Recycling Fly Ash With A New Firm

July 26, 2002
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WEST OLIVE — What once went straight into a landfill now represents a major business opportunity for a Grand Rapids investment bank that has formed a new venture to use the fly ash from Consumers Energy Co.’s power plant in West Olive to produce concrete building materials.

If successful, the venture could serve as a template for Phoenix Materials Co. to eventually recycle millions of tons of fly ash a year around the country to make concrete blocks and panels for the construction industry.

“We’re convinced, frankly, it’s one of the best opportunities we’ve ever looked at,” said Phil Blanchard, a partner in the small merchant bank Hartwick Capital LLC and president of Phoenix Materials Co.

“We thought the payoff was more than worthwhile,” Blanchard said. “We need to prove the business is viable and works and there’s a natural progression.”

Phoenix Materials Co., a new company formed by Hartwick Capital for the venture, has signed a deal with Consumers Energy to lease 20 acres on the grounds of the utility’s J.H. Campbell Generating Complex. Phoenix Materials plans to build a $7 million plant that will use 50,000 tons of fly ash a year from the J.H. Campbell complex to produce building materials used in roofing, wall and flooring systems in residential, commercial and light industrial buildings.

A new technology used to produce aerated concrete products from fly ash is far more cost effective than a previous manufacturing process, Blanchard said. The venture represents the first company formed by Hartwick Capital, which has ownership stakes in several area companies and is working to finalize capital for the Phoenix Materials venture, he said.

Aerated concrete materials made with fly ash now represent about 30 percent to 35 percent of the market in Europe, or the equivalent of the amount generated at 150 to 200 power plants in the United States, Blanchard said. He believes the new concrete materials — by providing improved thermal and acoustic insulation and a high resistance to fire, pests and mold — will catch on quickly in the domestic construction industry as a “low-cost alternative with many superior structural characteristics.”

“We’re eager to move forward and get the plant built and start production,” Blanchard said. “We want to be producing as soon as we can.”

Phoenix Materials hopes to begin work on the plant later this year and commence production by late in the second quarter of 2003. The plant will employ between 12 and 50 people, depending on production levels, and can expand to handle up to 100,000 tons of fly ash a year if market demand grows.

To Consumers Energy, the venture represents the opportunity to recycle an even greater portion of the 300,000 tons of fly ash produced annually at the J.H. Campbell coal-burning power plant.

Using the plant’s fly ash to produce building materials is beneficial for the environment and helps the utility control costs by not having to incur the expense of storing the byproduct in a landfill, said Dennis McKee, community affairs manager of Consumers Energy’s J.H. Campbell power plant.

“It’s cost avoidance,” McKee said. “The cost associated with collecting the ash waste, moving it into holding areas and storing it runs into millions of dollars over time.”

Consumers’ five coal-fired Michigan plants annually generate about 750,000 tons of fly ash, a byproduct of burning finely ground coal.

Jackson-based Consumers Energy has actively sought out businesses to recycle fly ash, which until recent years was stored in large landfills.

“We’ve always explored markets for that. It’s an ideal material for a lot of uses. It’s just a matter of finding the marketplace and getting the agreements,” Consumers Energy spokesman Jeff Holyfield said.

The venture with Phoenix Materials will not affect an existing two-year-old business relationship Consumers Energy has with ISG Resources Inc., a Salt Lake City, Utah-based firm that markets fly ash to concrete companies.

“We’ve got plenty of fly ash,” Holyfield said.

Hartwick Capital expects to complete financing for the venture soon and is working to secure contracts for the sale of the building materials Phoenix Materials will produce in West Olive, Blanchard said. The company is presently talking with “some very, very large potential users,” he said.

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