THE HOT TANDEM AT MOLTEN METAL
As the man in charge of helping students and faculty at Massachusetts Institute of Technology market their inventions, John T. Preston has seen thousands of ideas. Most never make it off the drawing board. But one day in 1987, a young grad student named Christopher J. Nagel approached Preston after a lecture with a concept that set his pulse racing. Before coming to MIT, Nagel had patented a novel way to dispose of hazardous wastes by dissolving them in a bath of molten metal. The concept was a potential blockbuster, Preston realized. The problem: Nagel had zero business experience, and his hazy notions about how to commercialize his idea lacked coherence.
Two years later, the solution walked through Preston's door in the person of William M. Haney III. Although just 27 at the time, Haney was already a hotshot environmental entrepreneur. His first company, which he started when he was a freshman at Harvard University, provided technology that helped furnaces burn more cleanly and efficiently. Having sold that company for $200 million--and pocketing $15 million--Haney was looking for something else to run. Like an old-fashioned matchmaker, Preston introduced the engineer and the entrepreneur.
Thus was born Molten Metal Technology Inc., perhaps the hottest startup in the U.S. environmental industry these days. Run by Haney as CEO and Nagel as chief scientist (Preston signed on as an outside director), the four-year-old company is racing to prove that it can turn Nagel's original idea into a workable technology. It's a daunting task for the youthful duo--Haney is now 32, Nagel 36. Buoyed by the tantalizing possibility that Molten Metal could have a nonpolluting method to clean up the world's filthiest detritus, investor expectations are sky-high. The company, based in Waltham, Mass., posted revenues of just $4.7 million last year but boasts a market capitalization exceeding $500 million. The stock, issued at $14 a share in February, 1993, is now trading at around $23.
So far, Haney and Nagel have been moving at a rapid clip. They've signed up a blue-chip board, raised about $140 million in capital, and built a $20 million pilot plant. What's more, they have persuaded several leading chemical and waste-disposal companies to sign on as backers or customers. On June 7, they got their biggest boost yet. Rollins Environmental Services, the largest commercial hazardous-waste incinerator in the U.S., agreed to license the technology and build up to eight of Molten Metal's $20 million waste units.
HYPED TO EXTREMES? The Rollins order represents a strong endorsement gf Molten Metal's approach from one of the stalwarts of the incineration industry. "We think it has marvelous potential for solving lots of tough, chemical environmental problems that competing technologies find difficult to manage," says Nicholas Pappas, Rollins' president. But, he cautions, Molten Metal's brash young team "still has to prove it" by getting a commercial unit up and running.
Others complain that the company has been hyped to extremes, given its unproven technology and overcapacity in the hazardous-waste market, where commercial incineration prices have tumbled nearly by half in the past two years. "Even if the process does work, it's not clear that the costs will be competitive," says Philip Barton, who manages the Select Environmental Services Fund for Fidelity Investments. "It's an interesting technology, but the risks are too high to justify a $500 million market cap."
Molten Metal's technology sounds like a kind of modern alchemy: Inject waste into a bath of molten iron heated to 3,000F (table). The iron molecules bond with the carbon in the waste, dissolving it, like pouring salt into hot water. By adding a variety of reactants, such as oxygen, into the molten mixture or by changing the operating conditions, Molten Metal can transform the waste into useful products--industrial gases, ceramics, and metal alloys, for example. The technology--in essence recycling hazardous waste--theoretically could work for everything from polychlorinated biphenyls (PCBs) to used electronic circuit boards. And in theory, it's completely nonpolluting--free of the toxic ash or airborne emissions of incineration. "We can take something that people view as a liability and turn it into something valuable," says Nagel.
With their very different personalities, Haney and Nagel seem to make a good team. Thin, intense, and bookish, Nagel works long hours with his staff of engineers and chemists, dreaming up new applications and poring over data from the company's test plant in Fall River, Mass. He seems relieved not to be bothered with daily business tasks and happily gives Haney most of the credit.
EVANGELISTIC VISION. The ebullient Haney is constantly moving around the country, meeting with regulators, customers, and investors. Blessed with an easy charm, a silver tongue, and political connections--he counts among his contacts Vice-President Al Gore--Haney can switch effortlessly from price-earnings ratios to charting complex chemical reactions on his office blackboard. "Bill is a wonderful salesman because he instantly comprehends the level at which to gear his conversation to get his point across," says James B. Anderson, a Molten Metal director who runs the venture-capital arm at Travelers Insurance Cos., which has invested $15 million in the company.
Inside Molten Metal, Haney and Nagel have created a loyal group of dedicated young staffers, many of them lured by an evangelistic vision of environmental revolution. They wander around in T-shirts and jeans, a casual tone underscored by the ping-pong table outside Haney's office and the game room down the hall.
Even as kids, Nagel and Haney seemed to be headed for their current roles. Keenly interested in chemistry in his native Royal Oak, Mich., Nagel recalls nearly blowing himself up in seventh grade by dropping a small piece of sodium into water. "I had to wear eye patches for a couple of weeks," he says, laughing. Haney, growing up in Portsmouth, R.I., had a paper route, sold greeting cards door-to-door, painted houses, and even had a summer job erecting circus tents.
While on nearly full scholarship at Harvard, Haney and a classmate launched FuelTech Inc., based on a new fuel-saving process they had licensed from an inventor. Parlaying connections made through parents of fellow Harvard students, Haney raised millions in capital, most of it overseas. He soon found himself running a multimillion-dollar business while still attending classes. "I remember going to a meeting with an adviser to Margaret Thatcher and frantically trying to finish a term paper in the taxi," he says.
Nagel, meanwhile, had graduated from Michigan Technological University and was working as a chemical engineer at U.S. Steel's huge Gary (Ind.) works. His job, finding ways to cut energy costs in steelmaking, eventually led him to muse about feeding such waste material as tires into the blast furnace. Along with Professor Robert D. Bach at Wayne State University, Nagel invented the basic Molten Metal technology.
Realizing Molten Metal needed experienced help, Haney sought out big-name partners. DuPont Co. signed up to help fund the pilot plant, while Fluor Daniel Inc. agreed to provide the engineering muscle to build commercial units. Maurice F. Strong, the Canadian industrialist who organized the 1992 U.N. environmental conference in Rio de Janeiro, agreed to invest in the company and serve on its board--his only outside directorship. "I've seen a lot of new environmental technologies over the years," says Strong. "But I've never seen anything that's excited me as much as this."
RADIOACTIVE MOUNTAIN. Still, some customers stress that the Molten Metal process won't be proved until it's up and running at a commercial site, which isn't likely to be until late 1995. Among their questions: Will the unit be robust enough to operate nearly around the clock, year-round? Can the process work as well in a less-controlled environment where the waste feeds vary more? And will the unit prove as safe and pollution-free as advertised? An accident or even failure to meet promises could severely dampen the company's prospects.
One potentially lucrative avenue of business: The U.S. Energy Dept. is examining whether Molten Metal's technology could be used for its mountain of low-level radioactive waste. Although the process won't remove the radioactivity, it could cut the volume of waste at least tenfold, slashing the storage cost.
Ever the salesman, Haney waxes poetic about future possibilities. As Molten Metal's scientists understand the process better, he says, they will be able to make more-valuable end products, such as stainless steel, dramatically improving the economics of the system. Haney even predicts that one day, the technology could be advanced enough to recycle the billions of tons of municipal waste that the world is now burying and burning. Imagine turning soiled diapers into industrial gases. Now that would truly be modern alchemy.Mark Maremont in Waltham, Mass.