOP PARTNERS PAGE 11

PET bottle supply is inelastic 160 East coast Postconsumer PET bale prices & recycling rates $0.400 140 $0.350 Millions of lbs. of PET per Month 120 100 80 60 40 20 $0.300 $0.250 $0.200 $0.150 $0.100 $0.050 Cents per lb. of PET Higher bale prices do not yield greater material recovery 0 $- 1/2005 5/2005 9/2005 1/2006 5/2006 9/2006 1/2007 5/2007 9/2007 1/2008 5/2008 9/2008 1/2009 5/2009 9/2009 1/2010 5/2010 9/2010 1/2011 5/2011 9/2011 1/2012 5/2012 9/2012 1/2013 5/2013 9/2013 1/2014 5/2014 9/2014 1/2015 5/2015 9/2015 1/2016 5/2016 9/2016 1/2017 Source: RRS PET Recycled (in millions of lbs) PET bales average CLOSED LOOP PARTNERS PAGE 12

Price/lb of virgin PET and rpet pellet are typically at parity $1.00 East Coast rpet Flake to Key End Markets vs. Virgin Resin $0.90 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 3/1/2005 6/1/2005 9/1/2005 12/1/2005 3/1/2006 6/1/2006 9/1/2006 12/1/2006 3/1/2007 6/1/2007 9/1/2007 12/1/2007 3/1/2008 6/1/2008 9/1/2008 12/1/2008 3/1/2009 6/1/2009 9/1/2009 12/1/2009 3/1/2010 6/1/2010 9/1/2010 12/1/2010 3/1/2011 6/1/2011 9/1/2011 12/1/2011 3/1/2012 6/1/2012 9/1/2012 12/1/2012 3/1/2013 6/1/2013 9/1/2013 12/1/2013 3/1/2014 6/1/2014 9/1/2014 12/1/2014 3/1/2015 6/1/2015 9/1/2015 12/1/2015 3/1/2016 6/1/2016 9/1/2016 12/1/2016 3/1/2017 LNO Bottle Grade Pellet Non-LNO Flake (Sheet, High grade fiber) Virgin PET (RRS Reference) LNO Flake Non-LNO Flake (low grade fiber) LNO pellet is most heavily impacted by virgin PET; flake prices are heavily impacted by bale pricing and competition with imports CLOSED LOOP PARTNERS PAGE 13

TABLE OF CONTENTS 1. BACKGROUND ON PET MATERIAL FLOWS AND PRICING 2. COST STRUCTURE AND DRIVERS 3. INTERVENTIONS 4. IMPACT 5. APPENDIX CLOSED LOOP PARTNERS PAGE 14

Virgin and rpet production processes are very different Virgin PET Production Reaction by-product PTA Polymerization Reactor Solid state polymerization MEG End Users rpet Production (bottles) Used bottles 17% (est. avg.) of PET bottles in MRFs do not make it to PET bales Bales Flake Pelletization Yield loss CLOSED LOOP PARTNERS PAGE 15 Source: RRS

The cost of producing rpet may be as much as $0.13/lb higher than producing virgin PET VIRGIN PET PRODUCERS Market reference cost (1) Non-integrated net price Vertically integ. To PTA net cost PTA $0.45 $0.40 $0.36 MEG $0.49 $0.43 $0.43 Combined Raws (CR) (2) $0.56 $0.49 $0.45 Variable Costs: Other (Catalysts/Chemicals) $0.01 $0.01 Variable Costs: Energy & Utilities (3) $0.03 $0.03 Fixed Cost: Labor $0.01 $0.01 Fixed Costs: Other (Maintenance & Plant overhead) $0.02 $0.02 Total (EXW cost) $0.56 $0.52 (1) References prior to M&G bankruptcy announcement, Sept 2017 (2) Formula: CR= 0.85*PTA + 0.35*MEG (3) Includes variable costs (electricity, NG, etc.) Source: RRS (4) Based on average bale price since 2005 (5) Includes fixed costs (labor, maintenance and overhead cost) PCR PET Curbside Deposit Average Bale Price (picked up) (4) $0.17 $0.22 $0.19 Transportation $0.02 $0.02 $0.02 Yield cost $0.12 $0.07 $0.09 Bale price adjusted for yield $0.31 $0.31 $0.31 Conversion to flake (5) $0.20 $0.17 $0.19 Subtotal: Flake (average) $0.51 $0.48 $0.49 Conversion to pellets & SSP(4) $0.10 $0.10 $0.10 Total (EXW Cost) $0.61 $0.58 $0.59 Reasonable Floor Price = $0.60-0.65 CLOSED LOOP PARTNERS PAGE 16

Challenges and bottlenecks drive costs throughout the rpet production process rpet Production (bottles) End Users Used bottles Bales Flake Pelletization Supply Yield Loss Conversion Demand Quality Quantity Low value PET Non-PET Cleaning / sorting Pelletization Inconsistency Price volatility Source: RRS CLOSED LOOP PARTNERS PAGE 17

Quantity: There are many ways to increase PET recovery - even before we put a single new cart on the street Increase Quantity Collect more PET bottles! Capture more of PET bottles collected Improve sorting technologies in MRFs Improve quality control Implement MRF best management practices Reduce Contamination Source: RRS CLOSED LOOP PARTNERS PAGE 18

Quality and Yield: 80% of PET bottle should be recoverable, but actual recovery is much lower 20 g PET 2 g other saleable resin 2 g label 1 g moisture --------------------------------------------------------------------- 80% recoverable PET But average curbside bottle bale yield is 62% (assuming thermoforms are not accepted) Source: APR CLOSED LOOP PARTNERS PAGE 19

Yield: 38% of curbside PET bales is considered contamination Green Flake, 5% Caps/Labels, 16% Clear Flake, 57% Yield Loss Moisture, 4% Fines, 6% Non-PET, 12% Source: RRS CLOSED LOOP PARTNERS PAGE 20

Yield: Contamination contributes ~ $0.12/lb in additional costs to the system, or an additional 55% of the price paid to a MRF Composition of Curbside Bale Yield Loss Caps / Labels 42% $0.051 Moisture 11% $0.013 Perforation Potential Actions to Impact Cost Design for recyclability; new market development Fines 16% $0.019 Improve markets & technology Non-PET 31% $0.038 Improve MRF operations & sorting Total 100% $0.12 Bale Price (including transportation) $0.19 Bale Price Adjusted for Yield $0.31 Source: RRS CLOSED LOOP PARTNERS PAGE 21

Price Volatility: Spot markets make it difficult to invest Bottle grade RPET Vs. Virgin PET $1.00 $0.90 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 3/1/2005 7/1/2005 $0.66 11/1/2005 3/1/2006 7/1/2006 11/1/2006 3/1/2007 7/1/2007 11/1/2007 3/1/2008 7/1/2008 11/1/2008 $0.69 3/1/2009 7/1/2009 11/1/2009 3/1/2010 7/1/2010 Q3 2010 price = $0.62 Savings of $0.10 / lb over spot 11/1/2010 3/1/2011 7/1/2011 11/1/2011 3/1/2012 7/1/2012 11/1/2012 3/1/2013 7/1/2013 11/1/2013 3/1/2014 7/1/2014 11/1/2014 $0.73 3/1/2015 7/1/2015 11/1/2015 3/1/2016 7/1/2016 11/1/2016 3/1/2017 Historically, locking in a price could have generated savings for buyers and guaranteed revenues for suppliers LNO Bottle Grade Pellet Virgin PET (RRS Reference) LNO Bttl Avg. Price 05-17 LNO Bttl Avg. Price 05-10 LNO Bttl Avg. Price 10-17 Fixed Price at Q3 2010 VPET/RPET Parity (1) Price of VPET increased in Q3; source: RRS CLOSED LOOP PARTNERS PAGE 22

TABLE OF CONTENTS 1. BACKGROUND ON PET MATERIAL FLOWS AND PRICING 2. COST STRUCTURE AND DRIVERS 3. INTERVENTIONS 4. IMPACT 5. APPENDIX CLOSED LOOP PARTNERS PAGE 23

Recommendations Apply interventions in MRF operations to improve the quality of bale supply, reduce reclaimer processing costs and improve yield rates Ensure that PET containers are compatible with APR Design Guide to improve rpet quality and yield Implement rpet procurement strategies that help to stabilize the marketplace CLOSED LOOP PARTNERS PAGE 24

Applying a suite of interventions to the value chain would considerably improve the cost of rpet production Virgin PET Production Reaction by-product PTA Polymerization Reactor Solid State polymerization BRAND PROCUREMENT STRATEGIES stabilizes markets MEG End Users BYPRODUCT MARKET DEVELOPMENT reduces yield loss improves revenue FLAKE TO RESIN OR PREFORM eliminates need for pelletization benefits from additional quality flake rpet Production (bottles) Used bottles Bales Flake Pelletization Source: RRS MRF BMPs, SORTING, AND QC Maximizes capture of PET reduces yield loss Yield loss BRAND ADOPTION OF APR DESIGN GUIDELINES reduces yield loss improves flake quality CLOSED LOOP PARTNERS PAGE 25

Interventions Overview INTERVENTION TYPE OF INTERVENTION IMPACT TYPE OF CAPITAL NEEDED CAPITAL EXPENDITURE PER INSTALLATION PROOF OF CONCEPT TIMELINE MRF Sorting and Quality Control Technology / Capital / Operational 10+% capture rate increase at MRF; 5% yield increase at reprocessor; 10% cost savings Equipment loan $0.5MM (avg) Widely deployed 1-5 years Flake to Resin Technology / Capital 15% cost savings vs. PCR pellet Equipment loan $2-3MM (per 25MM lbs) In production at both DAK & Indorama 1-5 years Flake to Preform Technology / Capital 15% cost savings Vs. PCR pellet Equipment loan $1.3MM 8 locations worldwide; 1 in development in CA 1-3 years Brand Strategies: Commitment to APR Design Guidelines Operational 5% yield increase at reprocessor None NA Already in the market 1-3 years Brand Strategies: Procurement Financial/ Contractual Increased stability for reprocessor None (Financial Structure) NA Already exists in the market for virgin and other materials; less so for rpet 1-3 years NOT MODELED Chemical depolymerization Technology / Capital TBD Venture capital / Equipment loan TBD Loop industries pilot scale facility 2-5 years NOT MODELED Byproduct Market Development Market-based Reduces yield loss; improves and diversifies MRF revenues Could include contracts, venture capital, equipment loans TBD Recent example: APR Demand Champions initiative 1-5 years Source: RRS CLOSED LOOP PARTNERS PAGE 26

Interventions Ranked By Criteria Source: RRS CLOSED LOOP PARTNERS PAGE 27

Recommended interventions support and enhance overall impact on PET throughout the system Reducing contaminants in the RPET production process, through MRF process improvements and greater conformance with APR Design Guides, will facilitate the production of higher quality clean flake, increasing the supply available for Flake to Resin and Flake to Preform systems Improving markets for low quality PET and byproducts (e.g., fines, colored PET, thermoforms), through development of chemical recycling technologies or developing new byproduct markets, will reduce disposal costs and diversify revenue streams to improve the economic sustainability of the PET reclamation industry Financial models for RPET purchasing designed to reduce price volatility can help meet buyer and seller needs for greater price stability and provide an enticement for longerterm purchasing agreements. This stability can promote an atmosphere for investment for both buyer and seller. Source: RRS Long-term purchasing agreements benefit both buyer and seller to create continuity of supply for the buyer and greater certainty of sales for the seller, and can be structured as a tool for to the seller to access financing for investment to continually improve their operations and bottom line CLOSED LOOP PARTNERS PAGE 28

Baseline materials flow Virgin PET Production Process Reaction by-product PTA MEG rpet Production Process Used bottles Polymerization Reactor Yield loss Solid state polymerization Bales Flake Pelletization End Users ~23% of total domestically collected PET bottles are made into bottles again, the rest are consumed by other end markets. Source: RRS CLOSED LOOP PARTNERS PAGE 29

Potential Intervention #1 MRF Sorting & Quality Control A series of actions to improve the quality and quantity of PET generated by MRFs Impacts proven through good MRF operators Could be enhanced by the implementation of robotics Challenge is large number of MRFs operated by disparate entities CLOSED LOOP PARTNERS PAGE 30

MRF Sorting & Quality Control: Materials flow Reaction by-product PTA Polymerization Reactor Solid state polymerization MEG MRF Sorting & QC End Users Used bottles Bales Flake Pelletization Yield loss Source: RRS CLOSED LOOP PARTNERS PAGE 31

MRF Sorting & Quality Control: Key details Capital Costs Operating (per year) Impact on rpet price (per lb) Potential Capacity Increase (mm lbs) Optical Sorting $50,000-360,000 $2,500 Robotic Quality Control $200,000 $5,000 -$0.02 to 0.04 ~80 BMP Implementation $15,000-25,000 $30,000-35,000 Note: Impacts on price and capacity assume MRF interventions are implemented as a package Source: RRS CLOSED LOOP PARTNERS PAGE 32

MRF Sorting & Quality Control: The ROI for a MRF A Hypothetical Scenario: MRF processes 1,000 baled tons of PET/year BEFORE : Bale yield: 62% Sell price: $0.15-0.17 cents per pound Transportation cost: $0.02 cpp Landfill tip fee: $30/ton Source: RRS AFTER SCENARIO with Investment TOTAL Total new baled PET tons (%) 110 (11%) MRF annual operating cost increase $42,067 MRF annual operating cost decrease -$70,000 MRF PET revenue increase -$37,400 MRF Residue disposal cost savings (50% of increased tons) -$1,650 Net MRF cost (+) savings (-) before depreciation -$66,983 Net cost (+) savings (-) / new ton -$609 MRF capital investment $518,283 MRF amortized cost (over 10 yrs) $51.828 Net cost (+) savings (-) / new ton with depreciation -$138 First year ROI (before depreciation) 12.92% CLOSED LOOP PARTNERS PAGE 33

Potential Intervention #2 Flake to Resin Technology Proven technology, by Thyssen-Krupp, that allows for clean flake to be mixed directly with virgin resin, eliminating need for solid stating and pelletization Key success factor is sufficient supply of high quality, low cost flake Key risk is competition with low virgin raw material prices CLOSED LOOP PARTNERS PAGE 34

Flake to Resin: Materials flow Used bottles PTA MEG Source: RRS Polymerization Reactor Yield loss Reaction by-product Solid state polymerization Reactor feedstock replaced with clean flake Bales Flake Pelletization End Users Cost impact to PET producers varies based on degree of backward integration 10% flake content to reactor will increase rpet to bottle markets from ~23% to 30% CLOSED LOOP PARTNERS PAGE 35

Flake to Resin: Key details Recycled Content Capital (1) Costs Operating (per lb) Impact on RPET Price (per lb) (2) Potential Capacity Increase (mm lbs) 10% $10-15 million $0.02-0.05 -$0.10 125 20% $20-30 million $0.02-0.05 - $0.10 250 50% $50-60 million $0.02-0.05 - $0.10 500 1) $2-3 mm / 25 mm lbs 2) Eliminates cost to pelletize Source: RRS CLOSED LOOP PARTNERS PAGE 36

Potential Intervention #3 Flake to Preform Technology Proven technology, by Husky, that allows for clean flake to be mixed directly, with or without virgin resin, into the PET bottle preform Key success factor is sufficient supply of high quality, low cost flake and investment by bottle converters in equipment Key risk is competition with low virgin raw material prices and conventional converter systems CLOSED LOOP PARTNERS PAGE 37

Flake to Preform: Materials flow PTA Polymerization Reactor Reaction by-product Solid state polymerization Eliminates need for bottle maker to blend pelletized PCR Used bottles MEG Bottle feedstock replaced with clean flake Bales Flake Pelletization Yield loss End Users Allows high % of food grade recycled flake (up to 100%) No compromise in quality and performance of container Source: RRS CLOSED LOOP PARTNERS PAGE 38

Flake to Preform: Key details Recycled Content Capital Costs Operating (per year) Impact on rpet Price (per lb) (1) Potential Capacity Increase (mm lbs) 10% $1.3 million $50-75,000 -$0.10 8 50% $1.3 million $50-75,000 -$0.10 40 100% $1.3 million $50-75,000 -$0.10 80 1) Eliminates cost to pelletize Source: RRS CLOSED LOOP PARTNERS PAGE 39

Potential Intervention #4 Brand Strategies Reduce costs in RPET production by designing packages for recyclability Utilize brand purchasing power to stabilize RPET markets Demonstrated, replicable models and examples exist in the marketplace CLOSED LOOP PARTNERS PAGE 40

Brand Strategies: Key details Conform with APR Design Guidelines Pricing model to reduce volatility Long-term RPET purchase agreements Capital N/A Costs Operating N/A Impact on rpet price Caps/labels contribute ~ $0.05/lb to cost from yield loss, some of this cost could be mitigated by design choices Potential Capacity Increase (mm lbs) 40-50 N/A N/A Depends 125-500 N/A N/A Depends 100-150 Source: RRS CLOSED LOOP PARTNERS PAGE 41

Brand Strategies: Conforming to APR Design Guide Design Guide Topic APR Guidance Explanation Metal closures and lidding Pressure sensitive film labels Shrink sleeve labels Paper labels Blow molded PETG containers Avoid using metal with PET packaging. Employ labels that meet APR Critical Guidance Test Criteria, including use of conforming substrates, adhesives, and inks. Employ labels that meet APR Critical Guidance Test Criteria, or which have been evaluated within APR s Responsible Innovation Program. Avoid use of paper labels. If used, conduct lab testing to select paper labels that have negligible impact on color and haze of recycled PET. Avoid using PETG in packaging. Metals can be detrimental, and in some cases, can render a package nonrecyclable. Metals can cause a package to be lost to waste at a metal detector. Metals can degrade process equipment. Metals are a source of contamination and yield loss. Testing confirms that labels cleanly separate from PET and that label inks do not impact wash water. Evaluations confirm that the label will have least impact on PET recycling. Paper labels create pulp during the PET flake wash step releasing inks and paper fibers into the wash water. Adhesives on pressure sensitive labels can interfere with recycling. PETG cannot be recycled with PET packaging. When PETG is mixed with PET in a drier, PETG melts to creates clumps of PET flake. There are crystallizable PET resins that can be used for extrusion blow molding applications. Source: APR CLOSED LOOP PARTNERS PAGE 42

Brand Strategies: Price stability model & long-term contracts Goals: Reduce price volatility for both buyer and seller. Minimize price swings, but ensure that all parties are "made whole" over the term of the contract/relationship by providing that an equivalent dollar value is exchanged Provide a long term, contractual relationship where mutual trust is a core value Achieve buy In at the CEO/CFO level from both organizations to ensure success How the Model Works: After the buyer and seller agree to a market price as a starting point, price increases and decreases are adjusted as per an agreed upon rate of fluctuation There is a defined maximum price difference from one quarter to the next, to contain fluctuation below market levels. For illustrative purposes, this model uses a maximum of 60% of the market fluctuation. Contracts can also incorporate a maximum differential that, when reached, would trigger reconciliation Dollar variations for the total contract value are maintained comparing LV (low variability) dollars and market pricing Market pricing is what the price would be if a full price increase or decrease were implemented, as per traditional agreements The contract may include a cap to ensure that the amount due or owed does not surpass an agreed upon amount At the end of the contract the amount Due is either paid off or is rolled into a contract extension. CLOSED LOOP PARTNERS PAGE 43

Potential Intervention #5 Chemical Depolymerization Unproven technology Key success factor is ability to cost effectively achieve production scale Strong potential to strengthen RPET industry by providing an outlet for lowvalue PET and byproducts Potential to produce virgin-quality RPET resin CLOSED LOOP PARTNERS PAGE 44

Chemical Depolymerization: Materials flow Reaction by-product PTA Polymerization Reactor Solid state polymerization Process can reportedly use low quality inputs (e.g., colors, thermoforms, fines) Chemical Depolymerization Used bottles MEG Flake diverted to chemical depolymerization process Bales Flake Pelletization Yield loss End Users Source: RRS CLOSED LOOP PARTNERS PAGE 45

Chemical Depolymerization: Key details Recycled Content Capital Costs Operating (per lb) Impact on rpet Price (per lb) (1) Potential Capacity Increase (mm lbs) 10% TBD $0.015 -$0.008 125 20% TBD $0.015 -$0.008 250 50% TBD $0.015 -$0.008 500 1) Based on increased revenue to reclaimers for low-value PET and by-products Source: RRS CLOSED LOOP PARTNERS PAGE 46

TABLE OF CONTENTS 1. BACKGROUND ON PET MATERIAL FLOWS AND PRICING 2. COST STRUCTURE AND DRIVERS 3. INTERVENTIONS 4. IMPACT 5. APPENDIX CLOSED LOOP PARTNERS PAGE 47

Value is created throughout the system End Users Used bottles Bales Flake Pelletization MRF Yield improvement: 10+% Additional capture/yield improvements for other material types REPROCESSOR Yield improvement: 21+% (incl. yield improvement at MRF) Cost savings: 10+% Reduced exposure to price volatility BRAND OWNER Increased volume of higher quality of RPET at lower cost Greater flexibility in end uses of material Less volatility in price CLOSED LOOP PARTNERS PAGE 48

If investments were scaled nationally, we could increase the supply of rpet for bottles and other uses by 6% Baseline Yield for Containers (2016) million lbs Yield with Interventions million lbs 1,753 (28%) 2,125 (34%) 6,172 370 (6%) 6,172 448 (7%) CLOSED LOOP PARTNERS PAGE 49

Implications for PP and PE Market dynamics for PP/PE are challenging need demand pull Cost drivers are similar to rpet; cost structures may not be as challenging, depending on enduse specifications (e.g., not food grade) MRF-level interventions can help improve quality of PP/PE bales and bale yields; similar challenges with colored PP/PE Supply (PP) may be an issue, but more MRFs are producing tubs and lids bales CLOSED LOOP PARTNERS PAGE 50

TABLE OF CONTENTS 1. BACKGROUND ON PET MATERIAL FLOWS AND PRICING 2. COST STRUCTURE AND DRIVERS 3. INTERVENTIONS 4. IMPACT 5. APPENDIX CLOSED LOOP PARTNERS PAGE 51

References 1. NAPCOR, and The Association of Plastics Recyclers. "2005-2015 Reports on Postconsumer PET Container Recycling Activity." Recycling Rate Reports. N.p., n.d. Web. Apr. 2017. 2. "CPI News Releases." U.S. Bureau of Labor Statistics. U.S. Bureau of Labor Statistics, n.d. Web. Apr. 2017. 3. NAPET Conference, 2015 4. OESA Conference, 2016 5. The Packaging Conference, 2015 6. Americas Polyester Industry Conference, 2015 7. Confidential interviews with industry experts, 2017 8. All data from RRS, unless otherwise noted. CLOSED LOOP PARTNERS PAGE 52