Facility Closures Are Coming With a Need For Decommissioning (Part 1): A Fallout of the COVID-19 Crisis

One doesn’t have to be an economist to predict that the world economy is likely going to see a slowdown which may be significant at least in the short term due to the COVID-19 pandemic and its after-effects. Global corporations and companies with significant North American operations are already conducting a reassessment of their value chains to make strategic adjustments in their businesses and perhaps even their business models to realign for a more reliable, predictable, and competitive supply chain in the future. The shortage in supply of essential medical supplies, equipment, medicines, and other critical supplies has exposed the tender underbelly of corporations outsourcing the manufacturing and sourcing of these goods internationally for the sake of cost advantage alone. More near-shoring and on-shoring is on the cards, which means more manufacturing jobs here in the US! The corporations with more savvy management and strong financial positions are also taking advantage of the disruption created in the current pandemic-induced economic environment by acquiring manufacturing and other strategic supply chain assets at cents on the dollar, while disposing of less profitable and low-performing assets. Some businesses which are likely highly leveraged, with mediocre management and that are poorly run, and without the financial cushion needed to weather this crisis may not have the luxury to conduct these strategically critical transformations and will be the casualties of this virus “war”. As a result, in the next several months and perhaps years, expect to see the industrial landscaped littered with closed or closing facilities, as companies move to shed non-performing assets. Also expect to see a significant jump in the operating budgets of the Fortune 1000 allocated for industrial asset closure and decommission. 

The process of successfully closing and decommissioning plants is a complex one and does not occur by simply turning off the light switch. Out of the Property, Plant, and Equipment on the company’s books, “Property” will likely yield the most salvageable value as plant and equipment is sold off at salvage value in many cases. Facilities decommissioning requires heavy manufacturing process lines and supporting equipment to be cleaned out and decontaminated, equipment scrapped, sold, recycled, and hazardous waste disposed of properly. Imagine plant infrastructure that has been in operation for more than 50 years: chemical plating tanks, sumps, trenches, and pits containing cyanides, acids, caustics, and solvents, paint spray booths, ammonia tanks and supply lines, raw material silos and dispensing systems, pressurized petroleum hydrocarbon tanks and fueling systems, boilers and refrigeration equipment with asbestos-containing insulation and lining, lead-based paint containing building walls, onsite wastewater treatment systems the majority of which leak waste liquids into the subsurface , and much much more. Even the most “cleantech” of facilities can surprisingly be significant users of hazardous and toxic materials that need special handling and disposal. The bottom line is that specialists are needed to execute this critical step in the realignment process in order to extract the most value from these residuals for the corporation and its shareholders. 

For more information: https://www.rpsgroup.com/services/environment/

Need a conversation started? In southern California, contact: 

Hari Gupta, P.E., M.B.A.

[email protected]

Information presented above are the writer’s own views and doesn’t necessarily reflect the views of his current employer.