Industry: Built Environment
Products: Medium-density fiberboard (MDF)
Founder and CEO Jerry Uhland has persevered and commercialized a scalable and eco-friendly manufacturing method for a construction commodity.
More than 20 years after Uhland started working on his vision to turn rice straw into medium-density fiberboard (MDF), the first boards will roll out of the $315 million CalPlant I manufacturing facility in February 2020.
The MDF product -- made without the formaldehyde-based resins that make MDF smell -- can be used to make furniture, kitchen cabinets, store fixtures, doors, moldings, and flooring substrates. Analysts estimate the global market for MDF is about $25 billion and steadily growing.
Uhland, who was a California rice producer for 20 years, started doing research and development around using rice straw in 1996 and after what he calls some "interesting failures" determined that the agricultural waste product could be converted to MDF.
The first commercial-scale plant of its kind in the world, CalPlant I will source rice straw, traditionally left to decompose in flooded fields, from growers within 25 miles of the plant in the Sacramento Valley, meaning its patented MDF-manufacturing method uses much less water than the status quo.
The numbers are big: As of February 2020, the plant will be capable of manufacturing 140 million square feet of MDF annually, or about 30 percent of California’s total demand. There are more than 300,000 tons of rice straw currently in storage at the plant.
Uhland started the project to solve a problem after California banned burning of rice straw and he needed to find a way to dispose of it. "Little did we know that we were going to have to go through a five-year research and development program," he says.
After developing the fiberboard, he started shipping it to end users such as flooring company Pergo and audio giant Bose for testing. "Bose tested it and discovered the high-quality acoustic value," Uhland says.
Uhland got end users to commit to buying his product, then was able to nail down financing for the project. His first financial partners failed and the project stalled, but Uhland didn't give up and ultimately got Stifel Nicolaus and Citigroup to underwrite the bonds.
Stifel and Citigroup took the deal to the market in May 2017 and garnered $834 million in secured bids -- well over the $225 million Uhland was seeking for the project. The financing closed in June 2017. "A lot of people wanted to be involved," he says. "We were able to select the people who wanted to hold our bonds."
Challenges: Despite the roller-coaster ride Uhland took financing the project, the biggest challenge has been building the CalPlant I. "When you're building the world's first, and you base contracts on preliminary engineering and design and you get into detailed engineering and design, things change," Uhland says. "Change orders seem like they're endless."
Cost overruns because of the changes forced him to return to the equity group for further investment. Uhland had projected producing the first boards in mid-2019, but the launch was delayed until early 2020.
Opportunities: Uhland says he plans to build future plants in places where rice is abundant and pollution is an issue. In California, rice is grown on about 500,000 acres. Arkansas, with about 1.4 million acres of rice planted, is a target; farmers are allowed to burn the rice straw. Uhland also is eyeing India for international expansion.
Needs: The plant will process 275,000 tons of straw annually, so to succeed going forward, Uhland says he needs rice growers who are committed to CalPlant for the long term.
The company also needs crews to bale the rice straw. This year, he had 50 baling units that baled 130,000 tons of rice straw in five weeks. He anticipates needing up to 90 baling units, which each need for people to operate. "We don't have to go very far to get our raw material because the valley is so small, but I need grower participation and the ability to bale it," he says.