Document yrR82D95j26YQbDkwkXk4bpw3

Positively Innovative Meeting with DGPR, French Environment Ministry Nov 10, 2023 Daikin Industries, Ltd. Focus of today's discussion CONFIDENTIAL I. Introduction to Daikin II. Daikin Chemical France's PFHxA phase out plan III. PFHxA restriction proposal IV. PFAS restriction proposal V. Other topics 2 I I. Introduction to Daikin 3 Introduction to Daikin CONFCIDOENNFTIIDAELNTIAL Daikin Industries, Ltd headquartered in Japan, is one of the world's leading producers of fluorochemicals as well as air conditioning and refrigeration equipment European presence Daikin Chemical Europe GmbH is a German subsidiary of the Chemicals Division of Daikin Industries, Ltd, headquartered in Osaka, Japan. Daikin Chemical Europe Innovation Centre Daikin Refrigerants Frankfurt GmbH Production, distribution of refrigerant gas, pharma propellant Daikin Chemicals Europe GmbH Sales and distribution of fluorochemical products Daikin Chemical France S.A.S. Introduction to Daikin Chemical in Europe Manufacturing of fluoroelastomer base polymer, precompounds, PPA Daikin Compounding Italy S.p.A PTFE compounds, micropowders Number of employees in 2023 (DCE): 381 Turnover FY20: 218.5m euro Daikin Chemical Europe GmbH supervises four manufacturing facilities in the EU: Daikin Chemical France S.A.S., Daikin Refrigerants Frankfurt GmbH, Daikin Compounding Italy S.p.A (previously called Heroflon S.p.A) as well as Daikin Chemical Europe Innovation Center in Dortmund. Daikin Industries, Ltd. produces and supplies air-conditioning, heat-pump and refrigeration equipment in Europe, under Daikin Europe N.V./S.A, Daikin Applied Europe S.p.A., and Zanotti S.p.A. 4 Introduction to Daikin CONFIDENTIAL Daikin's main product offering* in relation to the manufacturing, placing on the market, and use of PFAS: Fluoropolymers C6 side-chain polymers F-gases This includes: fluoroplastics and fluoroelastomers, notably FKM that is produced in France, at Daikin's site in Pierre Bnite. Examples of main uses: Automotive including electric vehicles; semiconductors; hydrogen; and other technologies supporting the green and digital transition. Examples of main uses: woven and non-woven textiles for medical; automotive; and professional apparel. Example of main uses: Stationary air conditioning; refrigeration; applied unit (chillers); mobile air conditioning; and medical usage. * List non exhaustive 5 FKM applications Means of transport Oil & Gas and Hydrogen Industrial machinery Electronics, including semiconductors CONFIDENTIAL In automotive applications, FKM is used in various engine components such as fuel and turbo charger hoses, piston coatings, gear box and transmissionn seals, shock absorbers, particle filter hoses, seals for EV motors, fuel cell coatings etc. For shipping and aircraft, FKM is used for stern tube seals, fuel hoses and gaskets, seals for rotating shafts, etc. FKM is also used in oil caps for bullet train lines, venting seals for liquid seal transformers ect. Used to ensure drilling equipment is safe and efficient. With high drilling depths come higher temperatures, exceeding 200 degrees C. For hydrogen, FKM is used as separators of fuel cells in electrolysers, sealing material for the compression process, coating in the cells. Used in O-rings and seals as sealants against oil in industrial machinery and robots i.e. reduction drives, in a wide range of industrial machinery, especially in sectors where there is increasing automation, including for vehicle manufacturing. Used to provide heat/fuel/oil resistance in wires and cables (i.e. LAN/telecommunication, automotive, industrial machineries) Oil and water resistant sealings and o-rings (i.e. copper-clad laminate in automotive/telecommunication millimeter wave radar). Heat resistance for next generation semiconductor chips. 6 I II. Daikin Chemical France's PFHxA phase out plan 7 INTRODUCTION TO DAIKIN CHEMICAL FRANCE Full subsidiary of DAIKIN CHEMICAL Europe Located in Pierre-Benite industrial platform (69) Certifications ISO 9001, 14001, 45001 Production FKM Base Polymers Currently produced with FKM Precompounds PFHxA Polymer Processing Aids (PPA) - mainly used for additives to other polymers such as PE, PP, PC, PA. Direct employees: approx. 70 people 82% of FKM placed on the EU market by Daikin is produced at DCF Daikin represents about 25% of the EU FKM market CONFIDENTIAL 8 PFHxA emissions capture - state of play (1/2) Secret C(on) fidential Summary : During FY22, DCF conducted surveys and deep analysis on PFAS emissions from the plant (water, air, and waste) and its surrounding areas (soils, subsoils, vegetables, and air), mainly based on request from decrees from French Environmental Authorities (DREAL). The authorities recognized DCF's high performance in wastewater treatment to capture PFHxA [see 1.], PFHxA mass balance at factory is available [see 2.], and PFAS used by DCF did not exceed the thresholds during monitoring within a 1 km radius around the plant [see 3.].. In FY23, DCF will continue to collaborate with DREAL to reduce emissions from water to comply with future regulations. Additionally, DCF will work with DIL to reduce emissions from air as required by authorities and prepare to transition to an alternative technology to replace PFHxA. 1. Wastewater treament result 2022 - 2023 Month - 01-22 02-22 03-22 04-22 05-22 PFHxA emission to water (g) Internal analysis (LQ = 70 ppb) Capture rate (%) Non detected 06-22 166 99,95 2022 07-22 18 > 99,99 08-22 37 99,99 09-22 172 99,96 10-22 240 99,95 11-22 6 > 99,99 12-22 2 > 99,99 Total 640 99,98 Month - 01-23 PFHxA emission to water (g) 240 Capture rate (%) 99,95 02-23 379 99,91 03-23 14 99,99 04-23 7 > 99,99 05-23 212 99,97 06-23 28 99,99 2023 07-23 36 99,99 08-23 154 99,97 09-23 4 > 99,99 10-23 2. On-site measurement / PFHxA material balance PFHxA In 6 160 kg Air emission 27 kg / 0,4% FKM 63 kg / 1,0% Waste Water 5 790 kg Waste 5 353 kg / 87% Gap In-Out 716 kg / 12% Waste Water Treatment Treated Water 1,0 kg / 0,02% Capture rate > 99,98% [PFHxA] < 100 000 ppt 3. Out of site measurement in the environment As requested by decree, in 2022 DCF performed PFAS analyses on soils, subsoils, ambient air, vegetables 1km around the plant, with around 18 sampling points. Results pointed out: - Air no exceeding of threshold values - Soils, subsoils exceeding of thresholds for PFNoA (C9), PFUnA (C11) - Vegetables exceeding of thresholds for PFNoA (C9) in case of carrots 11-23 12-23 Total 1 075 99,97 PFHxA emissions capture - state of play (2/2) Secret C(on) fidential 4- Next steps Additional requirements from Authorities Additional measurement in the water Arrt Ministriel PFAS Juin 2023 [2023-2024] Input of data in the questionnaire from DREAL [2023] Study of PFHxA dispersion around the plant [2023 end] Additional measures in the environment (air, soils, subsoils and vegetables) [2023 end] Proposal of Toxicological Reference Value and exposure scenarios to French Environmental Authorities [2023 end] Realization of studies Evaluation de l'tat des milieux IEM & Evaluation Quantitative des Risques Sanitaires EQRS [2024] Further initiatives to reduce emissions to water and to air Reduction of emission to the water: new project to improve current waste water treatment to achieve PFHxA capture < 100 ppt [2025] Reduction of emission to the air: new project to reduce PFHxA and HFP emissions by using activated carbon belts on channelled piping from the plant [2024 mid] Transition to an alternative technology to replace PFHxA [Q1 2026] Future waste water plant Current waste water plant RO membranes New decantor PFHxA phase out plan Tentative timeline for transition to PFHxA alternative Q1 2024: Trial at DCF Q1 2024: Sample to be supplied to customers for their evaluation Q4 2025: Installation of equipment for commercial production Q1 2026: Commercial production starts Secret C(on) fidential Hazard information on hydrocarbon alternative as polymerisation aid Product Hazard information (REACH registered, high tonnage band) Most promising candidate H315: causes skin irritation H318: causes serious eye damage H335: may cause respiratory irritation I PFHxA Restriction proposal 12 State of play CONFIDENTIAL Daikin is generally in support of the European Commission proposal: Does not include FKM Targets well-defined categories of products intended for the general public, where substitution is generally possible and does not affect essential uses. Implications for the PFAS restriction proposal Responsible manufacturing of fluoropolymers, incl. FKM, proposed to be addressed under the PFAS restriction proposal Need to cover derogations for the use of C6 short-chain fluorinated polymers in professional and industrial applications where alternatives are not available, including PPE, technical textiles used in transport, filtration and medical applications, as well as semiconductors. 13 I All PFAS Restriction proposal 14 Fluoropolymer Responsible Manufacturing programme CONFIDENTIAL In September 2023, Fluoropolymer manufacturers have committed to a Responsible Manufacturing Programme for European manufacturing sites: Key-elements of the programme are as follows: 1. The manufacturers have committed to the highest standards wordlwide for manufacturing 2. The manufacturers will establish a platform to promote and adopt state-of the art technologies to minimize all non-polymeric PFAS emissions in manufacturing. The platform should be active from Q1 2024 onwards 3. Minimize emissions of non-polymeric PFAS residues from polymerization aids to emission factors (EF) of - 0.009% to air and 0,001% to water by 2024 - 0,003% to air and 0,0006% to water by 2030 EF = mt of PFAS emitted per year / mt of PFAS produced or processed per year. The formula is given in the restriction dossier by the 5 competent authorities in Annex B, p. 227 4. Inform downstream users on their safe handling Competing companies are going to share innovation power to bring solutions to challenges that no one single company can solve by their own. DCF already complies with these targets. After the PFHxA phase out, DCF will comply with para 5a of the restriction proposal. 15 Daikin's general positioning REACH restriction Fluoropolymers: Responsible manufacturing Daikin shall comply with paragraph 5a of the proposal for FKM production Daikin supports site management plans (also for DUs) as set out in paragraph 8 Way to collect further information on uses and emission control, and where justified, have further RMMs Suggestion to report information to national authorities (or ECHA) GeSnceoraplecofmtmheernetstorinctsiocnope ECHA's Enforcement "challenging to enforce" Forum: Daikin supports a differentiated, more targeted approach based on the different risk profiles of PFAS incl. their uses, in line with Art. 68.1 Focus on consumer applications + responsible manufacturing requirements for fluoropolymers More detailed risk and socioeco assessment needed for most industrial and professional applications, including R&D CONFIDENTIAL Outside REACH R&D, Design Support R&D and Innovation in emission control technologies, design for disassembly, recycling technologies Improve waste handling Enforce already existing collection / EPR obligations (e.g. F-gases from ELV, WEEE) Expand incineration/recycling capacities 16 Submitted derogation requests, with a focus on R&D CONFIDENTIAL Fluoropolymers Time requested Derogation request for FKM critical applications + responsible manufacturing at DCF - supported by hundreds of contributions from DUs to the public consultation FKM (fluoroelastomer) bladder material for tyre vulcanization process FKM (fluoroelastomer) repair/protection materials for civil infrastructure Fluoropolymer Coatings of magnet wire for high voltage electric motors Anti-refective(AR) fluoropolymer coatings of optical sensors and parts PFPA -based coatings in optical lenses, sensors, and optical sensor coating parts and displays PFAS Materials for Advanced Electrolyte Applications for Lithiumion Batteries Unlimited 12 years 12 years unlimited unlimited unlimited unlimited In total, Daikin submitted derogation requests for a variety of critical applications, incl. critical R&D applications due to unique innovation potential of PFAS in particular to support decarbonisation. F-gases Time requested (F-gas) HFC-227ea pharma propellant in metered-dose inhalers (F-gas) maintenance and refilling of RACHP equipment without alternatives Refrigerant R-474A for electric vehicles Other 12 years Unlimited Unlimited Time requested Verification of Non-PFAS Materials as Cathode Binder for Lithium-ion Battery Suitability Verification of Materials for Gasket in Lithium-ion Battery FEP (fluorinated ethylene propylene) as insulation material for single pair ethernet PTFE-filters for air filtration Fluoropolymer-based architectural coatings unlimited unlimited Unlimited or 12 years Unlimited unlimited PFOB in manufacturing of inhaled respiratory medicines Industrial and professional applications of C6 SFPs product and process orientated research and development (PPORD) Support of derogation proposal 5(t) for calibration and analytical use 2036 - as defined in POP Regulation unlimited unlimited unlimited 17 R&D: R-474 A/C Refrigerant for e-cars Current Electric Vehicles Refrigerants Range anxiety, Bad climatic control R-1234yf (HFO refrigerant) Good performance (cabin comfort) in summer Low performance (cabin comfort) in winter R-744 (CO2) Good performance (cabin comfort) in summer Low performance (cabin comfort) and efficiency (driving range) in winter Higher vehicle weight Future Electric Vehicles Refrigerants Improved driving range and uncompromising thermal management HFO-blend R-474A (R-1234yf/R-1132(E)) High performance (cabin comfort) in summer Good performance (cabin comfort) in winter High efficiency (driving range) in summer and winter R-744 (CO2) Good performance (cabin comfort) in winter Low performance (cabin comfort)/efficiency (driving range) in summer Higher vehicle weight R-290 (Propane) Flammability and safety PFAS restriction proposal bans R-1234yf and all related refrigerant technologies Advanced R-744 (CO2) experience of German OEMs leads to competitive demerit for French car manufacturers Technical disadvantage of R744 (CO2) leads to competitive demerit for European car manufacturers on global market 18 R&D: Magnet wires for high voltage e-motors CONFIDENTIAL Fluoropolymers (notably PFA) as insulation material of magnet wires for high voltage motors (starting from 800-1000 V), in line with the growing electrification/decarbonisation trend In collaboration with two European partners: Additive Drives GmbH, Dresden, Germany, Tre TAU Engineering, Turin, Italy Key applications: electric cars, buses, trucks, aerospace, industry applications, robots, fans and compressors. For e-trucks: starting point will be 1000 V In case of ban, battery voltage will be stuck at 800 V. This will be detrimental to electrification for the following reasons: No decrease of charging time of batteries Reduced driving distance due to lower efficiency of the motor Higher e-motor sizes resulting in increase of material consumption, specifically aluminum, steel and copper Reduced lifetime prompting earlier replacement Issue in terms of availability of alternative materials to meet growing demand PDIV corresponds to resistance to electrical sparks that occur even more frequently with e-motors. PDIV depends on the motor insulation. What counts is the difference between the materials. PDIV results in higher efficiency, downsizing, longer life motors. 19 I Other initiatives 20 Bisphenol AF Secret C(on)fidential Summary : Daikin has decided in 2020 to relocate precompound production from The Netherlands to France (Pierre-Benite), where FKM base polymer is produced. Accordingly , Daikin has prepared a folder "Porter connaissance" to the Prefecture in 2021 for this new activity, which has been assessed as "non substantial" modification of Daikin's environmental permit by DREAL in 2022. This new FKM Precompound factory has been built with Best Available Technologies equipment's for emission in the air. Additional prefectoral decree will be delivered to Daikin with additional requirements. As Bisphenol AF is classified CMR category 1B and PFAS, new requirement is including the studies for an alternative to Bisphenol AF within 36 months. Simplified process flow chart Summary of the activity Target of this new activity is to mix some additives into the FKM Base Polymer. There is no chemical reaction during this process. Capacity of the new factory will be 9 t/day and 1 500 t/y. Main risks coming from this new activity are coming from products themselves, including reprotoxicity in case of Bisphenol AF (CMR cat.1, H360). Contents of complementary prefectoral decree - Update of ICPE categories - Update of threshold for VOC emission taking into account the usage of aceton for cleaning - Regular analysis on air emission (2 months after start-up and every 6 months) - Regular analysis on water emissions every months during 6 months - Thresholds on air emission (VLE) based on the lowest limit of BREF WGC at 1 mg/m3 - Study for Bisphenol AF substitution within 36 months New factory at Pierre-Benite Focus on requirement to subsitute Bisphenol AF 12 - 2 - Substitution des substances cancrognes et PFAS L'exploitant propose un plan de substitution dans un dlai maximum de 36 mois compter de la notification du prsent arrt des substances classes CMR toxiques pour la reproduction de catgorie 1B qui appartiennent la famille des PFAS. A dfaut, Daikin devra dmontrer dans le mme dlai l'impossibilit technico-conomique de cette substitution et l'absence d'impact sanitaire et dans l'environnement de ces substances compte tenu de l'tat des connaissances la date de transmission. L'exploitant remet un rapport d'tape sous 18 mois compter de la notification du prsent arrt. Concerns: - No visibility on substitution timeline despite continuous efforts to find a suitable alternative - Not in line with approach envisaged under recently withdrawn REACH restriction proposal on bisphenols that clearly intended to derogate FKM containing residual BPAF - Risk of distorted competition compared with other precompound FKM manufacturers in the EU, if a ban of BPAF was introduced for DCF. 21 Hexafluoropropen (HFP) Secret C(on)fidential Summary : in 2018, Daikin informed environmental policy (DREAL) of modification of hazardeous statement for hexafluoropropen (HFP), which is one of the 2 main raw material utilized to produce its fluoroelastomer base polymer. New self classification proposed by Daikin was now carcinogenic catgorie 2, H351 "suspected of causing cancer". As a result, Daikin received in 2020 a formal notice from DREAL to comply before end of 2020 with threshold of 20 mg/Nm3 for its channelled emission, according to decree from February 1998. Daikin performed several actions from that time and finally made request in Edit Master text styles 2023 to get exemption from the threshold value of 20 mg/Nm3 based on technical-economical study and health impact assessment around This request has finally been rejected in July 2023. Daikin proposed an action plan in Oct.2023 to be compliant with regulation by July 2024. the factory. Simplified process flow chart Summary of action plan proposed to DREAL on Oct.10th, 2023 First stage by July 2024 Reduction of HFP channelled emission by more than 90% (less than 800 kg/y) using actived carbon process by July 2024 to comply with regulation of Feb.1998 DAIKIN will make best effort to build and start activated carbon process from May 2024 and then reduce HFP chanelled emission by 60% or more by connecting on this new facilties at least the 2 mains contributors [dispersion tanks (ar. 6,5 t/y), vacuum pump F1 (ar. 4,1 t/y) ] Cost stage 1 : Capex: 540 k +/- 40% // Opex: 2-4 M / year Simplified HFP emission points Second stage by 2026 Introduction of new technologies to recover HFP from dispersion and re-use HFP at Polymerization stage Iwnittrhodfuutcutrioenreogfunlaetwiotnesc,hrneodluocgeiehsiginhsotepaedraotfinggracnouslta,taenddarcetdivuacteedamcaorubnotnotfowcaosmteply coming from granulated activated carbon. Cost stage 2: under consideration [HFP absorption capacity graph] Carbon have the ability to absorb HFP 22 I Thank you 23