Our P2O solution is a proprietary process that converts waste plastic into fuel through a series of chemical reactions. We developed this process in 2009 and began limited commercial production in 2010 following our receipt of a consent order from the New York State Department of Environmental Conservation (“NYSDEC”) allowing us to commercially operate our first large-scale P2O processor located at our Niagara Falls, New York facility. Currently, as of the filing of this report, we have one operational P2O processor and a second that is in start-up mode. Each of these processors are capable of producing naphtha, Fuel Oil No. 2 and Fuel Oil No. 6, which are fuels produced to the specifications published by ASTM International, the organization that establishes the international technical standards for fuel products. Our process also produces two by-products, an off-gas similar to natural gas and a petcoke carbon residue, both of which have a potential market value. We currently sell our fuel product to fuel wholesalers and directly to commercial and industrial end-users. We primarily use our off-gas product in our processing operations to fuel the burners in our P2O process.
Processor #1 – This is our first processor that was built and provided key research and development data. During the second quarter of 2012, processor #1’s reactor began displaying severe signs of wear due to extensive research and development performed on it since 2010. In order to maximize future production from this processor, the original reactor was replaced. This reactor included a more modular design and several technical improvements to the original reactor. Processor #1 then had to be reassembled with certain pieces of updated hardware, mainly piping and connections that accommodated this nearly 20% larger reactor. Processor #1’s reconstruction and upgrade was completed during the fourth quarter of 2012 and currently is in start-up mode, however, we did not produce any fuel from processor #1 during the third quarter of 2012. The lack of production from processor #1 during the third quarter of 2012 was a factor that negatively impacted our revenue from the P2O business.
Processor #2 – This is the second processor which we built and began production late in the first quarter of 2012. During the latter part of the first quarter of 2012 and during all of the second quarter of 2012, processor #2 primarily produced No. 6 Fuel Oil and Naphtha. Early in the third quarter of 2012, we made the decisions that due to the considerably higher market price for No. 2 Diesel Fuel Oil as compared to that for No. 6 Fuel Oil and Naphtha, we would make modifications (i.e. the addition of a cyclone) to the processor to enable the consistent production of No. 2 Diesel Fuel Oil. The modification caused approximately two weeks of down time during July 2012. Since completion of this modification, processor #2 has been producing ASTM D975 #2, Fuel Grades 2 & 4. Processor #2 also continues to produce a small amount of light naphtha as a by-product of #2 fuel production. The Company continues to focus on producing high quality fuel products that have the potential to generate the highest revenue for us.
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