gasworld article, November 2019 by Maura D. Garvey

Absolute Air, LLC broke ground in Faribault, about 50 miles south of Minneapolis on September 19, executing on their announced plans to build a merchant air separation plant (ASP) in the Minneapolis metropolitan area to serve its partners and customers. The plant is expected to be producing gases by early 2021.

Speaking at the groundbreaking ceremony were the President and the Chairman of Absolute Air, Ned Pontious and Brad Peterson. Peterson is also owner of Mississippi Welders Supply (MWS), one of the project partners and the current Gases and Welding Distributors Association (GAWDA) President. In attendance for the groundbreaking celebration were the companies that are under contract to design, engineer, and build the facility and plant, including ISG Engineering, Bauer Design Build LLC, plant builder AMCS, and Chart Energy & Chemicals, Inc. Steele-Waseca and Great River Energy, the power companies that will provide reliable electric power to the plant, were also in attendance.

Others attending that were involved in bringing this project to fruition included Bruce Best, owner, Aspen Run Consulting for financial modeling, and Bremer Bank for financing. The Mayor of Faribault, Kevin Voracek, and city administrative officials that assisted Absolute Air in the planning process were also in the audience, with the mayor giving brief remarks before the shovels hit the dirt. Supportive industry peers and friends Ray Borzio, managing partner at Global Calibration Gases and Ray Dillard, VP ARC3 Gases Gas Operations and chairs the steering PurityPlus® committee, were also there to cheer on the Absolute Air team.

Pontious discussed how the atmospheric gases of oxygen, nitrogen, and argon, are key to the industrial gas business. He described the hightech process of air separation and how building these plants is typically done by the large multibillion-dollar industrial gas companies such as Praxair, which currently owns the only ASP in the Minneapolis area, or Airgas/Air Liquide which just broke ground for a new ASP in Cottage Grove, MN.

Pontious, who built two ASPs while running NORCO, said “Very seldom will an independent company build an air separation plant because they are capital intensive. Now we have the Absolute Air group which is five companies that have pooled their money together to run an independently operated Air Separation facility. The location chosen, Faribault, is close to the interstate for ease of transport, has plenty of available land, and is located in the heart of the five partner’s operations that have invested in this project.”

Peterson introduced the Absolute Air Partners, five companies that have all been in existence for at least 70 years and are all family owned except Toll Gas & Welding Supply which is an employee stock ownership plan (ESOP) company. Besides Toll and MWS, the other partners include Minneapolis Oxygen, A-OX Welding Supply, and Huber Supply. Each of the distributors brought a great contingent of employees to the ceremony. Peterson also introduced Rich Mansmann, VP Gas Programs of the Independent Welding Distributors Cooperative (IWDC), who has been instrumental in getting the partner members together and providing project support. Peterson said that they tried to get this project started about 10 to 15 years ago, but the interest and connections were not ready. Peterson and Mansmann began working on this project a couple of years ago feeling that the timing was better.

Peterson said, “The eyes of the industry are on us. It’s a lot of disruption to the normal course of business. We are under the microscope. The big guys are watching us to see if we stumble and the little guys are watching us to see if this is a replicable model that they can go out and reproduce. We are up to the challenge, we are ready.”

Peterson explained how this plant will allow the partners to transition from buying all of their gases from the major industrial gas companies to making the bulk of the gases for themselves, affording the partners independence and economical supply.

Peterson said, “We will still have to purchase other gases from those large suppliers. We will still have a relationship with those big guys and will still need to buy other gases from them.” Peterson described the necessity of maintaining relationships with the majors because “one of these plants doesn’t exist in a vacuum. It needs to be a part of a network because if one of the plants is down for maintenance, you need to back each other up. So, we will still have a relationship with the big guys. We will have swap deals and we will have back-up deals and we will buy argon, helium, CO2, and a host of other specialty gases from large suppliers.”

What makes this venture effective is that the individual strengths in products, applications, and markets of the five distributors are complimentary to the whole and that by networking together it strengthens the individuals and the whole. These five partners are competitors, but friendly competitors. They are not direct competitors in all geographic markets as their 30 branches and over 400 employees are distributed throughout five states of Minnesota, Iowa, South Dakota, North Dakota, and Wisconsin. They also operate in Nebraska and Illinois and some have national components to their businesses.

The partners’ branches are distributed throughout the upper Midwest with the Absolute Air plant located in the center. From the Absolute Air plant, A-OX’s seven branches are located to the west, Huber’s three branches are situated to the south, Minneapolis Oxygen’s five branches are to the north, MWS’s 11 branches are primarily to the east with one branch just west of Faribault, and Toll’s four branches are to the north centered around the twin cities. The individual focus on products and applications varies widely among the partners. Minneapolis Oxygen has a significant business in the manufacturing and fabrication sectors. But they also service a wide range of other customers in the research and development (R&D) industry with specialty gases, microbreweries with carbon dioxide (CO2), veterinary and dental facilities, technology education schools, and power plants. They recently purchased a LIN trailer in preparation for the new ASP.

Toll has a three-pronged focus: industrial and specialty gases, equipment rental, and hardgoods. The industrial and specialty gases are diversified among metal fabrication, electronics semiconductor manufacturing, biotechnology, and others. Their recently expanded specialty gas facility and fill plant automation assists them in supporting and growing in these applications. They also service one of the largest brewers in the region with CO2. Toll’s equipment rental fleet is one of the largest in the nation and supports many construction operations nationally. Toll has LOX, LIN, liquid argon (LAR) trailers to take product from the new ASP.

MWS’s biggest market is metal fabrication where vehicle components and stainless-steel manufacturing are among their largest customers. The food and beverage sectors are also a significant piece of their business where restaurants, taverns, and breweries are big consumers of LIN and CO2. MWS has the largest distribution fleet of trailers among the partners.

Huber’s largest sector is manufacturing where they supply about 90% of the agricultural equipment manufacturers in the region. They are heavy in nitrogen supply, but also argon. Last year they moved into medical filling and food and beverage grade gases. Huber’s business is heavy on the gases, but they also have an e-commerce hardgoods business. Huber has a LAR and a LIN trailer.

A-OX’s largest market is medical gases where they are the preferred supplier to two of the major hospitals in the region. They are a significant player in the specialty gas market where they wholesale gases nationally. They supply medical mixes such as heliox and medical CO2. A-OX is a qualified medical CO2 supplier as well as a key player in the writing of specifications for PurityPlus®. They also have a large transport fleet of LOX, LIN, and LAR trailers.

he outlook for this venture is bright and Absolute Air and the partners have wisely thought out not only how effectively they have and can work together, but how they will work within the traditional business network of the “big guys”.