corporate perspective on environmental risks and remediationmseca.org/media/2015-10 - stenblom,...
TRANSCRIPT
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Corporate perspective on environmental
risks and remediation
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Lars G Stenblom
2012-12-06 TRELLEBORG GROUP 2
Vice President Risk and Environment
Risk Engineering Degree
MBA
20 years in the risk industry
Risk Engineering and Underwriting
Corporate Responsibility
Environmental Management
Risk Manager
Compliance Officer
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Agenda
2012-12-06 TRELLEBORG GROUP 3
Trelleborg Group
Our environmental landscape
Financial considerations | Corporate Social Responsibility
Mini cases | Morganfield, KY | Sweden | Dump site
Alternative contracting and negotiation tips
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2012-12-06 TRELLEBORG GROUP 4
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A world leader in engineered polymer solutions
Group profile*)
Focused polymer group
Founded in 1905
Annual sales:
about $ 3.5 billion
Employing about 16,500 people in
44 countries worldwide
~ 110 manufacturing facilities
Owns 50 percent of
TrelleborgVibracoustic with annual sales of $ 2.5 billion with 10,000
employees in about 20 countries
2015-10-23 TRELLEBORG GROUP 5
*) All data refer to year end 2014.
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Our history in brief
2015-10-23 TRELLEBORG GROUP 6
Internationalization
begins
1950 2012
TrelleborgVibracoustic,
a joint venture within
antivibration solutions,
is formed
2005
Celebrating
100 years
The development of
motoring
1930
Industrial rubber
products increases.
Car and truck tires is
phased out in 1975
1970
Focus on the industrial
sector
1999
Trelleborgs
Gummifabriks AB
is founded
1905 1990
A conglomerate with
sales of SEK 25.2
billion. Mines and
metals dominated
(Boliden)
2003
Acquisition of Smiths
Group Plc’s formed the
Trelleborg Sealing
Solutions business
area
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2014 Sales by business area
2015-10-23
1) Annual sales approx. EUR 1,780 M
7 TRELLEBORG GROUP
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2012-12-06 TRELLEBORG GROUP 8
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Our environmental landscape
2012-12-06 TRELLEBORG GROUP 9
There is a reason for risk and environment being the same function
Presently some 110 production units
Production of polymer solutions involves some interesting chemicals
The Group has legacy operations dating back to early 1900’s
Acquisitions and Divestments is in the DNA of the company
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Our environmental landscape
2012-12-06 TRELLEBORG GROUP 10
Some numbers
Remediation activities at 8 polluted sites
There are 12 sites under investigation
The Group is also involved as one of many parties in 6 remediation
cases
In 2014 we performed 17 environmental assessments as part of our
acquisition and divestments processes
25%
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2012-12-06 TRELLEBORG GROUP 11
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Triple Bottom Line | social, environmental and financial
2012-12-06 TRELLEBORG GROUP 12
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Compliance is the platform
2012-12-06 TRELLEBORG GROUP 13
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Financial Considerations
2012-12-06 TRELLEBORG GROUP 14
Part of the risk assessment
Some financial parameters
Inflation
Cost of Capital (WACC)
Return of Sale
Cash flow
Qualification aspects for a financial reservations US GAAP/IFRS
Credit risk (society/authority/owner)
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Time Element
2012-12-06 TRELLEBORG GROUP 15
Part of the risk assessment
Value over time
Net present value (NPV) – used for all investments
The environmental impact changes over time Plume growth
Material break down by nature
Technology changes over time Innovations e.g. Moore's law
Legislation changes over time Generally more restrictive over time e.g. less emissions higher penalties
Society changes over time What used to be isolated industrial areas now have residential next door
Old industrial estates are converted to residential areas
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2012-12-06 TRELLEBORG GROUP 16
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Manufacturing Facility, Morganfield, KY
2012-12-06 TRELLEBORG GROUP 17
Background
Identified impact from historic release of chlorinated solvent
(Trichloroethylene - TCE) from a former 2,000 gallon storage tank fill port;
transfer line; and
the above ground storage tank
The impact was down to 38 feet below ground in the shale bedrock.
Kentucky Department of Environmental Protection (KDEP) allows for
site-specific cleanup levels considering the degree of potential risk to
human health and environment
In the middle of a sales transaction – Joint Venture
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2012-12-06 TRELLEBORG GROUP 18
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The Options
2012-12-06 TRELLEBORG GROUP 19
Initial option analysis | White paper
No Action
Applicable if small/stable
No risks
$ 550,000
Passive
Containment with PRB
Off site exposures
$ 1,800,000
Passive/Aggressive
PRB and source injection
Limited on/off site exposure
$ 2,800,000
Aggressive
Electrical Resistive Heating
High exposure - Removal
$ 6,300,000
Consideration should also be taken regarding potential insurance cover. The selection
might be affected by the available cover e.g. need to aligned with the insurance carrier(s).
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Technology changes over time
2012-12-06 TRELLEBORG GROUP 20
Passive system elected
Cost estimate was $ 1,8 million
The cost for the PBR was actually reduced to $ 900,000 (50%) due to new methods proving successful treatment at other contaminated properties | 2011-2015
Option Initial investment* 5 years 10 years 15 years 20 years
WACC (8%) WACC (8%) WACC (8%) WACC (8%)
1 $ 550 000
2 $ 1 800 000
3 $ 2 800 000 $ 469 328 $ 1 158 925 $ 1 826 316 $ 3 660 957
4 $ 6 300 000 $ 2 111 976 $ 5 215 162 $ 9 774 761 $ 16 474 307
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2012-12-06 TRELLEBORG GROUP 21
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Norrahammar, Sweden
2012-12-06 TRELLEBORG GROUP 22
Some of the unforeseen issues
In 1618 industrial activities in small scale began
The foundry was established in 1877 – stoves, pots and farm equipment
Husqvarna a Swedish weapon producer bought the business in 1918
In 1928 production focused more on boilers and furnaces
Trelleborg acquired a small production unit as part of a larger acqusition in
1986 and closed the production in 1989
The industrial estate was gradually abandoned during the 1980-1990
Joint and Several responsibility by Law
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Legacy Site, Sweden
2012-12-06 TRELLEBORG GROUP 23
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Norrahammar, Sweden | Legacy site
2012-12-06 TRELLEBORG GROUP 24
No Trelleborg documents available regarding the old production
Indicated to have used Chlorinated solvents by old supplier records
The main issue at the site is NOT the solvents | studies from 2006
HOWEVER, nearby creek that is affected and the authorities are now looking for entities to approach
If you get involved in the case then you will have to share the expense of investigation and clean up. [Deep pocket]
Potential liability is excess of USD 5 million and expense to date is USD 130,000 (Legal costs)
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Widdifield, VA | Private estate
2012-12-06 TRELLEBORG GROUP 25
Trelleborg acquired Reeves Brothers in 2006 Producing rubber coated textile material
Fully aware of several old polluted sites when we acquired the business
The known liability was sold off to a “clean-up” company
An insurance policy with Chubb was put in place
A new environmental case appeared the Executrix of the Widdifield Estate wanted to sell a 23.75 acre estate.
The realtor was vaguely aware of “burning material” on the estate
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We got an email
2012-12-06 TRELLEBORG GROUP 26
18 months after closing the deal
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Use and occupancy
2012-12-06 TRELLEBORG GROUP 27
Rent was $600/year
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2012-12-06 TRELLEBORG GROUP 28
Dump
site
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2012-12-06 TRELLEBORG GROUP 29
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Widdifield estate
2012-12-06 TRELLEBORG GROUP 30
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Main building
2012-12-06 TRELLEBORG GROUP 31
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The dump area
2012-12-06 TRELLEBORG GROUP 32
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The dump area
2012-12-06 TRELLEBORG GROUP 33
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Outcome
2012-12-06 TRELLEBORG GROUP 34
Site leased between 1966 - 1976 to dump rubber waste and solvents
Insurance only cover known properties | No cover
We manage to get an agreement with the family which allowed us to
manage the case and apply restrictions
Remediation involved soil/material removal and then restrict use of
the land.
The remediation cost was more than USD 2 million
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Some more financial aspects
2012-12-06 TRELLEBORG GROUP 35
Widdifield $2 million
Norrahammar $5 million
Morganfield $1 million
Converted to Sales: 80 – 150 million depending on the expected return
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