New refrigerant rules = hot times for Priority Cool

By GREGORY ZELLER // With new refrigeration standards sweeping the globe, a Bay Shore company with proprietary rights to an advanced coolant formula is poised to cash in on a potential $10 trillion industry.

Pretty cool, right?

Green Way Solutions, dba Priority Cool, has only been manufacturing its patent-pending hydrocarbon blend since January, but it’s already estimating $3 million in 2015 sales – and that’s without tapping the enormous U.S. market. According to company officials, 99 percent of orders come from Pacific Rim nations, and the 1 percent ordered by domestic customers goes to companies that slap a private label on the coolant and ship it to Asia.

The orders are multiplying as new refrigerant regulations demanded by the historic Montreal Protocol on Substances that Deplete the Ozone Layer take effect. Even though the Montreal Protocol demands the coolant currently used in virtually all refrigerators, air conditioners and automobiles be replaced by 2020, the United States – a notoriously slow adapter of alternative energies – is yet to get on board.

That means Priority Cool is just warming up.

“In Europe, Asia and Australia, they’ve been using hydrocarbon refrigerants for decades,” said Green Way Solutions CEO Rudy Holesek. “Everybody knew 2020 was coming. But the United States, even though it was a major author of the Montreal Protocol, has been one of the last to embrace the alternate refrigerants.

“We have a tremendous opportunity before us,” he added.

Rudy

CEO Rudy Holesek: Future refrigerant market of $10 trillion is enough to give anyone the chills.

The tremendous opportunity dates back to September 1987, when 197 different signers – 196 nations and the European Union – ratified the Montreal Protocol, generally regarded as the first universally ratified treaty in United Nations history. Designed to protect the environment by phasing out numerous ozone-depleting substances, the protocol has undergone eight subsequent revisions, but several standards have remained intact.

Among them: a complete elimination of r22 Freon, a colorless gas used as a coolant in 95 percent of the world’s air-conditioning units. There are many refrigerants that can replace r22, Holesek noted, including various hydrocarbons, organic compounds made exclusively from hydrogen and carbon. But none of the substitutes are particularly efficient.

Enter Priority Cool, which formed in 2010 when Holesek – a 40-year veteran of the HVAC industry and founder of Bay Shore-based Apollo HVAC Group – was approached by Frank Galante, a financial professional who’d just met with a team of scientists in Idaho. The team had created “the best damn refrigerant in the world,” according to Galante, a hydrocarbon blend that was 25 percent more energy-efficient than any known coolant, including other hydrocarbons.

“When this came across my desk through Frank, it was in my comfort zone,” Holesek noted. “I understood the technology and I knew how to apply it.”

The partners quickly purchased the formula (for just $25,000) and formed the holding company Green Way Solutions. Since 2010, they’ve gone through an “arduous” patenting process, Holesek said, resulting in provisional patents – the only patented hydrocarbon formula, the CEO noted – with full patents pending.

After obtaining those provisional patents in September, they completed construction of a 10,000-square-foot manufacturing plant in a remote corner of Idaho. The plant opened in January; just four months later, orders are already outpacing production capacity.

“We wanted to start small for reasons of investment, but even just a few months in we’re at the limit of our capacity,” Holesek said, citing plans to increase the plant’s output by 400 percent by the end of this year.

While the plant’s location in Idaho’s Spirit Lake region is remote enough “to be part of the witness protection program,” according to Galante, having the manufacturing facility in the Northwest offers several advantages. With most of Priority Cool’s initial customer base in Japan, Malaysia and Singapore, the plant is convenient to the Port of Seattle, the company’s primary export point, and the raw materials that go into the hydrocarbon formula “are a little more readily available in that neck of the woods,” according to Holesek.

Although the Bay Shore company does plan to eventually open an East Coast manufacturing plant to service European customers, it’s not likely to happen on Long Island.

“Never say never,” Holesek said. “But political forces would have to help us get approvals and permits to put that kind of operation here. That’s not easy.”

Priority Cool, however, will remain headquartered in Bay Shore, at least until the founders decide to sell their patented formula to a larger entity. That’s “definitely the endgame,” according to Galante, who noted that $25,000 formula is already worth about $7 million and the U.S. hydrocarbon market is rocketing into “the billions of dollars.”

“We’ll eventually sell off to a large company like Dow (Chemical Co.) or DuPont,” said Galante, now the Green Way Solutions COO. “That was our strategy from Day One.”

Holesek said Priority Cool has already been approached by potential buyers, but “we haven’t taken them seriously because we’re not at the point of being ready to sell.” For now, he added, the focus is on growing the company, and that shouldn’t be too difficult.

With the reality of the Montreal Protocol bearing down, U.S. industry is finally pressing the gas. Companies like General Electric (in refrigerators) and Ben & Jerry’s Homemade Holdings (in ice cream vending machines) are already turning to hydrocarbons – less-efficient “straight blends” than Priority Cool’s advanced product, Holesek noted – while Priority Cool awaits word from Westchester-based cola giant PepsiCo, which is testing the Bay Shore company’s patented formulation.

“Those kinds of deals take a while to mature,” Galante noted. “But we know our product is bulletproof. We know it works.”

That means Priority Cool, just like the hydrocarbon industry, has some growing to do before its founders are ready to sell.

“There are some predictions that, by 2030, hydrocarbons will be a $10 trillion worldwide industry,” Holesek said. “Every refrigerator, air conditioner and automobile in the world uses a refrigerant, and the lion’s share needs to be replaced in a very short period of time.

“When you have a product that will satisfy those environmental requirements and also reduce energy usage, that’s a real win-win.”