LyondellBasell Industries N.V. (LYB) Earnings Call Transcript & Summary

Good morning, everybody. Can you all take your seats, please? So welcome. We're here at LyondellBasell's 2023 Capital Markets Day. So glad to see everybody here in person again, this historic building iconic room here. I just want to thank the New York Stock Exchange for everything they've done to get us ready for today. I trust all of you on the webcast can see and hear as well. We're glad you're here today as well. So it's been a long time since we met in Houston 3.5 years ago. We had some good barbecue out of Channelview. We saw some steel coming out of the ground for our new PO/TBA plant. A lot has changed in the world. A lot of has changed at LyondellBasell. So we're very happy that you're here today, and we've got a lot to talk about today. For those of you that don't know me, I'm Dave Kinney. I'm responsible for Investor Relations at LyondellBasell. I've been with the company for over 30 years now in a variety of roles. Some of you that have visited us in our facilities know that we have a tradition of safety moments in our company, and today is no different. We'll have a brief short and simple one today. So there's 2 doors behind you and in the unlikely event of an evacuation or some other event, New York Stock Exchange staff will help you out and bring you to the appropriate location. If you need to take a break today, there's restrooms down the hall to the right. So today, we're going to discuss our strategy, our forecast for the future, and including some forward-looking statements and non-GAAP measures. We believe that the assumptions that we have are reasonable and that the alternative measures are useful for investors. We encourage you to read the slides behind me, the regulatory filings, and learn about the factors that could lead our actual results to differ. You can find that on www.lyondelbasell.com/investorrelations. Today's forecast will be framed in terms of normalized income and EBITDA. We're not going to try to predict the cycle. We're not going to try to predict geopolitical events. We're not going to try to predict the price of oil. It's all pretty hazardous. What we're going to do is talk about our average historical margins and operating rates for the company through the past 10 years from 2013 through 2022. We think this is a reasonable time frame representative of a cycle for our industry. And it's a really understandable reference for thinking about through cycle economics. So we're going to begin with 2022 actual results and normalize that to our average historical margins and rates and then see how the new strategy carries that through to the future. Now some of these average historical results will be lower and result in normalization that brings our 2022 results down and some, naturally, will be higher and increase our 2022 actual results. We'll be using a 20% tax rate for all of our income and cash forecasts. We're going to assume that our EBITDA continues to get converted into cash at an 80% rate as it has been in the past. And our forecast also includes our current beliefs about acquisitions and divestitures. Naturally, the magnitude, timing and structure of these things are very unpredictable, but they represent our current beliefs. Finally, on March 7, we filed an 8-K with the Securities and Exchange Commission. And we provided you with unaudited historical financial results for Catalloy and Polybutene businesses. We moved those businesses from the Advanced Polymer Solutions segment on January 1st and put them into the Olefins and Polyolefins Americas and Europe, Asia, International segments at that point in time. So our forecasts reflect those changes. So now I'd like to get the program underway and introduce our Chief Executive Officer, Mr. Peter Vanacker.

Thank you, David. Thanks, everybody, for coming. Also thanks, everybody, for following us online today. My name is Peter Vanacker as introduced already by David. Happy to be here, my first Capital Markets Day, not the first one in my life, but the first one at LyondellBasell. And what a company this is, LyondellBasell. We have very passionate people in the company. We have, as you will see, a very clear strategy, a very clear framework. And within that framework, we will continue to deliver as you're used, I mean, from us. Of course, what you will hear from us today is, first of all, our excitement from the members of our Executive Committee team. We decided that it would be good not just to have a Capital Markets Day with Michael and me standing here, but you have also the chance -- some touch and feel, so to say, to see members of the executive committee. These are the people that are having ownership responsibility. And therefore, I believe it is important that they are standing here and talking about their excitement. The team is prepared to leverage upon our foundations that we have at LyondellBasell, and they are very strong foundations, leveraging upon these foundations to establish a value creation engine. We'll keep that heritage, let there be no doubt about it. And you will hear me say that over and over again. We're the safest operator in our sector. Safety is extremely important. We'll continue to work on our safety track records. I believe that we are the most reliable operator in our sector. And this is something that doesn't happen just from today to tomorrow. It's a lot of hard work. It's focus, concentration, passion. We're going to continue to work on our reliability. We are the lowest cost operator in the industry. We're not going to give that away. We're going to continue to focus on being the lowest cost operator, but we will add new attributes to that heritage. And we'll talk about that also today. So with our renewed strategy, we truly will unlock the potential that we see inside of our company, the potential across the globe. We'll outline our plans in terms of organic growth, margin expansion, improved returns. And our strategy is enabled by our technology position, technology that we have built up since many, many, many years. It's built upon our sustainable solutions. It's built upon the advantaged positions also that we have in attractive and in growing markets. So let's jump into it. When I was approached, I mean with this LyondellBasell opportunity and thanks, I mean if members of the Board are following, I was intrigued. I had a lot of respect because I've had quite some experience I mean with LyondellBasell in my career. When I was running polyurethanes at Bayer, my largest joint venture partner was actually LyondellBasell on propylene oxide. But then later, when I did my first CEO job, I ran a company under private equity ownership, which was the largest BOPP films manufacturer in the world, and surprise, who was the biggest supplier? That was LyondellBasell. Now after that, when I was CEO of Neste Corporation, who did we build a partnership up with? That was LyondellBasell. And we did write -- together, we did write history because it was the first time on the planet that we produced polyethylene and polypropylene in our Wesseling sites, the LyondellBasell Wesseling site in Cologne that was based upon renewable raw materials, based upon renewable hydrocarbons made out of waste. So I've seen LyondellBasell, I mean, from different angles. I've been extremely impressed, I mean by the focus on safety, focus on costs, focus on reliability and being the best operator. All that is still true. You just have to look at our results in 2022 despite a difficult market environment in the second half of the year. So we have a fantastic foundation in our assets, our people, our relationships, the skills, the global reach, LyondellBasell, if any of you doubt about it, is a true leader in global chemicals. 2022, $50 billion in sales. We generated $6 billion in cash. Directly employed more than 19,000 talented employees, employees that want to work for us, work for the company every day, to their best. With sales in more than 100 countries. We have more than 100 manufacturing site and joint venture sites. And we have a sales mix that is balanced across our products and across the geography. And these businesses that we have, businesses in technology, the O&P business, the I&D business, the APS business, they all have a very logical fit as you will hear today again in -- from the presentations. And they are all poised for attractive long-term growth. Now we lead in our markets by leveraging that low-cost manufacturing position that we have. And by having access to advantaged feeds. Again, part of our heritage, something we will continue to treasure. As I mentioned, this is the safest, most reliable, lowest cost and leading to superb cash conversion company that I have seen in my career. And this is something personally I like. And I have -- my commitment -- you have my commitment that we will continue to focus on this. Safety, highest priority. We have an outstanding record in terms of safety. We're not leaning back. We're trending lower. We're ahead of our peers. We're going to continue to work on it. Our efficiency leads to a superior profitability. Look at the strong EBITDA margin that we have. Look at the return on capital employed. Look at our cash conversion. We almost reached I mean 100% last year despite in the second half of the year the difficult market environment. Scale in this business, as you know, is critical. We have scale. We have 50 million tons of products that are of the highest quality that we are producing every year supplying in our markets. The proof that we are a leader in terms of technology, what's the best proof. Well, if you look at our out-licensing strategy that we have, if we continue year after year after year to be chosen for our technology in different parts of the world, it shows that we have a leading technology. And this is not because, again, we are relaxing on our technology that we have developed so many years ago, it's because we continue to further develop the technology over and over again. You will hear from Kim on our propylene oxide, our PO/TBA plants, big investments, largest investment in our history. By the way, propylene oxide is coming out of it as we speak. We're up and running. Now there is a lot of new technology that we have built into these plants. Kim will be outlining it, more than 100 different new tweaks that we have built into the plant. So we keep on reinvigorating our technology. We're leading on a global basis in #1, #2 and #3 positions, and I will talk about what is core, I mean, for our business. Now let's turn to our long-term strategy. And strategy is all about making the right choices and being very decisive in terms of its execution. So here is what you can expect from us at LyondellBasell. Our strategy is there to maximize the potential and to build upon our core strengths and then to deliver best-in-class returns. We have 3 pillars that we have developed that give the guidance, the foundation, you can say, the sandbox direction of our strategy. First of all, we grow and upgrade the core. We focus on our portfolio and the parts of the portfolio that have a lasting and competitive advantage. And we will reinvest in those advantage areas to generate returns at scale. Second, we're building up a profitable circular and low-carbon business. We're establishing our leadership position. We're addressing the massive customer demands in a profitable way, which means all hands on deck. You will hear from Yvonne, very bullish about this, $1 billion incremental EBITDA by 2030. We believe in attractive returns for this business. We see the demand that is there. And why can we do it? Because we can leverage upon our scale, our market access and our technology leadership. And by the way, also here, our core and the APS business, they are synergetic to realize this plan, and we will explain that today. The third pillar of our strategy is stepping up our performance and culture. We have a strong operational performance, strong operational processes. But we have a plight in history to a similar focus on costs. Now that is important in our business. As I said, we will continue to be the low-cost manufacturer. But if you do that over a longer period of time, you may lose certain value opportunities. And this is not about 1 or 2 or 3 big projects. This is about lots of smaller projects that can create value, and we will elaborate more today upon that and give examples. Now our strategy in itself is also circular. It's not about having 3 different pillars that are completely independent from one each other. These pillars are cross-fertilizing one each other is by stepping up the performance and culture that we are creating value, value that we can reinvest in growing, upgrading our core, value that we can reinvest in establishing a Circular and Low Carbon Solutions business. We can be more successful than anybody else in building up a profitable Circular and Low Carbon Solutions business because we are the largest in terms of our compounding business. We're the largest, which means that we have the access to the market. We know what the demand is of the OEMs. We know what the demand is of the brand owners. We know how the value chain is actually working together. And as a result, we know what answers need to be delivered, what solutions need to be provided, what products need to be provided and how to capture that value. It's all about value. So let's know have a look at how our strategy is actually also differentiated. We've benchmarked of course, our strategy to other winning strategies and not just, I mean, limited to our sector, but looked at what makes companies so successful. And our strategy is differentiated by our ability to do these 3 big initiatives, the pillars, do them all at the same time simultaneously because that is what we are doing. That's what we have been doing all the time. We have a strong track record. We have an excellent focus on execution, with passionate people. We also know how to run low cost. We have excellent cash generation, and we have a strong balance sheet. Now our core has also lasting advantages. We will grow with focus and disciplined reinvestments. And you will hear that from our business unit heads. In terms of the Circular and Low Carbon Solutions business that we are building up, we're advantaged in technology. We know how to scale up. We know how to develop catalysis. We know how to develop projects. We know how to develop assets that were having the lowest energy consumption possible. So that fundament provides also the confidence that LyondellBasell is uniquely qualified to be a leader, and you will hear more from Yvonne on this. And on the value enhancement program, we've talked about that during earnings calls. We have a tremendous enthusiasm. You'll hear from Dale, it's enormous. I mean, how our people are reinvigorated, how they are participating with ideas is becoming already today part of our DNA. We have these synergies across the 3 pillars that I'm absolutely confident it will ensure that we have a profitable and sustainable future. Now know what is growing and upgrading the core now mean? Let me set the stage a little bit on that. It means that we are focusing our portfolio around our legacy strengths. We invest at scale to expand our competitive advantages at attractive returns. Now we understand and we appreciate the legacy, that technology I'm talking about, the assets, our people, our customer relationships, our low-cost approach. And by reflecting on those legacy strengths, when we were discussing in the executive committee, we said, you know what, it would be good if again, we define what the sandbox is, what are those criteria to say what is core, leading positions in growing markets with attractive returns. Second, advantaged feedstocks are important, which means location. Third, an increasingly advantaged circular and renewable feedstocks that support the growth in our Circular and Low Carbon Solutions business. And having significant competitive advantages, we will be disciplined in reinvestment at scale for exceptional returns. Now with those criteria, it becomes also, I hope, for you, obvious that we have taken the decision, we didn't wait to exit our refinery in Houston. We'll talk more about that because we have good people there. We have good assets there. And we have a core team that is looking at what can we do with that? If classical oil refining is not core of our business, but we have people, we have assets, we have knowledge, there may be very good ideas that we have to transform that refinery so it fits with our Circular and Low Carbon Solutions business. We took a decision also on exiting the polypropylene Australia business, which looking back at the criteria, it is obvious that this is not core for our portfolio. Now Kim will also discuss in her part about our plans on ethylene oxide and derivatives. Now we also have, of course, regional strategies. And we align our LyondellBasell's strengths with these regional markets to maximize again our value creation. Let me give and go through the regions. North America, scale, low-cost feedstocks at world-scale Gulf Coast assets, you know that. We are in the best position there, something we will continue to focus upon. In South America, it's more being close to the market. So it's a market-focused solutions approach that we have, where we are supporting our global customers on a local basis. In Europe, we all know and especially, I mean, also last year, very difficult environment to operate in and traditional -- yes, traditionally, Europe is less competitive. But we see that there are great opportunities for a Circular and Low Carbon Solutions business in that region. Customers are asking us for our solutions. Regulation is more advanced in that regards. In the Middle East, we have already leveraged I mean our technology position and our global market network. So already today, we are the partner of choice to gain low-cost feedstocks access through those companies that get these concessions. And if we talk about Asia, then here, our approach to market is not changing, which is having market access with a low capital intensity through our technology leadership position and our joint venture structures. So message again here, we will be extremely disciplined in our approach to each market. We will maximize the returns while gaining global scale and leverage upon our competitive advantages. Now all starts with our heritage of technology leadership, something we have cultivated over decades, independence of the economic cycles. Chemical engineering is not simple. I'm a chemical engineer myself. It takes time, it takes talent, it takes investments to succeed. Now LyondellBasell is built on the foundation of 2 Noble prize winners, Professor Ziegler and Natta. That's our heritage. But for me, what is the most impressive is that LyondellBasell has continued to invest in people, in technology, in catalysis, in product development without distraction of the economical cycles. And the result is that we have a leading technology business. We have continued to reinvent ourselves. I'll give a couple of examples, and you will hear from Jim about them, Hyperzone for superior crack-resistant polyethylene, our advanced recycling technology, what we call the MoReTec technology. Our state-of-the-art propylene oxides, PO/TBA for propylene oxide and clean burning oxyfuels with all the improvements that we have made. These are just 3 examples. There are quite a lot of examples that otherwise I would be able to give. Now we generate earnings through several avenues also. We can decide, I mean, to build and operate. We may decide, I mean, to out-license our technology. And therefore, if we invest in technology, listen to what Jim will say, we can eventually have a double benefit out of it because we can use it for our own means or we can out-license it. And we are the world's largest licenser of polyolefins with more than 300 lines globally that we have licensed out. And then, of course, if you have those licenses there, if you have those partners, it gives us also the opportunity in terms of developing catalysts, continue to improve our catalyst and supplying catalysts because they are being used by our partners every day. And this is extremely impressive. I thought LyondellBasell grade in polyolefins and propylene oxide when it was on the outside. But when I then joined and I started visiting all the different manufacturing sites, it became so obvious, I mean, to me, I mean, how strong that core is in terms of catalysis, and catalysis is not easy to replicate, definitely something to treasure and definitely something that helps us in building these leadership positions that we have in our core plus also building up that new business, that Circular and Low Carbon Solutions business. So technology also helps establishing LyondellBasell as an ESG leader. We talked a lot about building the Circular and Low Carbon Solutions business already, but our ambitions go beyond that, as you know. We want to establish LyondellBasell as a clear ESG leader in our industry because we can create substantial value by doing so. We've accelerated our greenhouse gas reduction targets already in December to align them with science-based guidance and the Paris Agreement to limit global warming to 1.5 degree Celsius. You know we have communicated our ambitions. 42% reduction in Scope 1 and Scope 2, 30% reduction in Scope 3 and that by 2030, baseline 2020, and that is leading our industry. And again, we're not doing that just because we believe that we need to have those targets and they need to be aligned. That plays an important role. But we believe even more so, if we are the leader in that field, we can create value. Our customers are asking for us. Now here today, also we have a more senior management team, and you see that topic of diversity, which is also important if we talk about ESG. We have a broader employee base. We have clear targets that we have set ourselves, and we're not doing diversity just for the purpose of diversity again. I truly believe, I mean, that quality comes first, but you see that the kind of discussions that we have when we are sitting across the table with the executive committee, they are completely different if you have a higher degree of diversity. They are multifaceted, and it leads to better decisions. Now the next pillar of our strategy is building a profitable Circular and Low Carbon Solutions business. We are a leader in polymers. Our products are essential part for modern life, and we believe that there will be also growth in the future in that field. Now plastic waste is a problem, yes. But plastic waste is also a very good source of carbon, and it should be reused again and again. There is no life on the planet without carbon. Polymers, best solutions over the life cycle for a low-carbon future. Give a couple of examples. We need better insulation materials. So insulation materials are based upon our materials that we have. Everybody these days talks about electric vehicles. Well, you add weight to those vehicles. Plus also what do you do I mean with the batteries? I mean you need to make sure that they are safe, so you need to encapsulate them. Our materials play a role. You need to reduce the weight of the cars. Our materials play a role. You need to do it in a safe way. Our materials play a role. So we're confident there will continue to be growth for our business. And as such, you will hear also from Yvonne our circular and Low Carbon Solutions business is not cannibalizing the other part of the business, but it will be additive. We also believe that the future will be more circular, and it will be based upon more renewable materials. Now we are best positioned, as I said, I mean to do that, because we have a complete range of solutions. Look at the entire Circulen family that we have launched in the market, it is in the market. It's not something we need to start doing tomorrow. We're technology agnostic. We develop our own technology. We leverage upon start-up companies and technologies that have been developed there because we know how to scale up. We're capturing healthy margins because we do believe that we see that demand will continue to outpace supply. So there will be very healthy margins in this field. Now let me say something that my colleagues, I mean, also will repeat. This is a different market that is being built up. So this is not a premium market. It is a different market, and it will have its own supply and demand. And there will be huge opportunities to create value. That's how we go to market, creating value for the brand owners, for the OEMs, for the converters, the players in the value chain. Now we've made a clear commitment, at least 2 million tons of recycled and renewable polymers annually by 2030. Now the third pillar is key also to our execution of the first and second pillar, as I said, and that's where every employee can act as an owner. I said multiple times already, we have a successful history and track record of operational excellence. Low cost is in our DNA. We want to keep it. No doubt about that. Long-time focus on low cost leads to missing value capture opportunities. So let's address that. We did a deep and detailed diagnostic, involved our people, hundreds of workshops, thousands of people were involved, had very good communication and excitement to identify these opportunities. We established the stage gate. We have a center of excellence completely up and running. This is an engine. This is happening. You will hear about it from Dale. So all that work convinced that we have a huge opportunity here. And we need to prioritize the projects, invest smaller amounts, eventually, some people here, some people there that have focused on the implementation of the projects, some CapEx here, some CapEx there, not hugely expensive. Again, these are not things that are costing huge amount of money. It's about how do you do it, and how do you focus on it. So we add the skill to our DNA. Now with our line of sight and also our leaders empowering our teams, help them to think like owners, take measured risks, that, we are convinced improves our results, and we see the track record already happening. But as a consequence, also, we changed our delegation of authorities. We are making sure that we have more lines outside management in the organization. $750 million recurring EBITDA by the end of 2025. That's a big, big number. Now we're not going to stop there. You will hear again from Dale. This is not a project. It doesn't have a beginning and an end. It's becoming part of the DNA. So it continues. It is continuous improvement. We're excited, I mean, by the energy of this cultural shift. And we hear, I mean, over and over and over again from our employees, I mean that they are so happy with that empowerment, that they are so pleased that we have this Kaizen approach bottom-up that they can contribute in the value creation. But of course, we have not waited, I mean, to start with our execution. Already in April last year, mentioned it, we decided to exit the refining. We divested the Australian polypropylene business. They did not fit the criteria for core. But also, we investigated intensively how to transform these refining assets, to fit them with our Circular and Low Carbon Solutions business. I talked about that already at the beginning of my presentation. Now of course, since then, we've taken more steps and you see already a little bit the speed. Customer and commercial excellence team up and running, high focus. How can we capture more value, reorganize the company to be more business focused and agile? New organization, completely done, implemented, working very well. Circular and Low Carbon Solutions leadership, established full line of sight management, P&L responsibility. Team is in place, ramping up fastly. You see it from the different things that we have done during the last couple of months, all the announcements, how fast this is moving. Our value enhancement program launched in October, on track, full speed. Broader ESG approach because we want to capture value. The accelerated greenhouse gas emission reductions because our customers are asking for it, they have made ambitious targets to reduce their Scope 3. We can leverage upon that capture value. So you see, and I hope that, that bit of passion also comes across, I mean, to you. We have an enormous amount of passion and focus at LyondellBasell. And you will hear that from our executive committee members that this space that we have is much faster. We'll share regular updates on future Capital Markets Days, on earnings calls, press releases as well as meetings that we have with you. This is truly a team effort. And this is a very dynamic and a very talented team that we have. I'm highly confident that this experienced executive committee will successfully execute our strategy. There's over 300 years of global experience with diverse, I mean, industry backgrounds. We've seen what good looks like by having work, I mean, in different companies, but also by having people that have the whole heritage inside of LyondellBasell. We've changed also the organization. We have an improved accountability. We have line of sight management, we have strategic business units. Manufacturing is reporting into the business unit, full ownership, full accountability. We've moved supply chain management and procurement closer to the business in context of how we do want to run the business and capture value. We have a strategy, which is something we have not developed on our own just in a dark room. We have involved, I mean, more than 100 senior leaders in the company, which is enormously helpful because we hit the ground running. I mean, these people are involved. We have global leaders forums where we communicate, where we involve also on the further development of what kind of value do we need in order to implement our strategy. Now take the time, of course, also to meet the members of our team. Trisha has just joined our team. So maybe I take the chance, I mean, also for people in the room. Trisha has joined us in February, and she is leading the new function, People and Culture, because people in this business are extremely important to us. Culture is extremely important, and Trisha knows what good looks like. And of course, no strategy is there complete without having a financial aspiration. If I would be standing upfront, I mean here in front of you, we don't talk about the financials, you'd probably be disappointed. So what are the financial aspirations that we have. We are confident that the execution of our strategy will deliver strong profitable growth. We believe that we can reach $9 billion in EBITDA by 2025 and $10 billion by 2027, and that's based on our average historical margins and operating rates. What you may expect to continue is cash generation focus, disciplined capital allocation, generous returns through dividends and share repurchases. Taking into consideration a lower share count, that will result in an EPS that is rising to $23 per share by 2027, and Michael will talk more about that. We're excited, but we're not just growing for the sake of growth. I think that message is a very important message that I want to make sure that comes across. We will grow with discipline. We will grow with capital efficiency and strategic focus. We'll continue to focus on safety, low cost and operational excellence. We're not only increasing the EBITDA and the earnings, but our portfolio as well will expand our competitive advantages that will sharpen our focus on areas with leadership positions, it will cement ourselves as a preferred supplier for our customers and it will establish a profitable leadership in a growing market for circular and low carbon solutions. Now I'm grateful that you have chosen to spend the time with us physically here or online to hear from us today, to hear from the members of the team. And I hope that you come away as excited as I am, as we are about the future of LyondellBasell because we are a global industry leader that is growing sustainable value at scale and with focus. We're poised to execute our new strategy, leveraging upon the foundational strength and sharpening our focus on value creation. We're positioning our portfolio for the future through our technology leadership, innovative customer solutions and favorable positions in growing global markets. We're strengthening our proven ability to achieve exceptional cash generation and deliver compelling returns to our shareholders. These are my core messages, and we're going to go more in depth now by handing over, first of all, to Dale. Thank you, Dale.

Well, thanks, Peter. I appreciate that, and welcome, everyone. It's really a pleasure to be with you today. And as Peter mentioned, I'm responsible for operational excellence and I also have the responsibility for health, safety and environment in the company. I've been in this industry for over 35 years, and I've spent the last 28 years with LyondellBasell, so I know a lot about this company. Most of that time has been in our operations, and I've had the responsibility to run some of our largest assets in the company. And for the last 3.5 years, I actually was responsible for people and culture. So all this experience has taught me that safe, reliable, efficient operations with an engaged and inspired workforce are keys to success in this industry. So that's why I'm so excited to talk about the value enhancement program. This is a new way of working for LyondellBasell, and it's igniting the passion in our workforce. Through this program, we're going to deliver $750 million, and this is new recurring EBITDA by the end of 2025. So on the surface, this may sound like a cost reduction initiative. It is not. Cost reduction, we've done this many times in the past, they deliver short term benefits that generally are onetime. And this also is not a project that has a start and end date. This is a new way of working for us. And I'll tell you, in my 30 years with the company, I've never seen this approach taken. And across the organization, people are excited, and we're seeing the benefit and the results of that. But as Peter mentioned multiple times, we're not taking our eye off the ball in terms of our foundational elements that are so critical to our value system. First and foremost, safety. We're going to continue to be focused on being the industry leader in safety, and towards our true goal of zero injuries and incidents. That's really what we're after. Also, we're going to continue to focus on being a very reliable and a cost-effective operator. These are part of our DNA that will continue. However, there is a difference between being a low-cost operator and having a culture of very strict cost control. Peter made reference to this. And over a decade, that's who we've been, which is good in some aspects, but the downside is, you leave opportunities on the table to create additional value. And that's exactly what we're seeing. So now we're shifting this culture to one that's more comprehensive and more focused on creating value for the long term. And we're also shifting our culture, one that's more agile and entrepreneurial, and we're engaging our entire workforce all the way down to the shop floor. So we're talking to our operators. We're talking to our maintenance technicians who, frankly, often have the answer or have the best ideas on how we can get more out of our assets. And we're coming up with those ideas, and we're acting on them. We're also engaging deeper with our customers, and finding opportunities where we can grow together. You're going to hear a lot more about that from our business leaders. So my focus is going to be more on our operational aspects. Now in LyondellBasell, we've had an operating model that we've used for a very long time. And we've been successful, particularly around safety, reliability, operational efficiency, but part of that model, including -- included a very strict cost control filter. So a lot of good projects didn't make it through the engine through this operating model. So we're loosening up on that a bit. It's not going away, we're loosening up on the cost -- the strict cost control filter. But what we're adding is an ideation step, where, again, we're engaging our whole workforce to come up with new and creative ideas to bring more value to the company. And I can tell you they're starting to step up to the process. We started this about -- I think Peter said October of last year, so fall of last year, we started with just a few sites here in the U.S. Some of our larger sites, of course, we prioritize where we thought maybe there's the most value. And they were skeptical. Again, it's been over a decade that we've had this strict cost control culture. So they said, "Are you sure? This sounds like another cost control initiative." We said, "No, this is different. We want all of your ideas. First and foremost, bring all of your ideas to the table." And they said, "Okay. We'll trust you. We'll see." Well, then we followed it up with resources to start implementing some of these great initiatives, and the word spread. So the next wave of sites was at the beginning of the year in Europe, and we -- people came with excitement. They started bringing new ideas forward. The last wave that we launched was just a month ago back here in the U.S. One of our sites had already developed 1,100 new value-creating ideas before the kickoff of the meeting. So the word is out, and people are excited. And a lot of these ideas, look -- there's thousands, thousands of ideas we're working through. And they're not all great, okay? They're not all great ideas, and not all of them will move through our system. We have a very strict governance process. Again, we're still focused on being a very cost-effective operator. So we have a governance process. Every project has to stand on its own merit, has to have a business case. There's stage gate processes we go through before we implement. And any new capital has to be approved by our investment committee of the company. So it is a rigorous process, but we are investing. We've added some additional resources, particularly in the technical areas, to advance some of these projects as well as we have allocated some capital. These aren't big dollars, and I'll show you some examples in a minute what I'm talking about, but it's making a difference. So for those who like baseball, you know baseball season is kicking off. Again, these are not home runs, right? These aren't big hits that are going to win games with one swing at the bat. These are your singles and doubles. The singles and doubles win games consistently and over time, they create a winning franchise. That's what we're after. But I will tell you, some of these projects, the returns are pretty compelling, and I would call them home runs. But these are not huge ideas that people are coming up with. But this is a continuous process that's going to continue to deliver for us in the long run. So what am I talking about? We can bucket them generally into 3 categories. One is operational excellence and manufacturing, so improving our assets and capabilities. The next is procurement and supply chain. And then the last bucket is customer and commercial excellence. So when it comes to our operations, this is creep capacity, reliability improvement, low-cost debottlenecks, operational efficiency, how we optimize our asset in terms of energy efficiency or yields. These are the types of projects I'm talking about. When it comes to procurement, supply chain, it's what you would guess. This is competitive sourcing, more strategic partnerships with our suppliers. On the supply chain side, it's around optimizing our logistics and our transportation system. And then with customer and commercial excellence, this is around understanding our end markets better. It's around investing in some tools and systems to improve our customer experience, and also a deeper level of engagement with the customers to create value long term. And our business leads are going to talk a lot more about this in their presentations coming up. So I'd like to bring this to life for you with a few examples, what am I talking about? The first example is how we do turnarounds. So as you know, turnarounds are planned maintenance activities on our assets to do repairs, to do maintenance, to do inspections, to make sure our plants can run safely and reliably for the long term. In an olefins cracker, this can take 60 days to execute a turnaround. And as you can appreciate, there's a lot of paperwork involved. There's permits, hundreds of permits are written daily. There's work orders, thousands of work orders. There's inspections that have to be documented. And before we can turn it back over to operations, we have to have closure documents for all of that. It takes a lot of resources to manage that, and we're doing it manually today. So this is about digitizing, lighting up our sites with WiFi, providing tablets for our teams and digitizing how we do all of this work. So think about -- think of DocuSign for turnaround execution. That's what I'm talking about. Through this simple change, we're able to cut up to 2 days off an average turnaround. That's significant value. We're going to invest about $1.5 million to deliver $6 million to $8 million in recurring value just through executing turnarounds faster. The next example I want to talk about is at one of our sites, olefins crackers. And this is about how we operate our furnaces, and how we balance the combustion in the furnace. So we use air and fuel mixture to heat our furnaces. And a lot of that's done manual today. And if there's too much air being fed into the furnace, then it requires more fuel. Just like if you left your window open today in your house, your energy bill is going to be a little higher because you got to have more energy to heat your home, same concept. But we're automating that. We actually have the control system in place today to automate it, but we didn't have the resources available to implement this. So now we're applying some resources, engineering control system resources, minor equipment to now automate this process so the control system actually does it for us. And of course, it's more precise and it never sleeps. So it's 24/7 it's adjusting the furnaces. So through a modest investment of a couple of hundred thousand dollars, we're able to save $5.5 million a year in energy usage making the same amount of product. Also, we had the added benefit of lower CO2 emissions by about 50 kilotons per year, which helps us towards our climate ambitions. The last example is also an olefins cracker. This is specifically our Channelview plant, and they came up with a way to add an additional feed point to the ethylene fractionator. In simple terms, we're adding a pipe to the column to produce material faster and more energy efficient. So we're going to get more production by adding a simple pipe to the process. At a cost of less than $2 million, we're going to increase our capacity at this one site by 30,000 tons worth about $6 million a year in recurring EBITDA. So these are the kinds of projects that I'm talking about. And I'd like to pause just a moment, and I'd like you to hear directly from our Channelview team about the VEP, how excited they are about it, and a little bit about this project. [Presentation]

Well, hopefully, you can see why we're so excited. You heard the enthusiasm on the video. Now multiply this across the company, and this is the kind of level of engagement and excitement I'm talking about. So you heard the $750 million. We set a target for this year of $150 million in recurring EBITDA by the end of the year. And I'll tell you, we're well on our way to exceeding that number. Through the level of engagement you just saw in that video, and what we've seen across the company, more ideas are coming in than we ever anticipated. So we're well on our way, and things are just accelerating, and they will continue to accelerate into next year. And we are going to hit the $750 million. So to wrap it up, just share a few things. We're going to continue our values around safety, reliability, operational efficiency, but we're shifting a bit around this very strict cost control culture to one focused on value. And also, maybe more importantly, we're igniting the passion in our teams to go out and find that value wherever it exists in our operations, and they're delivering. And we will deliver on the $750 million. And because this is becoming a new way of working and frankly, we still have more sites that we're rolling this out, I feel confident that there's more upside to this number. So thank you. And now I'd like to turn it over to Jim Seward, who heads our Technology and Innovation businesses.

Thanks, Dale. So I am Jim Seward. I'm our Chief Innovation Officer. Peter, you said technology matters, it matters deeply. And what I think is that the way that LyondellBasell manages technology is part of the secret sauce of this company. And I'm going to show you why that is. In fact, my -- I've been with LyondellBasell 30 years or so. And in my career, I've worked in our core product businesses, O&P, for example. I ran our joint ventures. I lived in 6 different countries around the world. And for the last 15 years or so, I run our technology business. And I'm an example of the integration that we have between the different parts of the company. I'm an example of that synergy, which I think is part of our secret source. And in that time, 30 years with the company, we have never wavered in terms of R&D investment, and we have never wavered in terms of that core strategy of integration and synergy between our businesses. So these are the key messages that I want to bring across. So the role of technology in our company. Technology drives not just value, it drives growth. And I think it does so in 3 different ways. The first, I will talk about our technology business. We have the leading franchise in the industry when it comes to polyolefins licensing and catalysts. It's core to our company. Secondly, I'll talk about the way that technology enables differentiation, it enables leadership within our product businesses. And there's a very important point here, which is, as Peter mentioned, our R&D, our technology starts at a lab scale. So it's very -- it's all the way through the chain. And the fact that we can go from lab, to pilot, to scale up, to industrial scale within our product businesses and then into the market and therefore, have expertise on application, gives us that full range of development. And that means we move very, very fast through development phases, and that's a competitive advantage. If you like, as Peter said, we're monetizing investment in R&D twice. We monetize it through our technology business, and we monetize it through our catalyst business. So the second part is the way that fits. The technology business itself, the way it fits with the product businesses. And the third area is that, in certain areas we want to grow, in advantaged markets with access to advantaged feedstock, technology is the key to do that. Technology makes us a differentially attractive joint venture partner. Why? Because our joint venture partners may want to be able to derisk the investment through known leading technology in addition to operational and marketing expertise which we also have. So technology drives this company in 3 different ways. So first, I said I would say I mentioned about technology business. So essentially, this is a licensing business and a catalyst business together. It's one of our 6 reported segments, so I think you all know quite well. And last year, it made $360 million at EBITDA. Of course, it's a technology business, so absolutely fantastic cash conversion in this area as well. We are the global leader in polyolefin licensing. We have been for a period of time, and we still are. We developed our technologies that are used in our businesses, but we also technologies -- developed technologies, which are used for out-licensing. We are recognized as being the leader in this space. And I would say is, as you can see on this chart, we've built a very strong historical license base, but we are also developing technologies for the future as well. And so at the bottom of this chart, you can see just some examples of that. We have a very leading position in technologies for people or licensees that want to develop, especially [ anti-polypropylenes ], that want to develop infrastructure or pipe material with our leading well-renowned [ hosteling process ]. And in fact, at the moment, it's very interesting, a number of our licenses that we are selling off the solo patents, we have a very, very strong market position in this point for photovoltaic cells in the solar panel market. So our licensing business, historically, incredibly strong, very global, but it also -- it maintains its leadership. And we are, today, as strong as we have been in terms of these important and growing segments. The sister to our licensing business is our catalyst business. We are the global leader in catalysis. We are the global leader in polypropylene catalysts as well. And here, the key for me is that we are able to combine a really deep and fundamental chemistry which we have been working out for decades. You cannot do this stuff overnight. We combine a deep and fundamental chemistry with a truly global approach, a world-class supply chain because our customers, as you can see, are all over the world. And we have to be able to supply them, we do. So we have relationships built on long-term value partnership and trust. In a way, when you think about licensing in catalysis, it's kind of the old cliche about the razors and the razor blades, right? So you sell a license, but that license then when your licensee builds a plant, the lifetime of that plant, they will require catalysis. They will require a catalyst. So in a way, you're -- our relationships with these customers are very, very long-term, decades long term. And that catalyst business is in part built on our installed license base. And then, of course, we have those long-term relationships. So when a customer wants to come back to us and build another plant, we've got a fair shot. I think a good measure of success is, in the past 5 years, we've increased our catalyst capacity by 30%. So that -- if you think about it, it's simply a measure of the way that our catalyst business is growing, a great testament to our success in that field. So that's our license. That's our technology business. Switching now a little bit to the way that we use technology also in other parts of our business. As Peter said, we've got a very strong heritage dating right back to the 1950s. If you look at polypropylene, if you look at polyethylene, if you look at polypropylene oxide, we've basically written the history of those technologies in terms of the way those technologies have been developed. But what's important, and my message here is that, that doesn't stop. We are continuing to be one of the few -- I would almost say one of the only companies that really are making major innovations in process technologies and in catalyst technologies. So a couple of good examples here would be a hyperzone process, state-of-the-art leading high-density polyethylene process, redefining the balance between stiffness and impact performance, which has enormous impact for things like pipes, building materials, et cetera. But a second one that I think may be one of interest in this room and one I will talk about is MoReTec. So MoReTec is our advanced chemical recycling process, and I'm going to talk about that in a moment. We are very excited about that. In summary, what you can say is this industry has been and continues to be built on our technologies. So I think the idea of synergy and the idea of integration of technology with our core businesses is fundamental to how we operate. And these are just some examples of very unique technologies that drive value. And my message here is simply that we think very deeply about how we want to bring these technologies to market, whether we want to do that ourselves, whether we want to do that through our joint venture, whether we do want to do that by outlicensing. It's that integration, which is critical to us and is one of the reasons why our technology business actually is core to the company because it gives us a very wide playing field, if you like, a number of different options about how we do that. Here, we see some technologies that either have or will soon shape the industry. I'm going to talk about a couple of things. I'm going to talk about propylene oxide. And then as I said, I'm going to talk about MoReTec. Propylene Oxide, you're going to hear Ken talk a bit about that -- this as well because, of course, we've just started up the largest propylene oxide plant on the planet. The 470 kt starting up now. Now this technology, we've been a leader in this technology for 60 years. This is not a completely new technology. However, our ability, our integration of application, product and technology means that we have continued -- we have not stopped. We have continued to develop this technology. And this technology, as Peter referenced, we think has around a hundred different improvements when this technology started. And why that is important is this continues to be the largest, lowest cost, the best environmental footprint technology in this space. Second example, I'm going to talk a bit about advanced recycling. You've seen that recycling circularity is core to our strategy. You'll hear more about that later with Yvonne. Very, very important to us. For us, circularity is a major market opportunity as well, to be honest, as being a central element in the way we make the plastics economy more secure and, therefore, more sustainable. Our MoReTec proprietary technology is complementary to our existing mechanical recycling business. We are already very strong in that area. We are already a leading player in circularity. This is complementary. This is building out on that. And in this chart, you can just see how our advanced recycling process, how MoReTec fits into our value chain because we are, of course, not only the developer of the technology here, we are the user of the technology here. And that actually, in this space, is quite unique, that you have the same company developing, as you will have building, as you will have using. The polymers that MoReTec will make will be indistinguishable from those made from virgin fossil feedstock. MoReTec will allow the use of mixed post-consumer plastic waste that is not accessible, that is not usable by many other processes, including mechanical recycling. So it is -- we believe, it will be a benchmark in this area. I mean, if we look at, let's say, some of the key things which really differentiate us and what we've been thinking about as we develop this technology. So why are we developing this technology in a way, right? So we were looking at scale. That's very, very important to us. Scale allows meaningful impact. Scale is what we do quite well because we're able to, again, scale right from bench all the way up to pilot and through large-scale unit. So scale is one thing that is driving this technology, and it will enable lowest cost delivery which will be important in this space. But secondly, we've been looking at environmental footprint. And we also think that's very important in this space as well, so that the high process yield that this will deliver, combined with the low energy consumption, will make this a leading technology, not only in scale, and therefore, cost, and therefore, profitability, but also the environmental footprint. And we think that is also very, very important. What I'd like to do now is show a video where Gabriele Mei, our Head of Process and Catalyst Development down at Ferrara in Italy, explains a bit more on this process and how it will work. I would say that we've been doing a lot of this work actually in Ferrara in Italy, where we have an integrated R&D center. [Presentation]

We do a lot here in Ferrara. And that integration, that commitment to investment expertise is really one of the things which allows us to move very quick. When we started discussing this project, Gabriele and a couple of his colleagues that have essentially been integrating, building the polyolefin industry, their view is, "Look, we are the leader. We know how to convert monomers into polymers. We're the best on the planet at that. So why would we not be able to convert polymers into monomers better than anybody else as well?" And that is -- I'm very happy is exactly the direction we're going. Okay. Here, we see a couple of very differential technologies, a couple I've talked about, also our Catalloy technology which we're very proud of. And I think that these technologies also, we are starting to think more and more about in that third pillar I said originally, which is this concept of being a partner of choice, being a preferred partner for development around the world. And Ken will talk a bit about this later, that we have this ability to look at how we want to play different technologies in the value proposition, if you like, in terms of being a developer with our partners in terms of our joint ventures. So we offer superior value, I think, to our partners that may want to develop with us through technology, which very often is the sort of the sticker, the sort of standout point that people are very attracted to. But of course, we also offer operational expertise. And we offer marketing expertise as well. So this is the third part about being sort of a partner of choice, if you like. This is also a very, very strong part of our value proposition. So to summarize, my key takeaway, we get sustainable competitive advantage through technology. That is really important to us. We have this model of rapid innovation which can go from bench, all the way through to scaled-up commercialization. And we have consistent strategy. So when we think about the way those joins up, you have a very powerful feedback leap, which goes all the way from the bench to the market and back to the bench. So we have a very, very strong machine in the way we can develop and maintain leadership in technologies. There's real synergy here in terms of that acceleration. And we have a very efficient development model. We have a very efficient innovation model. We say we can innovate once to get paid twice because we have both the technology segment, which is driving through out-licensing as well as our own businesses. And finally, this technology is part of what makes us a partner of choice going forward in our joint ventures. So thank you very much for your time. I would now like to introduce my good friend and colleague, Tracey.

Good morning, everybody. It's always great to be in New York City. I love the city. It's a very special place. And then even being in this institution is incredibly humbling. So thanks for joining us today. Thanks for joining us online. As Jim mentioned, I'm Tracey Campbell. I am now in charge of sustainability and corporate affairs for LyondellBasell. And I'm here, I just do want to give a quick shout out to some of my communications team who have been working tirelessly to help produce this event with David Kinney's team in Investor Relations. And I also want to introduce Andrea Brown. She's sitting over there in the corner. She's our Chief Sustainability Officer. I hope you get a chance to meet with her at lunch time. As Peter mentioned, I was appointed to this new position just last fall. And it's a new position intended to synchronize and harmonize our messaging, our narratives for our company. It harmonizes our policy positions, make sure we have a very consistent advocacy approach no matter where we're operating in the world and also make sure that our strategy and engagements are aligned with what we're trying to achieve as a company, and again, all through a business lens because what you're going to hear now is I've spent 3 decades in the petrochemical business, in different parts of the world, successfully leading different functions, leading different businesses. So I bring a very unique perspective to sustainability in this company and what I think -- and one that I think is incredibly vital to the future success of not just this industry, but of also of LyondellBasell. As a global leader, we have sort of an outsized role to play in addressing the challenges that you hear every day, plastic waste, climate change, but we have to do that with a very disciplined focus on value creation. So success for us requires very bold, differentiated solutions that not just benefit society, but do generate that enterprise value. So formal sustainability reports, ESG ratings, some of you might think it's fairly new in our industry. It's even fairly new for somebody who has been in this industry for so long. But when I think about LyondellBasell, we have been embedding the principles and the governance with respect to environmental and safety in our company for many, many, many years. We have top safety -- as you heard from Dale, we have top environmental compliance. We have incredibly strong governance, and we have people every single day that strive for new ideas and strive for excellence. So that's one of the things that keeps me excited about working at this company. Our work to address the global challenges of plastic waste and climate change have positioned us to capture the value that demand for circularity that our customers are looking for. The demand for low carbon solutions that we're already seeing materialize in this business. So -- and we're -- again, we're doing this while making sure we've got the best talent. We're fostering a diverse workforce, and we're continuing those safe operations that we have globally. We are addressing, as you heard Peter talked about, plastic waste through our ambition to produce at least 2 million metric tons a year by 2030, right? 2030, even more, Yvonne's going to talk a little bit about that. And every day, we commit to having zero plastic pellet loss or nurdle loss from our operations around the world. That's also incredibly important to us. We are reducing our greenhouse gas emissions. We're developing lower carbon footprint materials, and we're committed to having that footprint and that pathway to net zero by 2050. And we're focused at the same time on the success of our talent, on the success of the communities where we operate and our commitments to diversity and gender parity with that relentless focus on operational excellence. One of the big value drivers is our customers and their brand owners, big household names that you're all familiar with, they are committed to circularity. They've committed to recycled content mandates. They've made commitments to being aligned with the science -- the best of climate science, science-based targets, and they are now declaring Scope 3 reduction goals. So this is incredibly important, especially in packaging and mobility. For those of you who follow us, you know that packaging and mobility are important market segments for this company. So our brand owners, our customers, that demand is for all the products that we're now mobilizing to produce and sell all around the world. So as a solution provider, we're always well positioned as you just saw from Jim and some of the other technology players, we're positioning to capture all of that historical demand and now all the new demand that's coming. And it's really a massive shift in how the market is being shaped in a very short period of time. So we're super excited about that. You might have remembered we branded and we launched our Circulen suite of products in 2021. And another new position we announced last fall was the circular and low carbon solutions business segment to really mobilize and accelerate our progress toward meeting our goals. In addition to being at the forefront of circularity, we are a leader among our peers with the most aggressive greenhouse gas emissions target in our industry. As Peter mentioned, in December, we announced 42% absolute Scope 1, Scope 2 reduction. We announced a 30% Scope 3 reduction by 2030. Those are pretty ambitious, and we're excited about that. And we've maintained our commitment to net zero by 2050. We've mapped a pathway for all of our assets to make sure that we can accomplish these goals. We don't come out and announce these goals without first understanding what is it going to take? How are we going to do this? But we've mapped that pathway, and perhaps even more importantly, is we've assigned resources an organization accountable to deliver, and they're very excited about delivering on these goals over the next couple of years. And we've assigned resources to make sure that we can leverage the incentives that are being made available around the globe, such as here in the United States, the Inflation Reduction Act. A couple of proof points to note that we're serious about this. I personally had a recent engagement with the White House with 20 other industrial leaders from this country. And you might recall that it culminated in a $6 billion investment in reducing industrial emissions that the Biden administration announced just last week. So very, very impactful and very exciting for certainly here in the United States. Another is our progress on renewable power. We have a goal to have at least 50% of our electricity source from renewable sources, and we're already more than halfway towards that progress -- against that goal. And I'd also like to say that our progress with respect to these power purchase agreements, they are either at or better than the traditional alternatives. And we have strong governance over that to make sure that we're managing that going forward. And then lastly, I talked about positioning for early mover advantages. We've already seen favorable market trends in industries like lithium and steel and aluminum. And we certainly are expecting and seeing signs of this in polymers as well. So we are really getting ready to capture those advantages. I'm quite often asked what's the value or why -- what's the value of having these very ambitious sustainability objectives? And to be completely honest, I used to ask that myself not that long ago, right? So I can remember being all in charge of shale gas, not so many years ago. So what is the value proposition? They are accretive to earnings. I believe it, our executive team believes it, our Board believes it, and I think the whole world is starting to see that as well. So again, they're accretive. But the longer answer is there's many, many drivers to having these aggressive ambitions. We can meet the demand of our customers. I just spoke about that. We can reduce costs by making our operations incredibly more efficient. We increase our ability to attract, retain and develop the best talent, the future leaders of our company. And we deliver profitable growth and lower risk for ourselves and for our investors. We've continued to invest in talent and develop learning platforms, skill development programs, all during this crazy time of COVID and remote work, and it's really paid off for us. We continue to have some of the highest employee engagement above normatives in our space, so it's very exciting. And we also very recently have thousands of employees engaging in what we call employee networks around the world. And these networks are designed to emphasize connecting with each other and growth, growth of the people to develop in their career. And I like to think of it as connecting with people who are like you, but also building allies with maybe people you don't normally work with or you won't normally associate with. And what we're finding is these relationships, these conversations are generating innovation. They're generating the thousands of ideas that Dale talked about in terms of tying that to the VEP program. But really, we're helping people see their future in their career and bring that value back to the company, all while focusing on DEI at the same time. So it's fun. And I personally enjoy my role as a mentor, as a coach. The older I get, the more I enjoy coaching others. And then really now, I'm excited to also be appointed to the executive sponsor of our Asian and Pacific Islander network. Having lived there recently, I have a lot of colleagues in the region, and it's a great way to stay connected with them. Integrating ESG and sustainability into our everyday operations is only possible with a very strong Chief Sustainability Officer and strong governance and really the oversight of the entire executive committee, which enables us to manage our progress, be accountable for our progress against those ambitions and make sure that we meet those stated commitments. We have already top quartile ESG performance from MSCI. We were awarded recently the EcoVadis gold medal. We were very proud of that. We're also part of the prestigious FTSE4Good Index, and we received the best possible score from IFS with respect to our governance. And we know this is important for you and for our investors. We do appreciate the recognition, but we do believe that these rating agencies and reporting frameworks, such as FASB GRI, TCFD, these all give you a blueprint to make sure we're giving the best, what we call decision-useful disclosures to our stakeholders. Now we're very committed to the transparency and to the accountability. Before I hand things back to Dave Kinney, he's going to come up in a second. I just want to leave you with a couple of reminders on why we are a top pick. So sustainability in ESG is foundational. It's foundational how we operate and grow, and that's an exciting evolution of our company. Our actions are aligned with demand and they create value. And I'm committed to making sure that, that happens because after all, I am a business person. And we are positioning to capture early mover advantages, and we are being recognized for our performance already. So with that, David Kinney, why don't you come on back, and thank you very much for your time.

Now the moment you have all been waiting for, some questions and answers from the group here. And so we have two microphone runners in the back. Actually, we have three microphone runners in the back. And so please raise your hand. We can also take questions from online. So if you send those in, the group, will send them right to my iPad up here, and we can get underway. So my first question there. Please state your name, your affiliation and the question.

Mike Leithead from Barclays. Peter, just on the $1 billion of incremental circular EBITDA by 2030, I guess a couple of things. One, what's the right baseline for that today? Two, I guess, Michael talked about it a little bit, but how much capital do you need to spend to get there? And then third, it looks like, at least from some of your slides, that will be incorporated with -- in the O&P segment. I guess should we be able to benchmark you or grade you on that, given all the volatility in the segments? And of course, I mean, very, very good questions. But I don't want to steal the show of Yvonne. So what I'm trying to do -- I mean, let's keep the questions around the businesses. I mean for the second session because all the business unit leaders are going to try to answer your questions during their presentations. Let me say just, I mean, the 1 billion is in addition. So it's accretive, I mean, to what we are talking about. Yes, it's part of our transformation. So I said it in my presentation, it's not cannibalizing. I know I need to be careful that I don't steal, I mean, the show of Yvonne here. But we see continuous growth above GDP for the total business in polyolefins. So we believe that about 50% approximately of that growth will go into circular and low-carbon solutions. So circular and renewable, polyolefins and the other 50% approximately will still be the classical technology type of products, gas naphtha-based. But I will keep it there at this point, and then we'll discuss it then later when Ken talks and when Yvonne talks.

Great. Next question. Alex, right here in the front. Dave, your name.

Dave Begleiter, Deutsche Bank. Peter, on the value enhancement program, how much capital is required to generate that $750 million of EBITDA? Is this incremental to your ongoing productivity efforts? And I'll stop there.

That's a very good question as well. As you heard, I mean, from Dale, lots of these projects are smaller projects, so not necessarily, they are very capital-intensive. Lots of the projects eventually also in terms of OpEx, it requires that maybe you have one more engineer or more chemist, an operator, a maintenance guy that is working on it. In the first year, as what I can say. I mean, if we talk about at least 150 million, that's what I heard. I mean the commitment also from Dale already, at least, I mean, 150 million. Well, that 150 million, if you look at it from a net-net, it will cost approximately, let's say, 150 million just to get the project up and running. But as we get more traction, then you will see that going to the 750 million. And eventually, again, I heard what Dale said about the 750 million because it becomes part of DNA. Then, of course, that will not go in line the OpEx and CapEx. I mean, with what we expect, I mean, to get out of it in terms of recurring EBITDA. Both of the. Sorry?

Productivity efforts.

I mean, of course, the productivity efforts, I mean, they are incremental to that. We differentiate -- and maybe I should hand over I mean to Dale here.

Yes, I'm happy to add in. So as you know, our allocation -- capital allocation is $1.6 billion for 2023. The $150 million that Peter referred to is what we have earmarked for this program for this year. That's within that $1.6 billion. So it is included in our capital -- current capital allocation. To date, we've earmarked about $60 million of that to specific projects. Again, we have a very rigorous governance process. Everyone has to stand on its own merit as a business case and has to be approved by the investment committee of the company. But these are very good return projects. And so they're very compelling. And we're only moving forward the ones that have the best returns. And you saw by my example, some have very, very little cost associated with them. Those are the ones, obviously, we love with zero or very low cost to get to benefit. But we are willing to spend some capital where it's very compelling to do so.

I mean this goes extremely fast. I mean, we have weekly CRM meetings. I'm personally involved in those CRM meetings, weekly CRM meetings where the entire teams are presenting then also their ideas, their projects and where we are looking at the prioritization we call it sequencing so before it becomes part of a bankable plan. And when it's part of a bankable plan, that's where we were at that stage in a stage gate where it then can be executed. And we track the execution then from L3 to L4. And then the L5 stage is where we see it and capture it at the bottom line. So there will be also auditing that we have in place, I mean, to see that everything what we are committing to, yes, we're also delivering that. So Michael is also very much involved in that. I mean, and also from a -- making sure that the financials fit and the auditing.

[Operator Instructions] Question over there, I don't know, in the second row.

Josh Spector with UBS. A couple of questions around the advanced plastic recycling initiatives. I'm just curious on so the partnership or agreement you have with Nexus Circular, why partner if you have conviction in your technology? I guess what does that add? I mean my knowledge of Nexus is that their scale is a bit smaller, they're not using catalysts in their process. So what do you get with that agreement? And it seems some other smaller firms are already starting to license their technologies, particularly within Europe. If you don't have your first commercial plant until 2025, are you behind the curve on that? Or how do you catch up, if so?

Jim, you want to take that one?

Yes. Good questions. So maybe I'll do them in reverse order. So I mean, yes, there are a couple of plants now where they're either being licensed or partnered. I think what you've got -- I think in part, this reflects the sort of massive overhang between this huge defund and the emerging supply, right? And it also partly reflects that different sorts of business models that sometimes people will look to partner in order to get their technology in the market, where they're not capable of getting that technology in the market themselves. It's not a new space. There are plenty of players out there. What we Think is that we will set a new benchmark in this space because a number of those technologies are very, very small. So the idea of being large, being focused on integrated hubs, we think will essentially set that benchmark. I don't think we're particularly behind. There are a couple out there now. But as I say, I think what's really important is, given the sort of the activity in this space, I think what we will see over the next few years is emerging, not many -- we will be one of them, not many clear reference points, clear leaders. And I think that's what to watch for over the next couple of years. In terms of the relationship with Neste, I mean what Peter referred a lot of that is around renewable feedstock where, to be honest, Neste is the best, right? So -- but there's a great partnership there because it's using the renewable feedstocks and not necessarily the recycles of the renewable feedstock on different raw materials, which then we partnered in order to be able to put through our crackers. So that was a very nice synergistic partnership.

And I'd say, I mean, from time to time, I mean, it was a bit my impression. I mean, you know I was the CEO of Neste at the time. And we looked, of course, so I've been busy with advanced recycling since many, many years, looked at all the different technologies and startup technologies. And when we were looking at LyondellBasell, we had kind of heard about the MoReTec technology, but it was kind of a bit hidden in my view. And if I then did my visit to Ferrara and I saw this semi-industrial plant, which is actually the biggest, if not one of the biggest, semi-industrial scale running advanced recycling plants in the world. So that is maybe something also, I mean, how we kept it very close to our vested LyondellBasell, and that's where we said, okay, let's accelerate this, and let's talk about it because it is one of the biggest running plants in advanced recycling. We have the flexibility, as Jim said, in terms of not being selective on one particular type of waste, polyethylene or polypropylene and so on. Scalability will be extremely important as well, not just having a plant which can do 20,000 tons or 50,000 tons. But we think big. I mean we are used to that. We know how to scale up. So from the beginning, what convinced me was our technology in catalysis, knowing how we reduce, I mean, energy consumption, the automatic tar removal that we have involved in that. All these things are extremely important criteria to be able to scale it up and set the standards, and that could be eventually 200,000 tons on a plant or 250,000 tons of a plant. So that is going to make the difference. And that's what you need, I mean, if you don't have 2 million tons of aspirations and above. So Yvonne will also talk about apps and so on. So let's keep that for a bit later.

Thank you, Peter. Sabrina, down here in the second row.

Kevin McCarthy with Vertical Research Partners. Peter, you outlined an EPS goal of $19 for 2025. I think consensus today is below $13. So there's a rather massive disconnect, I think, between your internal expectations or projections and what investors might be expecting. Can you comment on that? How do we get there from here? I think Dave mentioned at the outset, you would not like to get into too much detail on your cycle projections, but however you would like to bridge that in terms of your individual businesses base versus your future endeavors, I think it would be helpful. I guess related to that, is it fair to say that you would expect an upyear in '24 despite your exit from refining?

I'm inclined, I mean, to answer your question because it's a very good question. But of course, I mean, we have Michael that is going to talk about this in a while. I mean, of course, we need to bring it into context. We're talking about mid-cycle margins, historic mid-cycle margins. And Michael will outline that, I mean, what that means because we all know that a big part of our business is cyclical. So therefore, I mean, how to compare, so that we're not comparing apples to pears. So based upon mid-cycle margins. And of course, I mean, as you hear, I mean, from today, we are quite ambitious. We see that we have, I mean, opportunities to further create value in the company. So a big element of that is, of course, also making sure that we continue based upon mid-cycle margins to increase our EBITDA, value enhancement programs, et cetera.

Okay. So just to clarify, those $19 and 23 earnings goals, those are on a mid-cycle or fully normalized basis looking through whatever cyclical flow equations there may be?

Like David said, at the beginning, setting the stage in his opening comments, we always talk about historic mid-cycle margins because that's what we can compare to also later. So all the numbers that I also mentioned this morning, also on the EBITDA side, mid-cycle margin.

Thank you for that.

Thanks for that, Kevin. Alex, this gentleman back there.

Gentlemen, Frank Mitsch, Fermium Research. A clarification, Dale, and then a question for Peter. Dale, I think in response to David's question, you suggested that there's $60 million of capital already allocated for the $150 million that you plan to use in '23. I'm not sure if I heard that correct or not. But in that context, one would think that unleashing the creative juices within the organization that there probably would be, call it, $300 million of projects on the books and so forth. So I'm wondering if you could expand upon where that stands. And then, Peter, you indicated that you still intend to close a refinery. You were very clear on the fourth quarter conference call in that regard. There's a press report suggesting that you did get an offer for the refinery. And I'm curious if you could expand upon that.

Dale, can you take the first one?

Sure.

Everything in the context, of course, as Dale already said. $1.6 billion is the guidance in terms of CapEx for this year. So everything what we talk about, I mean, these numbers are not on top of the $1.6 billion. So that's all correct.

And so you did hear correctly, we've allocated approximately $60 million to projects to date. And to be clear, when you're -- you have to engineer and install a project, you may not see the benefits of that for 6 to 12 to maybe 18 months. So it's not just a 1:1 that whatever we invest this year, we'll see the -- in the run rate number at the end of the year. As I mentioned, we're seeing no cost or very low cost opportunities. Those are the ones that we're going after first. So I wouldn't use a one-to-one comparison necessarily. But again, we're taking a very disciplined approach, maintaining our capital discipline and strict governance process. So when we see a good idea, we're willing to fund it appropriately. So I don't have a target for you moving forward. Every project has to stand on its own merit though.

[indiscernible] starting this year, you're 40% through with how much you plan on spending this year. A lot of confidence that you're going to get to 100% by year-end?

We'll see. The other sites, as I mentioned, we're rolling out new sites, this program to new sites as we speak. And so a lot of it just depends on what ideas are surfaced and how compelling they are and whether we're going to allocate capital or not. Those decisions are made at the executive level, which includes Peter and other members of the executive team. So again, they have to meet our return hurdles, and they have to be very compelling before we're willing to allocate the dollars.

The way we have set it up is actually that Michael and myself, I mean, we have like say, within that context of the $1.6 billion. So we have made an estimation of eventually what could we spend. So that's the numbers that we talked about, I mean, before. And that's a separate bucket. So we released that bucket based upon the proposals that have been made. So so far, we've released, I mean, $60 million. All in the context of this $1.6 billion, just to make sure is this something we're starting up. So getting the right discipline in place is extremely important. And then secondly, also taking into consideration you need to start these projects somewhere. You can't -- if you go and you go through every site and every function and you do your diagnostic and you gather your projects, then you miss opportunities because that takes time. So we've said, okay, let's go sequential. The fourth largest sites that we have in the United States and then move, I mean to the most important sites that we have in Europe. And I'll go back to the smaller sites. But we've not waited until we have all the ideas and then start prioritizing. So there may be certain ideas that we have said, okay, we move forward with them because they are very important ideas but you may have, in some other sites, I mean some better ideas, but that we haven't seen yet. But due to the fact that this becomes part of the DNA, it doesn't stop. It continues. So those other ideas will come as well become in year 2 or year 3 as we speak, and they will be included, and of course, also in the overall estimation that we have in terms of CapEx. To your second question, everybody knows we have gone out in the markets. We have looked at getting offers on the table. But something also has changed in last year. And what has changed was that we started to go deeper into, how can we accelerate our circular and low-carbon solutions business leading to the fact that we have then set up this dedicated business unit? So our belief has also changed. I mean from lots of companies -- lots of discussions that we had, where I personally was also involved with the big brand owners I mean you saw already a part of that in Tracey's presentation, you will hear more in Devon's presentation, and that has really convinced us in addition to what we already have seen because we have the largest volumes of products that we so far have sold in circular and renewable in polyolefins in the markets. So we see that there is a market that has a huge amount of value, not premium, but value, its own supply and demand. So let's go after that. And then if you look at the refinery, you have hydrotreaters. You have hydrocrackers. We have pipelines that are running to channel view. So let's think into have concepts so that we can eventually retrofit part of those assets, bring the next MoReTec technology -- I'm stealing already no more Yvonne's turn there, bring the next more technology to the Houston refinery, produce these circular or renewable hydrocarbons, feed them in the pipeline, in our steam cracker in Channelview. And that value opportunity for our company is much more important than any offer that we have received. So that's our attention, that's all the span of attention. We have a dedicated team under the leadership of Aaron that is really focusing on that.

Well, thank you for all those questions. That's all that we have time for right now. We'll have the second question-and-answer session at the end of the second session. We're just going to take a 5-minute break, and we'll start at 25 minutes after the hour. Again, thank you. [Break]

businesses here at LyondellBasell. It's great to see you all again. I joined the company almost 4 years ago now. It was actually just before our last Investor Day back in 2019. And based on the weather, it was in Houston, I'm wondering if we should move back to Houston next time, but we'll wait and see. Well, thank you for being here. I know the weather was a challenge. The snow seems to be just starting, but hopefully, it's not going to be too bad. Very quickly, I do want to introduce two of my colleagues that are here today. First is Jim Guilfoyle. Jim runs our olefins and polyolefins business in Europe, Africa and Middle East; also Aaron Ledet who runs our business here in the Americas. You'll have an opportunity to get to know them more at lunch. So please take advantage of that. Great to have them here. I'm really excited about our new strategy. I'm excited about the focus that we have and the direction that we have going forward. Being able to be part of the development of that with this team has really been a great time in the company. And I'm looking forward to the future. So four areas that I want to cover today. First is to reintroduce you to our leading positions in our core olefins and polyolefins businesses. Second, I want to talk a little bit about how we're going to grow and shape our core businesses. Next, we're going to talk about how we're going to enable the growth in our new circular and low-carbon solutions strategic business unit. And then finally, I want to talk about how we're going to drive value through focus on our customers and manufacturing efficiencies. Now olefins and polyolefins have historically been a major driver of the earnings of this company. We have two segments that we report externally. O&P EAI, as we call it, and O&P Americas. In 2022, we were a little less than half of the company's EBITDA. Now I want to take just a second to acknowledge that 2022 was a very challenging year for us in Europe. And I want to acknowledge the great job that our team did in managing through a very challenging environment. We all know the background around the energy challenges and supply chain challenges that we faced as an industry there. But really, our teams in Europe did an outstanding job fighting through that and still delivering a positive result. We are the largest polyolefin producer in Europe. We're the second largest polyolefin producer in North America, and we're the fifth largest olefins producer in the world. We have very broad reach, and we have got unparalleled channels to market. Not to mention, with that, we have a presence with offices in all of the major regional hubs. Now while we're going to focus on the future today, I want to reassure you that we are not going to forget what got us here. We've got a very strong track record of operating our assets in a world-class way, both from a safety and cost efficiency standpoint. We've always been a very high cash conversion business, that's going to continue. We've talked before about the flexibility of our crackers. So with that flexibility, we're able to optimize our feedstock slates and our product slates to drive a lot of value in our company. We've demonstrated over time as well a differentiated utilization of our polymers assets. So we have shown that we can operate our polymers assets at a 2% higher utilization rate than the industry in both Europe and in the Americas. In addition to that, differentiation in our polyethylene integrated margins come from two different things. One in Europe, is a broad portfolio of high-value polyolefin products. So we're able to produce very specific products for industries such as construction, medical, automotive, that have a high margin in that market. And that's really important in Europe, where you don't have the feedstock advantage, your competitiveness really needs to come from that innovation in your product portfolio. In the U.S., the combination of that flexibility of feedstocks that I had talked about and the flexibility of the products that we can produce at our cracker sites gives us a significant advantage versus the industry in that integrated polyethylene margin. This is foundational to us as a company and as a business, and I promise you, that foundation is what we're going to build the future on. Now I've got to say Jim Seward did an outstanding job talking about our technology leadership. Every time I hear him talk, I learn something new. That technology leadership has led us to be a partner of choice in the industry. Joint ventures already represent a significant part of our portfolio. So today, about 20% of our polyethylene and about 30% of our polypropylene capacities are based in joint ventures. It has provided us access to advantaged feedstocks and the growth markets, and that's been done in a capital-light approach. So we haven't had to invest all of the capital to get access to that. When you combine our world-class operator status, our ability to operate these assets better than anyone, and our unparalleled global channels to market, that makes us a very attractive partner to people who want to be able to invest in this segment and move their products to markets for the highest value. The average contribution that our joint ventures have delivered to our business over the last 10 years has been about $400 million. So it's meaningful, and it's something we're going to continue to build on. I also want to talk for a few minutes just about our industry-leading polyolefins product portfolio. These markets grow at or above global GDP, with the circular and low-carbon solutions markets growing at an even faster rate. And we're very well positioned to capture those growth opportunities. Why is that optionality important? Well, it's important because we have access to markets that are both durable and nondurable. With that broad portfolio, we're able to find the highest value applications and innovate with our customers to bring those products to market. So having that leading industry portfolio will give us even more options to grow, including our circular and low-carbon solutions business. So we're not just going to focus on one segment. We're going to be looking for options throughout our portfolio. What's driving that growth? Polyolefins has been around for a long time. It has been growing at the same more than GDP rate for more than 30 years, and it's going to continue to do that for more than the next 30 years. Virgin and circular mix, yes, that's going to change over time. But what you're hearing with our new strategy today is we're going to be able to capture both of those because we're going to be a leader in both the circular and the virgin markets. We have them both, and polyolefins are not going away. So just step back and think about it, the things that have driven the growth to date are going to continue in the future. So we've got a growing population, growing middle class, growing standards of living. That means that you're going to have increasing need for food and reducing food waste. Polyolefins plays a major part in that. Availability of health care. More people will have access to quality health care. Polyolefins plays a huge part in that. Next time you go to the doctor's office, hopefully not the hospital, just look around and look at all of the polyolefins that you see, whether it's the syringes, the masks, the gowns, the tubes, the bags, all of that, and that's going to continue to drive growth. The energy transition, shifting to electric vehicles. There are many more options for us to put polyolefins into an electric vehicle than we can in an internal combustion engine just because of the temperature profile. So we're going to see that polyolefins growth is really driving the macro trends in the market. They go hand in hand. Now Peter had talked about our core criteria before, and I just want to talk a little bit about how we're going to apply that to our portfolio. First, we're going to evaluate our portfolio with that criteria. We're going to be enabling the circular low-carbon solution strategic business unit that we have. And we're going to -- over time, we're going to upgrade that portfolio as we go. A couple of examples of that. We've already talked about the MoReTec investment in Westling, Germany. We're doing the engineering on that as we speak. But similarly, we took a look at our polypropylene business in Australia last year, and it didn't fit with our core criteria, so we decided to exit it. So this is going to be a continuous evaluation that we're going to do. We're going to be decisive and we're going to improve the quality of our core business. So there'll be some things that are part of the business in the future and there'll be others that aren't and we'll be adding and subtracting as we go. But I do want to emphasize that we're going to do that in a highly disciplined and prudent way. And I think just quickly to point out, in our plans, we are not including any new wholly-owned integrated cracker. It's just not in the cards for us. We see other ways to be able to grow in a very capital-efficient way. Now we're going to continue to leverage M&A and joint ventures as we go forward. That's one way we're going to drive profitable growth with attractive returns. And we're going to think about that through 4 lenses. These are very well aligned with the core criteria that we talked about. First, we're going to look for assets that leverage our culture around safety and operational excellence and that will build on our global channels to market and our global marketing capabilities. We will prioritize integrated assets that have got advantaged feedstock, and of course, that's going to be in regions like the Middle East where we already have got joint ventures today, and here in the United States where we just established recently a new joint venture with Sasol in Louisiana. We also are going to prioritize access to growth markets. We've also done that over time. We've got joint ventures in Thailand, in Korea and in China. And our partners value what we bring to the table because we market a lot of the products coming out of those joint ventures, and they just slide right into the channels that we have today. We're also going to be enabling our strategy around sustainability. And you're going to hear a lot more about that later today. Now Jim Seward did a great job talking about our leadership in technologies, and he showed a few technologies that we have historically made the conscious decision that we would not out-license those technologies. But now one of the things that we are going to do, and we've made the conscious decision on this as well, is that we will be offering these technologies like Catalloy, like Hyperzone and potentially MoReTec, but only exclusively where we're a partner. Only where we're going to join in an investment. So these are not going to be technologies that we're going to be marketing through our normal licensing business. These will be leveraged for our benefit and to grow our company. Of course, underpinning that is always our capital allocation discipline and the financial principles that you're going to hear Michael McMurray talk about here later. Now I also want to highlight that enabling the Circular and Low Carbon Solutions business is really about our existing assets and leveraging them as well as our existing customer base and innovation that we've got. We don't have to build these crackers. We've got them. That flexible feedstock that I talked about before, that includes recycled and renewable feedstocks. So we can buy third-party materials, and we can feed them into our crackers. We can produce it ourselves with MoReTec, so we've got a lot of optionality with that. Initially, we're going to focus on 2 flagship hubs. The first one is in Cologne, Germany. Second one is in Houston, Texas. Both of these hubs have got ISCC+ certified assets. That's how we're going to create the value and monetize these products. So we'll be selling products that have the certification. Both have produced circular and renewable products, and we're expanding those capacities in both of these hubs. We've already talked about the investment in Wesseling for MoReTec but with the closure of the refinery, and we talked about this during the Q&A a little bit with Peter, we've got an opportunity here to also grow and expand the footprint of our Circular and Low Carbon Solutions business. The refinery is very well connected with pipelines to our Channelview crackers, very centrally located, great logistics access. So we'll be able to reuse some of those -- some of the equipment that is there today to be able to process some of these feedstocks that we would then supply directly to the cracker in Channelview. The other thing you probably have heard is that we're members of a consortium that are looking at an investment in a hydrogen facility on the Gulf Coast. And we've aligned with our partners in that consortia that the preferred location is going to be the Houston refinery. So that's going to be a great opportunity for us to further develop that site. It's a very good location. No final decision has been made yet, but we're excited about the opportunities that this site has for the future. Now I want to switch and talk a little bit about value enhancement program and the customer and commercial excellence and the value that we see there. We've created a new customer excellence team last year because we want to recognize that probably more than any other time in the history of this industry, the markets are changing. The demands of customers are changing. And we have a history of being an innovator with our products in this marketplace, and we want to continue that. We want to be in the preferred supplier position. But the way we're going to do that is by focusing on a few different areas. So let me talk about what those are. First is the value and use pricing. When you think about all of the different applications that are out there, especially when you include Circular and Low Carbon Solutions, we want to be the ones that are able to identify the best value, the best prices and the trends that are happening there and capture them first. So we're going to use things. We're going to use digital tools and new processes like AI to be able to identify those and then get after them and be the first one to capture them. Segmentation is also going to be really important for us. How do we segment our market, how do we segment our customers and how do we couple up the best products with the best customers and get the highest value. Being able to see that first and move quickly is going to have a lot of value for us. Third is we move a lot of product as a major player in this market. We move a lot of volume out of our producing regions into other regions. And so we're always trying to optimize where we produce a product and match that up with the best price. We do it today, but there's always room for us to be able to improve that. And so optimizing that value pool is something that we're going to continue to focus on. We sell 10 million tons a year of polymers around the world. More than 4,000 customers, 1,300 products in 100 countries. There's a lot of optimization potential that you can do there. And with the tools that are available, digital tools today, we believe that we can leverage that into about 100 basis points improvement on our normalized margins between now and 2027. So there's significant value here to be very externally focused on our customers and position LyondellBasell as a preferred supplier. Now what does all this mean? The net result of this means that we expect to be able to grow our normalized EBITDA from a level of $5 billion in 2022 to $7 billion in 2027. We're going to do that thinking through the 3 pillars that Peter had discussed earlier. We're going to grow and upgrade the core. So we've already talked about the value enhancement program. A lot of that $750 million is going to come through the Olefins and Polyolefins assets. We've identified a lot of high-value fast-return projects that we're excited to get after and implement. We're also going to upgrade our portfolio of assets. I mentioned this earlier, we're going to continuously evaluate the assets that we have, and we're going to be adding and we're going to be subtracting, but we're going to be decisive there. We will leverage technology to be able to access new high-return growth opportunities. Also, we are going to enable the growth for Circular and Low Carbon solutions. And you can see that here shown in our bridge. I'm not going to dive into details because I know Yvonne is going to do a much better job than I could explaining that in just a few minutes. And then finally, we're going to be stepping up our performance around manufacturing efficiency and our focus on customer and commercial excellence. I am very confident that we're going to be able to grow above our historical average earnings with the new strategy that we have. Now just to wrap up, just to remind you, we have leading positions in the Olefins and Polyolefins market, and we're going to continue to build on those things. We're going to grow and upgrade our core by focusing on operational excellence, leveraging our global reach and our leading technologies. Olefins and Polyolefins is a key enabler for our new Circular and Low Carbon Solutions strategic business unit. And finally, we are going to be driving margin enhancement through customer focus and that manufacturing efficiency that we've talked about as part of the value enhancement program. So I am confident that our strategy and the actions that we're taking are going to result in a significant increase in the normalized EBITDA, the $5 billion to $7 billion by 2027. A significant part of that is going to be this new Circular and Low Carbon Solution strategic business unit that I mentioned. And now it is my great pleasure to introduce to you the leader of that, and that's Yvonne van der Laan.

Thank you, Ken. Good morning. Wow, I've never heard my name and my new business unit referenced as frequently as this morning. This is my first Capital Markets Day with LyondellBasell. I'm not sure if this is the reference but it feels good. It's a pleasure to be with you here this morning in the room and the people who are watching virtually. I've been with LyondellBasell just over 3 years. And before that, I was with the Port of Rotterdam, responsible for the industry cluster and the industry customers in the Port of Rotterdam. And LyondellBasell is one of those customers. And during that period, me and my team work with the customers in the Board to actually create the key enablers that gave our customers the optionality to create value from the energy transition, entering into Circular and Low Carbon Solutions space. And today, I'm really excited and I'm proud that I can do that by leading the new business unit, Circular and Low Carbon Solutions. And as Ken already mentioned and Peter has mentioned and many of my colleagues before, it's for good reasons to actually be able to deliver value to the bottom line of LyondellBasell. So what is creating that great momentum? And Tracey actually already, and Peter spoke about this. There is a massive demand opportunity out there. And that is triggered by some of these trends that Tracey already spoke about. In society, people wanting to see to address plastic waste and greenhouse gas emissions. In consumer behaviors, consumers wanted to see that reflected in the products they buy and their willingness to pay for it. And last but not least, supporting policies and regulations that aim to accelerate that demand. And if we dive a little bit deeper into that, we see that actually the highest sense of urgency there is in supporting regulation that's actually addressing plastic waste, announcements around introduction of extended producer responsibility schemes like in Europe, we are already very familiar with, announced plastic taxes along single-use plastic bans. And that has resulted in demand coming from the global brand owners -- the global consumer brand owners. So if you look at the picture in this chart, you see an overview of the 10 largest global consumer brand owners, and their commitments and their demand for recycled content to be addressed in their consumer packaging solutions by already 2025. Now 2025, that's tomorrow. And what you see here as well, these 10 global brand owners represent over 12% of that demand are working very hard to find the solutions, the supply actually to meet their commitments. And what you can also see is that most of them still, despite their efforts, have a way to go. So let's dive a bit deeper into the demand-supply situation. So if we take a look at that and see what's going on outside and what is triggering that demand, and first of all, we see that, that demand is growing, and Ken already spoke about this. He was referencing to overall polyolefin demand, growing with GDP growth. But if you look at the mature markets like Europe and North America, or we, as LyondellBasell are already market leaders today in polyethylene and polypropylene, you see that more than half of that demand growth is actually coming from recycled and renewable polymers. And this demand pull adds up to a material number of at least 15 million tons by 2030. You think of it, that's a big number. And the vast majority of that demand will be driven, first of all, by packaging, as you've seen in the slide before, triggered by those brand owners. And LyondellBasell, as Ken already alluded to, is well positioned in these packaging markets. And more than half of that packaging demand is coming from food packaging. And you've heard Jim Seward already talking about MoReTec, which is bringing a great drop in solution for food packaging to address that demand. But we also see the demand for recycled and renewable content solutions growing in other segments where we are exiting like automotive and consumer durables. And also Torkel will talk more about that growth when he speaks about his Advanced Polymer Solutions business. So strong demand growth that is expected to continue, given the trends out there. Let's look at the supply side because you already heard today from Peter, that there is quite a big demand but also a very limited supply base today. So if you look at that supply base today, which is predominantly actually mechanical recycling, that needs to grow massively, and it will grow. But this market for the foreseeable future will be supply constrained. And at LyondellBasell, we are very well positioned to take a leading market leadership position in that supply-constrained market. As Tracey mentioned, we have made an ambition 2 years ago to supply a market 2 million tons of recycled and renewable polymers under our Circulen brand. And that 2 million tons represents a 20% market share in that supply-constrained market. That is a market share that we are very comfortable with because that's also a market share that we actually have today in our traditional business in these markets in Europe and North America. So strong demand growth, supply constraints, that is actually setting the boundary conditions for attractive economics and attractive value that actually motivate and give the business case for the investments needed to take a leading position in that market. So I know you're thinking, that's a nice picture, but what does that mean in terms of value, in terms of dollars? So let's take a look at that. And you heard already Peter mentioning it at the beginning of his presentation and introduction. The answer to that big question is, that we will be able to not just grow that $0.5 billion to the bottom line that Ken has just referenced to by 2027 to at least $1 billion incremental EBITDA to the bottom line by 2030 and this is incremental to what Ken already has shown you. And this is in a market, a total addressable market of at least $25 billion by 2030, and we believe that, that is still a view that is more -- has more upward potential than downward potential. Because what we have not yet included in this view, is the fact that there is more regulation coming, but we have not yet translated the upcoming EU plastic tax into these numbers. Already announced but not yet firm, additional EPR schemes to be enrolled in different states in North America. Also not included yet is the Scope 3 demand coming in as of 2030 and onwards, as commitments made by our customers by the brand owners and OEMs. And the other piece of good news is, and you heard Ken already a little bit saying that, is that we can do this with a lot less capital intensity than building a new world-scale cracker. In that $1 billion number, there is foreseen that we can do that with roughly 15% of our total annual CapEx spend over the coming 8 years. Because these recycling units are less capital intense. Although advanced recycling more so than mechanical recycling, but it tells you something about the attractive margin and attractive returns of these investments. And as has already been mentioned before by Peter and Ken, we will do that by leveraging our strong key success factors. We already today have a market-leading position with great market access, great customer base. We can do this by leveraging our strong asset base with 2 flagship sites that are very strategically located, the Cologne area and the Houston area. And we will do this with leveraging our leading innovation technologies like MoReTec that Jim already spoke about and where we are convinced that we will set the benchmark in terms of not just yield, but also scale and efficiency. And we will do this with a different operating model, a model that is based, first of all, on different feedstock, plastic waste and renewable feedstock. So how will we do this? And in order to dive into that, we need to look, first of all, a little bit deeper into how does this value chain look like based on plastic waste. Today's plastic circularity value chain starts with waste collection. And in markets like Europe and North America, waste collection as such is already pretty well organized. But it's also very localized, often organized by municipalities, it's fragmented. And the majority of that waste that includes plastic waste today, even in Europe where there is already legislation in place that member states need to collect and recycle 35% of that household plastic waste, and that's going to increase to 50% by 2025. The vast majority today doesn't end up in high-quality recycling. It actually ends up an incineration, mostly in Europe; and in North America, landfill and incineration. Now with this great demand opportunity, there is actually an incentive to get it out of incineration and landfill into plastics recycling value chain. But in order to do that, it's not just about the recycling assets that need to be built. It's also about the infrastructure that needs to be built to actually sort it out, a primary sorting or [ Merc ] as they're called here in North America, and what we call advanced [ sorter or PERT ] because that will actually make them into feedstocks that can go into these different recycling technologies and assets. Now the good news is that for a part of this plastic waste turned into feedstock, it can actually be turned into liquids like pyrolysis oil or renewable bio-based feedstock that we can process in our existing asset base, the crackers that Ken mentioned in Germany and in the Houston area. But this also shows you a complex and fragmented picture. It requires an integrated approach, and that's how we will do it. Ken and Peter already spoke about the integrated hub model. And what you see here is an infographic example of what we're trying now to build and already are building with proof points in place, our integrated hub model in the Cologne area. So if you look into that infographic from left to right, it actually starts with our move upstream that we've started to do last year. We already announced a new joint venture called Source One Plastics, and we had the ground break of the first advanced sorting unit for that already in December last year. Secondly, and it was already mentioned by Peter and by Jim, this allows us to have additional feedstock to grow our existing mechanical recycling footprint that we have in place today through the QCP joint venture. It will enable us to grow them. And with that mechanical recycling position, we can leverage our strength in compounding that actually is there in the core business of our colleagues of APS, and Torkel will talk more about that. On the other side, these advanced sorting units will provide the necessary feedstock coming out of the mixed plastic waste that today is hard to recycle, to feed into advanced recycling. And I heard a question before about our Nexus partnership, which is a third-party example, different business model. But we have already announced that we are working and progressing our decision to build the first commercial skill unit of MoReTec in Cologne at our Wesseling site, integrated with our crackers over there. And this allows us to process the advanced recycling feedstock, renewable-based feedstock as we are already doing today, and Peter spoke about that in our crackers and optimize that and complementary to the mechanical recycling value chain we're building up there, and other technologies like solution-based, where we made an announcement in February to invest in new cycle technology of APK. So this allows us, in this integrated hub model to build scale, get the operating cost down and take advantage of that integrated business model instead of individual assets only. And that's important because it has 2 important effects. It makes us the preferred partner for the companies today that are in waste management or in waste to energy or our [ EPR ] operating schemes that actually own the plastic waste in Europe today because we allow them to partner with us and co-invest, for example, in these advanced sorting units and get access to this value chain that has all the solutions there. It's not just preferential to either advanced recycling or only mechanical recycling. It allows us to economically optimize the value of these streams at all times and drive additional value over incineration and the landfill model. The second part is it allows us and continues to be the preferred partner of our customers, of the converters, the brand owners, the OEMs because we provide them with an efficient, full solution suite of solutions in that recycled and renewable space of polymers in one-stop shop, if you like. Now can you think, okay, that's a great story. But aren't your peers doing exactly the same? And that's why I'm really so excited about how uniquely LyondellBasell is positioned. Because if we take a look at the next table, and I'm not going to take you through all the rows and the columns. And if you have marked the tick boxes in the previous slide, you can actually see that LyondellBasell ticks all of these boxes needed to be successful in that integrated hub model and actually be able to scale, reduce operating costs and logistic costs and take the integrated value advantage of that model. And the good news is also that we can do that by leveraging also our existing asset base, first of all, in the Cologne and Houston areas. And as Peter told you already, we don't have to start with these solutions. We already have them on the Circulen brand. We are already marketing and selling these products. In fact, we have sold already over 175,000 tons of this product under the Circulen brand today as we speak. If CirculenRecover, which is the umbrella for all the mechanical-based and compounded-based solutions, we have CirculenRevive addressing these solutions under the advanced recycling value chain, and we have CirculenRenew, addressing the solutions under the renewable bio-based feedstocks. So that makes us very confident that we cannot just deliver on that 2 million tons ambition by 2030, but also deliver the additional incremental value with it. So just to summarize, demand is not the issue. It's growing and is sustained. This market will be supply-constrained for quite a while, and we are best positioned to take a leading position in that supply-constrained market because we have a great plan, and we're actually already started to execute on it, by leveraging our existing customer base and solutions and market positions, by leveraging our existing assets in flagship strategic sites that are in heavily populated areas where there's waste available, with this integrated hub model that allows us to scale and bring down operating costs and capture the integrated value. So with that, I'm confident that with this new Circular and Low Carbon business unit, we will be able not just to deliver on that $0.5 billion Ken was speaking about by 2027, but at least $1 billion additional EBITDA by 2030. Now before I hand over to Torkel, I want to share with you a video of one of our customers, Samsonite, on CirculenRecover. So let's watch that video before Torkel comes on stage.

Sustainability has always been very important for Samsonite. We have set our vision to become the most sustainable lifestyle bag and travel luggage company in the world. And of course, we cannot reach our goals alone. So we need partners for that, such as LyondellBasell, with a very strong partner for us in terms of innovation and also customer focus. We started the collaboration in 2019, the Circular Eco Limited edition. This was the first suitcase produced from CirculenRecover, the recycled polypropylene coming from post-consumer household waste, and we saw that the market was actually quite positive on this limited edition. So then we started working together with LyondellBasell on the new grade because we also wanted to reduce the weight of the suitcase. And so for that, we needed the high-performance grade to be able for us to use it in our lightest suitcase. We are also interested in using more bright colors. And by offering ivory grade, we were able to offer recycled PP, but also in bright colors. We find the LyondellBasell really a reliable partner for us. I believe it's really the drive and the passion of the teams to make it a success. Looking at the future, it also looks very interesting. The collaboration continues. We will introduce this year 2 new collection, Essence, which is our newest 3-point lock suitcase made using CirculenRecover and also a dream-to-go suitcase for the youngest generation.

Thank you very much. I'll be looking forward to take questions later on and meet you during lunch. But for now, I want to introduce Torkel Rhenman, who will talk about the Advanced Polymer Solutions business. Torkel?

Thank you, Yvonne. Many of you know me as maybe as Mr. I&D or Mr. Refining, that's not what I'm here to talk about today. That's in very good hands with Kim, who is going to be next up. I'm going to talk about the transformation that we embarked on for my APS business, which I took over as of October 1. The APS business, we have 60 plants around the world. We are the global leader in compounding solutions. We service over 16,000 customers, and we have over 97,000 active formulations in our library. As you know, the APS business was formed after we acquired A. Schulman in 2018, and we combine it with our polypropylene compounding business. We have then generated about $200 million in synergies, primarily on cost as we integrated the 2 companies. We have also transformed from having over 20 different enterprise systems to now being on basically 95% on one, which gives us complete different visibility around data and how to run this business on a global basis. We've also significantly improved the safety performance of this business to more the standards of what we want to operate as LyondellBasell. However, we are not happy with the performance of this business, and I want to be very transparent about that. During my first couple of weeks, I went out and visited over a dozen customers. And I'll share you a sort of summarize what I heard them tell me. "We love your products. We think you are a leader in innovation. And over the years, you've really helped innovate and help us grow. It's been a really good partnership. However, your service performance has really deteriorated. And for us, it's not acceptable. And if we're going to be able to grow together, you have to really change that." And that's the transformation that I'm so excited about being able to lead. And let me share a little bit about my background in terms of my energy level to actually get this challenge to lead us through this transformation. I've been in the industry for 35 years. 25 years of those I've been in specialty businesses. I've been the CEO of 2 companies about the same size and complexity as APS. I've even been an engineer earlier in my career, working in a company facility, working on improvements, turnover improvements and color matching very, very similar to the kind of plants that we operate around the world. Both Basell and A. Schulman were customers and partners of mine, and we grew business together. We had a very, very good partnership. And I see the potential that's in the business, that's in this space of what we can do and create from this business if we only go through and become really customer-focused and really perform to the service expectations that our customers have. That's what we're embarking on. Our portfolio has changed. We basically said we need to focus on what's the core of APS, which is the compounding business. So we moved the Catalloy and polybutene, which are really polymer businesses, we moved them back to O&P, both the Europe and Americas regions to really create us the focus and the attention of transforming the core of APS. PPC, we're the global leader. We're backwards integrated, and we have basically grew this business over the years. So if you go back and look at how our car looked 20, 30 years ago, and how much more polymer there is and how they design the front, the interior, we work with our customers to help them transform that and make that happen through the innovations that we've had. In Engineering Polymers, we have a portfolio of products, we're not backward integrated, and we play where the big integrated players do not play where they don't have the asset capability to service that market. We have nylons. We have styrenics. We have a PBT, POM and other polymers. And so that is a focus area for us also in going after high-performance applications where we get the good margins on it, and the big players do not play. On masterbatches, we're a global leader. Goes into many different applications where you're looking for some sort of either performance or processing aid. In Colors, we have a strong regional footprint. And on composites and the powders, we play more in specialty niches. I believe this business has significant higher earnings potential. I put the target out there with my team for $500 million by 2027. I think this is feasible. The 3 components that we are driving, I call them restoring the base, and I will go through that. I see this mid-term over the next 1 or 2 years. The market recovery is partially underway. China reopening. We've had a lot of issues on supply chain as well as labor force issues in the Americas region, and those are also easing up. The third one is our growth focus. And I will go through the megatrends that we see that gives the potential for us to grow this business. And I think there's actually upside on that. That growth comes from both our sales funnel as well as innovation funnel. The sales is basically selling more of tweaking existing products to existing or new customers. The innovation, those are really the new products, and I will focus on the innovation pipeline, what we're doing, what I see the opportunities there. We see that from that growth, over $150 million opportunity, and I think there is upside. On restoring the base, this is already a transformation that is underway. We made both organizational changes in order to enable this completely different business model than how we operate in LyondellBasell. Recognize, this is a highly complex business with the number of customers that we serve with the number of products that we offer, we need to be much more agile, lean, decentralized, quick in making decisions and be excellent in operating. And that's why we put the different business model in place. As Peter mentioned, we put manufacturing customer service procurement into those regional leaders in order to make it much more nimble and fast. We're also implementing underway, what we call integrated business planning, which is like it's an enhanced S&OP process, and that's to become excellent in driving execution. I already start to hear customers are seeing an improvement in our performance. Our delivery performance is increasing. Our lead times are decreasing, and we're targeting to have us back to have that restore to work customers expected by the middle of the year. On the growth side, which we're now looking at how to accelerate partly just by fixing the service issues, we're also freeing up the people that were doing firefighting to actually focus on growth, what they should be doing. And what I heard from customer that were actually used to be really good at. We have good people, both on the innovation but also on the business development. The 3 megatrends that I will focus on that we see unique opportunities are circularity, mobility and modern living. And we will -- I will go through those in terms of what we see the opportunities. It's all about leveraging the strength of APS and LyondellBasell where we're really good at is our customer relationship, our formulation know-how, our application know-how and the breadth of our portfolio and market reach. We have probably the largest formulation library in our industry with the 97,000 formulations in our library. We started to use artificial intelligence with project we started already 3 years ago. And I think we're seeing already today that this increases the speed of development. It improves the performance of our compounds and actually has the opportunity to reduce the cost, and we're rolling this out from having piloted in the Americas region and seeing the results from it. I think that's going to be an important factor also for us to exceed and deliver on the upside by being differential versus our competitors in the speed and the ability to enhance our performance. As I look at this part, I also think realistically, we're probably going to need to add back some resources on it when we were too much focused on the cost and the synergy side for us to be successful in driving the growth potential. But I think if I compare it to the $200 million in cost out, this is an area I look more of a $20 million to $30 million investment in order to accelerate the growth. On the megatrends, you already heard a lot from it from Yvonne and from my colleagues there, the sustainability. It's happening in my business as well. We cover many of the big brand owners, and we hear it. They're all working. They made the commitments, as you heard. They're all working on figuring out how am I going to get to that commitment that I've made, who's going to help me. We are their partner. We closed the circularity loop by APS presence in that market, and being the partner for how to innovate and how to get circular products into a car, into an appliance and to still make it work. I want to show just an example, a testimonial from a customer that we have.

At LyondellBasell, we are committed to innovative material reuse across the value chain. In collaboration with our customer, the automotive manufacturer Audi, we are helping to transform old car products into new recycling materials.

So we want to use secondary material whenever it is technically possible, ecologically feasible and, of course, environmentally friendly. Recycling is not that easy because, as you can imagine, if something is mixed up, it's not that easy to separate it again. We are recycling plastic, which was already in the hands of our customers. So it's called post-consumer. Chemical recycling is a good addition to the mechanical recycling. Chemical recycling is a process where we heat the plastic and then a pyrolysis oil will be created, and we can use it for the production of new polymer parts. So we can use it for high-quality demanding parts like, for example, safety relevant parts and in very specific case for the Q8 e-tron seatbelt buckle.

By transforming recovered plastic waste materials with mechanical and complementary chemical recycling, we are helping to close the plastic loop, saving valuable resources and reducing waste.

So just to say that we have probably the most number of requests when it comes to circularity. The number of customers that are asking for, please help me design in my parts with Circular Solutions. The next megatrend I wanted to talk about is mobility. And this is where we -- the biggest part of our polypropylene compounding business where we've been working on lightweighting the car. It's a trend that continues. And we are working with many of the car companies, what we call in being able to come with lightweighting formulations, we see 4% growth rate in this segment. The modern living is where we sell into appliances, sporting goods, electronics, et cetera. We cover global CPG companies to regional brands. These are typical smaller applications with higher margins. As -- if we ask the question, why do we think we can be successful here? It is our global scale, the market reach that we have, the breadth of our portfolio, what I heard from our customers. Now we're adding this circularity integration with the compounding capabilities that we have in recyclates. We just announced yesterday the acquisition that we made in Europe of a company called Mepol, which plays in exactly that space. It's a small Italian-Polish company that's 30 years' experience in the industry and primarily into compounding but it plays perfectly into what we're trying to accomplish in our circularity push. They have 30 years' experience plus our experience with our brand owners, we see significant synergy opportunities and accelerate the growth of that company. The other success cases that we have is the molded colors where we have enabled customers to replace painted plastic, painted metallic to look -- make it look like metals, where we basically do that through a formulation, and we're basically just a compound that looks like metal and you don't have to paint it. The 10 program -- 10-kilogram program that we offer with automotive companies, we basically have a project to help car company how to redesign the car, to replace metals and formulate it in a way with new designs that enables you to put in plastic compounds to lightweight the car, both through lower density formulations but also through new designs, enabling it to happen. So I see overall the enormous opportunity for us to transform APS. And you can hear my energy level in terms of I believe that this actually can realize a lot of value for us. We have a lot of the strengths already. We were really good and our customers would say that we are really good when it comes to innovation and servicing our customers. What we've realized is we need to reformulate and go back to look at how do we make this business successful with a different business model of being much more decentralized with the speed and agility of customer focus and delivering what customers expect. But there's a lot of the base that we already have, but we now need to make release and make it feasible. And that's what we're driving. That's why the transformation is underway in what we're trying to accomplish with it. I'm confident of the potential of delivering more than $500 million from this business to the transformation that we have underway. And I want to share with just one more testimonial for my customer.

Since its foundation by Carl Miele and his partner, Reinhard Zinkann, back in 1899, Miele has always been an independent family company. Today, we focus on product Miele stands for all over the globe, both in domestic and in the professional field. The journey of LyondellBasell and Miele started decades ago in the 1960s when we began using Hostacom compounds made by Hoechst. In LyondellBasell, we found a valued and long-standing supplier who also focuses on recycled materials, such as CirculenRecover polymer. These perfectly meets our Miele-specific requirements. This polymer is successfully used in a variety of Miele appliances. For example, in structural parts for the dryers, salt funnels in dishwashers and dust bags for vacuum cleaners. We are very much looking forward to continue our collaboration with LyondellBasell, even beyond Miele's 125th anniversary in 2024.

There's actually 3 Circular Solution for just 1 customer that wants to be a leader in circularity. But that's what I think is the exciting part of this business is not just the opportunity to transform APS to be successful but actually to be a leader in the industry and together with our customers transform the whole industry and by doing so, creating a lot of value. That is what really makes me excited about this opportunity. And I see as the upside for how we can make this really good business for LyondellBasell. So with that, I'd like to introduce my partner, and I'm not sure if I should say Mrs. I&D and Refining but at least my partner, Kim Foley. Thank you.

Thank you, Torkel. Welcome to our Capital Markets Day. It's a pleasure to be here with all of you. Some of you may have recognized my face from our 2019 Investor Day. At that time, I was the site manager at Channelview. So I was your tour guide on the bus. And many of you asked me about the RVs and the boats that were on the side because we had those there from the hurricane. But I'm Kim Foley. I'm responsible for Intermediates & Derivatives and Refining. I've been with LyondellBasell or one of our predecessor companies for over 35 years. I love this company. I'm going to retire from this company. This is a fantastic company. I've also been, during my career, part of several very successful transformations that have led to our global leadership position in olefins, polyolefins and propylene oxide. So why do I also share that with you as my lead in because what we're doing right now is differential to all of those things that we've done before. I'm excited today to talk to you about how Intermediates & Derivatives is uniquely advantaged and how we will contribute to LyondellBasell's strategy and transformation going forward. As you've heard from others, our focus is on growing and upgrading the core, stepping up our performance and culture and advancing sustainability to grow our businesses and to do so profitably. This is also the focus in Intermediates & Derivatives. We are a global business with a broad array of applications serving markets in 65 countries around the world. We have propylene oxide assets or participate in propylene oxide assets in the U.S., Europe and China where we are the #2 global producer, but more importantly, #1 with the lowest cost technologies. We also operate as [ steels ] and EO sites here in the U.S. This broad portfolio across I&D enjoys stable cash flow through the cycles. We support our customers and our end products or end markets, excuse me, by focusing on 4 key areas: first, process innovation with our industry-leading propylene oxide technologies. You heard from Jim earlier today over 100 improvements in our new plan. Unparalleled operational excellence, exemplified by our industry-leading safety performance and our 97% asset reliability across our propylene oxide assets. Global portfolio optimization, we can leverage our feedstock advantage here in the U.S. across all of the other regions of the world that we participate. This is really important as we ramp up our new PO/TBA plant as well as the joint venture that I'll talk about later. And we are advancing sustainability. We are out there offering renewable products to our customers and reducing greenhouse gas emissions to meet the needs of the future. Let's start by talking about how we are connected to the core olefins and polyolefins business. As you can see here, we are the critical link between olefins and other petrochemicals. The chemical chains are much more complicated. It's not just a olefins to polyolefins. You need to go through these intermediates to get to the products. So as the world becomes more and more circular and sustainable, we're going to be a critical link. And I'm going to talk about that a little bit. First, we get our ethylene and our propylene at almost all of our PO plants from our LyondellBasell crackers. Not only is this an integration and a feedstock advantage, but this also enables us to run circular or renewable feedstocks through those same crackers and provide that upgrade to our customers. So how do our markets grow? Ken talked about the megatrends that influence is markets. For me, the megatrends are urbanization, energy efficiency and clean air. We'll talk quite a bit about oxyfuels. But on the energy efficiency side, we're into a lot of products that help enable energy efficiency. Insulation is one of the big ones that we'll talk about. We differentiate through 3 unique characteristics: process innovation, diverse markets that create strong and stable cash flow, and we are developing our low carbon and circular capabilities and product offerings. So I just talked about this example where we get our feedstocks from our olefins plants, and we have this ability to process renewable feedstocks. Earlier this year, we took renewable feedstocks through our olefins crackers and then through our POSM plant or one of -- our propylene oxide styrene monomer plant to make our first shipment of renewable styrene. We believe this is an untapped growth opportunity for the Intermediates & Derivatives chemicals or the Intermediates & Derivatives segment. This is different than what Yvonne has talked about. So now let us take a look at our portfolio and end markets. Propylene oxide is our core or growth driver. Historically, this has represented about half of our EBITDA. The advantage of our propylene oxide technologies are that both of them have a coproduct. And these co-products provide a tremendous cost benefit. Our propylene oxide or PO/TBA process, the co-product is TBA. TBA is converted into oxyfuels. Oxyfuels are a high-octane-premium gasoline component. It enables better combustion in your engine, it reduces air emissions. It supports clean air standards especially in emerging markets. It is also a great countercyclical hedge to the other chemicals that are in the I&D portfolio. Last year, and this year, we are seeing strong demand for gasoline. Oxyfuels will represent more like 40% of this segment's EBITDA. The other technology for propylene oxide is POSM or propylene oxide styrene monomer. Through this technology, we produce styrene that goes into the polystyrene, rubber and polyester resins. And to round out intermediate chemicals, we also produce acetyls and ethylene oxide. We define acetyls as methanol acetic acid and vinyl acetate monomer. These chemicals go into a broad array of products, but think of it as predominantly adhesive coatings and solar panels. Ethylene oxide is produced in our Houston area. We captively convert most of that into glycols and solvents, similar to what we do in our propylene oxide business, and that is used in the textiles, detergents and automotive industries. This broad array in I&D gives us a balanced exposure to automotive, housing, durables and consumables and fuels. Again, this diversity of this portfolio provides a stable cash flow. So let's talk about our pillars. We talk about upgrading and growing the core. Propylene oxide is our core. It and its end markets grow at GDP plus rates driven by strong market fundamentals and megatrends. As I mentioned earlier, we're the #2 producer in the world, but more importantly, we have the lowest-cost technologies with both PO/TBA and PO/SM. Our new PO/TBA plant exemplifies the attractive returns that we've historically delivered with these technologies. So why are they so advantaged? I mentioned a moment ago, TBA goes into oxyfuels. Oxyfuels are, again, a high octane premium component in gasoline. They're made in our process through butane and methanol, which are traditionally discounted significantly to crude, which is the other component that typically makes gasoline. So this built-in margin provides significant benefit to the PO/TBA process. The remaining 1/3 of our propylene oxide is produced through our PO/SM or propylene oxide styrene monomer. You can also see that this is advantaged. I want you to look at that curve so when you ask me questions later today, at the tail of that curve. So that when you say later, boy, you're bringing a lot of capacity online. Do you have any concerns? Look at that tail. Those people, they're going to have things they're going to have to think about in the next couple of years. So in addition to these two wonderful highly advantaged technologies, we have world-class safety culture, operational excellence with our high reliability and we have a very experienced sales team. So what did I mean by capacity? With the start-up of our new PO/TBA plant and the joint venture that we started up in China last year, we are increasing our propylene oxide capacity by almost 50%. This new plant that everybody already has alluded to is our largest lowest-cost asset in the world. And I do want to take a moment to not only share with you again that this plant became operational yesterday with on-spec product, but I would also like all of you to join me in congratulating the hundreds of employees that we have in LyondellBasell, who have been working on this for many, many years in our engineering, manufacturing, project planning and business organizations. Thank you for your tremendous effort. Obviously, in the near term, we're focused on ramping up the capacity of this new asset and filling the sales funnel. We're also implementing a VEP program, Dale talked about reliability and most importantly, an amazing team. We are announcing today that we are exploring strategic alternatives for this business. And we believe that this asset could provide even more value to a different owner. The last thing that I want to tell you on this slide is this process does not change who we are and how we serve our customers, how we operate or maintain this facility. Those are core values to us around commercial and operational excellence. So now let's talk about sustainability. We believe our focus on sustainability can add value to our customers. Our customers are eager to provide Low Carbon Solutions to brand overs just like you heard earlier in polymers. But as I mentioned earlier, it's much more complicated in the chemical chain. I also want to remind everybody Intermediates & Derivatives has always been advancing sustainability. For over 15 years, we have been providing certified bio-oxyfuels into the gasoline pools in Europe and in Japan. In 2022, we sold over 2 million metric tons. We want to leverage this expertise around renewable and renewable products into our chemical products. And we want to get very focused on the carbon footprint of our assets and how we work with others to reduce that carbon footprint. Remember, there's 3 scopes, 1, 2 and 3. So we want to look at that full value chain. We've just completed getting our assets ISCC+ certified. As I mentioned earlier, that's enabled our ability to start selling renewable products. We made our first shipment of renewable styrene earlier this year. We make our second one tomorrow. Additionally, we've done this life cycle analysis on our propylene assets -- or propylene oxide assets as well as our acetyls plants. And we're all excited to get ready to go to AFPM next week and the -- or the week after. There's actually 2 weeks of AFPM. But to sit down and talk with our customers and to share this data and say, here's our carbon intensity. We're committed to reducing our carbon intensity. How can we count on you so that this full value chain can deliver Low Carbon and Circular solutions to brand owners? So now let's talk about how we put all this together and how the financials, show you the numbers, so to speak, of the clear value that we are poised to deliver. We expect to achieve a 40% EBITDA improvement over the next 5 years. This is built off our average EBITDA for the last 10 years of $1.6 billion. Now many of you know in 2022, we made $1.9 billion. We had an extraordinary first half with some very discrete events and a very sombering second half. In total, I hope you can see the clear picture of how we step up performance to $2.2 billion by 2027. The largest and biggest bucket is our new PO/TBA plant. The second is our contributions on the volume side of growing and upgrading the core that we get from our VEP program. So those are the debottlenecks, the reliability gains. And you're probably thinking that looks lower than the number on the other slide. We have backed out the EBITDA for the sale of the ethylene oxide and derivatives business. That third bucket is stepping up our performance on the margin side. So we've identified over $100 million of reoccurring opportunities on product or commercial improvements as well as variable cost savings. This is all very exciting and clearly, a step change in performance. In summary, I hope you see the clear value that Intermediates & Derivatives brings to LyondellBasell. We are laser focused on advancing our strategy to grow and upgrade the core, step up our performance and culture and advance sustainability to grow our businesses and do so profitably. I leave you with 4 final points. Propylene oxide is core to our strategy. We are a clear leader in propylene oxide with industry-leading technology, global scale, advantaged feedstocks and commercial and operational excellence. Third, the Intermediates & Derivatives segment serves a broad or diversified end markets. We are evenly exposed or balanced between automotive, housing, durables, consumables and fuels. This provides strong, stable cash flow with moderate cyclicality. And fourth, our goal is to deliver a 40% EBITDA increase for 2027. So thank you very much. With that, I would like to introduce Michael McMurray.

Thank you, Kim. Good morning. Good morning. It's great to be with you all this morning. So I'm Michael McMurray. I'm the Chief Financial Officer of LyondellBasell, and I'm responsible for the financial management of the company, among other things. And it is good to be here with you today. I do want to thank the support staff and also thank the communications team and put a thanks to my Investor Relations team big time. While these events are lots of fun to get ready for, they are tedious and painful, rest assured. So I've been with the company for a little bit more than 3 years. And prior to joining LyondellBasell, I spent roughly 11 years at a company in Toledo, Ohio, called Owens Corning where I was CFO for almost 8 years. And then prior to Owens Corning, I spent roughly 20 years at Royal Dutch Shell. And while at Shell, I spent time in all Shell businesses, including chemicals. And so again, I'm excited to be here with you today to share my perspective on our new strategy and the implication for the long-term potential of the company, which all is enabled by the company's financial strength and our disciplined financial policies. All right. This is a good chart. So LyondellBasell has a reputation for delivering strong free cash flow. So a reputation for delivering strong free cash flow and converting earnings into cash. And we have a long and strong history as well. So looking back over the last 10 years, on average, we've generated $5.5 billion of cash from operations, $5.5 billion, and converting 80% of EBITDA into cash. Going back to 2020. So during the pandemic, the company successfully navigated the pandemic and covered not only our capital program, but also our recurring dividend with cash from operations. And for me, I think it's a testament to our resilient portfolio, but also the ability of our businesses to successfully navigate cyclical markets. We have really good teams across all of our businesses. In 2021, we delivered record performance, record performance in 2021. And we took the opportunity that year to actually strengthen our balance sheet. So in 2021, we reduced long-term debt by $4 billion, while at the same time buying in 5 million shares. And so as we sit here today, our balance sheet is in great shape. And there's no need to further delever, no need to further delever. Now last year was an interesting year. The first half of the year was pretty good, but the second half became quite challenging and quite challenging very, very quickly. We experienced weaker demand. At the same time, we had incremental new supply coming on across the industry. And we also had significant inflation, in particular, energy inflation. So energy inflation year-on-year for LyondellBasell last year was almost $2 billion. And then we faced into other challenges as well like supply chain, like many other participants in our industry. But despite that, despite that, we generated cash well above our historic average. And in fact, we generated $6.1 billion of cash last year, 96% conversion, and we took the opportunity to return $3.7 billion of our cash to our shareholders. We have a strong investment-grade balance sheet. And as you heard me say, our balance sheet is in great shape and a strong investment-grade balance sheet underpins our corporate strategy and quite frankly, it's a key enabler to our strategy. It also improves our ability to act upon opportunities when others can't. A great example is the Sasol joint venture that we closed in late 2020, the year of the pandemic. That was enabled by our strong balance sheet. And it was a great transaction. And it also enables us to weather market challenges relative to our competition as well. And we ended '22 with $11 billion of long-term debt and about $9.2 billion of net debt. And during 2022, we actually reduced net debt by about $900 million. Now for those of you who have been following the company for a while, you know that in 2020 and 2021, we took decisive actions around refinancing our balance sheet. So the financing markets were very attractive and we took advantage of that by refinancing a significant portion of our permanent or long-term debt. And our maturity profile as we sit here today is in fabulous shape. Average maturity profile of 18 years, 18 years. Our interest costs last year, just under 4%. And we're facing into very, very few maturities as you look forward over the next couple of years. So again, our balance sheet is in great shape and we ended the year with a net debt-to-EBITDA of about 1.4x, which is the low end of our range. And so that gives us plenty of flexibility as we think about the future. So the strength of our balance sheet and the company's cash generation profile actually plays very, very well to our strategy of providing meaningful returns of capital to our shareholders. So let me put this into perspective for you. Since 2011, the company has returned $44 billion to our shareholders, $44 billion to our shareholders. That's both dividends and repurchases. And from a dividend perspective, that represents 12 consecutive years of dividend growth. And on a CAGR perspective, when our dividend was initiated back over a decade ago, that's a 22% growth CAGR. And now our new corporate strategy supports the continuation of our balanced and disciplined capital allocation strategy. So nothing is really changing what we've done historically looking forward. And that's from a dividend perspective, but also share repurchases, which will both play a central role going forward. Therefore, it's my expectation, it's our expectation to continue returning meaningful amounts of cash to our shareholders, including growing our recurring dividend. All right. So talk a little bit about capital allocation. We've had and we will have a disciplined and balanced approach to capital allocation. So the pie chart on the left shows kind of our overall balanced approach over the last 5 years, and I'm not going to go through it in detail. You can see it there. But our confidence and our ability to pursue our focused growth strategy is driven by best-in-class cash generation and the strength of our balance sheet. So let me go into a little bit more detail just about the priorities themselves. Our first priority is around maintaining safe and reliable operations of our assets. For me, this is table stakes. Secondly is about rewarding our shareholders by growing and protecting our strong dividend. Third, it's about pursuing a focused -- so pursuing focused organic growth opportunities, which is shaped by our strategy. And let me be clear, I think you heard Ken, we have no plans to build a wholly owned cracker. Hopefully, that's clear. And then the last priority, the last priority is around funding additional growth through strategic and disciplined M&A and/or returning excess cash to our shareholders. And so let me say one more thing. So one last important point. So as we look forward in pursuit of our strategic initiatives, our commitments to shareholder returns remain intact. And we demonstrated this last year in 2022 when Peter joined the company by declaring a pretty significant one-time dividend. And today, we're communicating a target payout ratio of 70% of free cash flow. So that's a new commitment. So now I'm going to talk a little bit about our strategy from the perspective of the CFO. So from my perspective, our new strategy is driving focus. It is driving focus, and I am confident that it's going to drive differential growth and value creation. The first pillar is around growing and upgrading the core, growing and upgrading the core. I'm confident that our actions are going to build greater resiliency and performance through the cycle. And we are in action, you heard today, around pruning the portfolio, and we've narrowed the aperture in regards to inorganic growth. So we're pruning the portfolio, and we've narrowed the aperture in regards to inorganic growth. Second pillar. You heard a lot about this today as well. So we are building a profitable, circular -- Circularity and Low Carbon Solutions business. And for me, it's all about meeting the rapid demand growth for sustainable solutions and becoming a critical partner in helping our customers achieve their sustainability goals. And you've heard Yvonne, the demand out there is immense, and we're going to service it. And I am confident. I am confident in our ability to grow this business at scale and generate attractive returns. And then lastly, the last pillar is around stepping up our performance and our culture. If you know the company, you know that we have a history that's steeped in best-in-class operators, evidenced by our cost discipline but also our safety results as well. And now we've put a focus on enabling a value-creation mindset. And as you heard from Dale, we've identified and we are acting upon a portfolio of improvement opportunities, a big portfolio of improvement opportunities. And taken all together, these pillars will unlock of $3 billion of incremental EBITDA, $3 billion of incremental EBITDA, roughly $1.8 billion coming from growing and upgrading the core and then $500 million and $700 million coming from our Circularity and Low Carbon Solutions business and performance and culture, respectively. So we have a disciplined framework to evaluate our existing portfolio and future growth opportunities. So you saw this with Peter, you saw this with Ken. We're using this across the enterprise and playing to our core strengths and growth in advantaged businesses is core to our strategy and aligning future growth and other portfolio actions with this strategic criteria to define our core. And so the principles are centered around businesses with market-leading positions; focusing on end markets and businesses with attractive growth rates; businesses that consistently deliver attractive returns; and then obviously, expanding access to advantaged, renewable and circular feedstocks; and then lastly, we're putting a big strategic focus on growing our Circularity and Low Carbon Solutions business. Hopefully, this is clear. Now a couple of examples. So from a buy-side perspective, I think a fabulous example is the Sasol joint venture that we closed in late 2020. It checks most of these boxes. That was a great transaction that was done for deep value and that has created significant value for the company and our shareholders. And then we are in action on pruning the portfolio, where appropriate, as well. And so the decision on the refinery is quite clear. And then Ken made another announcement today in regards to the strategic review of our EO&D business. So we are in action from a portfolio perspective, and we will be disciplined, disciplined around future growth opportunities. So let me talk a little bit more about our approach to growth around M&A and joint ventures. So we're going to generate growth through differentiated M&A and a joint venture strategy that not only leverages our balance sheet, but also our global network and capabilities and our long history of operational and commercial excellence. Our approach to M&A and our approach to joint ventures closely aligns with our new corporate strategy. And we'll build upon -- we will build on core businesses and will increase positions utilizing advantaged feedstocks. We'll leverage LYB's operational strengths and our global commercial reach to capture synergies from acquisitions and then we'll leverage our strength in technologies and global marketing capabilities, which will, quite frankly, enable us to be a partner of choice and enable us to access and facilitate access to advantaged feedstock concessions in locations like the Middle East. And then recently, as you've seen in the various press releases and what Yvonne highlighted in her materials, we have been very active in building out our supply chain for our Circularity and Low Carbon Solutions business. And then lastly, let me share the financial criteria that we have when it comes to inorganic growth. So the first screen is that we would expect to generate earnings that are accretive within the first year, and then we're targeting IRRs in excess of 12%. And again, all while maintaining a disciplined investment-grade balance sheet. And then in regards to inorganic growth, Peter and I are at the hip. We will be extremely, extremely disciplined. So let me put everything into perspective from a long-term financial goal perspective. So I'm going to go -- I'm going to spend a few minutes going deeper into our long-term financial goals and expected outcomes over the next 3 slides. But let me be clear on kind of how these financials are based because we had a question earlier in the room. So what we did is we looked back basically 10 years and we calculated our average margin profile for the enterprise and also the utilization rate as well. And we're using those -- that margin profile for our forward view that goes out to '27. So as a company, we normally don't give guidance and we're not giving any guidance from a market or from a cycle perspective, right, because basically, we're using the average margins from the last 10 years. But what we are guiding to is what we're actually going to accomplish and deliver around our new strategy in those 3 pillars. So over the immediate term, we expect to achieve $9 billion in mid-cycle EBITDA by 2025 and by 2027, $10 billion. And we expect cash conversion should remain at that historical average of 80%. And all this translates into a normalized EPS of $19 a share in 2025 and $23 a share in 2027 and we will achieve these results by evolving our portfolio to generate higher returns by focusing on growing and upgrading the core, building a leading and accretive Circular and Low Carbon Solutions business and transforming our culture, along with the delivery of our $750 million Value Enhancement Program. So let me highlight a few of the financial principles and assumptions that go into this modeling effort and that also, also support our strategy. So there were a couple of questions around capital expenditures. So for 2023, we're kind of at the low end of our expectations. So $1.6 billion is what we've guided to for the year. That's lower than what we had guided historically, but that's because of the completion of PO/TBA, but also we're in a difficult operating environment right now. So we've constrained our capital a little bit. So what we guided to on the fourth quarter call still holds, so it's $1.6 billion for this year. Now looking forward over the next 3 years, looking forward over the next 3 years, including our current year, the average should be about $2 billion, which is consistent with what we had given before around over the next couple of years. And then -- so $2 billion over the next 3 years with sustaining CapEx of about $1.2 billion over that period of time, $1.2 billion of sustaining CapEx. And then through 2027, we would expect to be below our historical high in any given year of $2.9 billion. Now for Yvonne's business, Circularity and Low Carbon Solutions, the capital intensity of that business is actually relatively low, relatively low, and it will consume about 15% of our capital budget looking out to 2027. And again, as you heard me say, we expect to return approximately 70% of our free cash flow to our shareholders, including extending our track record of growing our dividend. And so again, returning 70% of free cash flow has been modeled as well. And I'd say that we remain comfortable in managing the company with about $1 billion to $1.5 billion of cash on sheet. And I'm confident in our ability to maintain our investment-grade credit rating looking forward with a goal to keep net debt-to-EBITDA below 2.5x through the cycle. And I think all of these principles support our drive to reach $10 billion of EBITDA on a normalized basis by 2027. So here's the bridge. This is the EBITDA bridge. So this shows our 2025 and 2027 normalized EBITDA targets driven by the impacts of the 3 pillars of our new strategy. The first pillar, or the orange pillar, is growing and upgrading the core. This includes PO/TBA, which has just started up. That's fabulous news. It includes incremental volume from our Value Enhancement Program like creep capacity. It also includes our growth CapEx, or nonsustaining CapEx and then net M&A. And when I say net M&A, net of divestments. And all told, this totals $1.8 billion through 2027. The second pillar, or the green pillar, includes our Circularity and Low Carbon Solutions business and emission savings coming from various investments that we're making to reduce CO2. This contributes roughly $500 million through 2027 in total. And then looking out to 2030, I'm confident as the CFO that Yvonne's business has the potential or will -- excuse me, not potential, it will generate $1 billion or more of EBITDA. And then thirdly, or the pink pillar, I think that's pink, is stepping up performance and culture. And this includes our Value Enhancement Program related to cost and margin projects. It includes our Customer And Commercial Excellence program and the APS improvements that Torkel took us through earlier this morning. And again, this represents about $700 million of improvement through 2027. And so taken together, taken together, this represents a 30% uplift in cash from operations, EPS improvement of over 80% or $23 a share in 2027 and again, all modeled on historical margins and historical operating rates. So in closing, I'm confident in our strategy and our ability to drive differential growth and value creation. I'm confident in our continued delivery of strong cash generation and maintaining our investment-grade balance sheet. And make no mistake, this new strategy will continue to be grounded in continued disciplined financial principles and policies and capital allocation priorities that will drive significant shareholder returns. And then finally, all of this is supported by an evolving culture, focused on unlocking significant opportunities across the portfolio with a focus on value creation. So really great to spend time with you all today. And thank you for your interest in LyondellBasell. And with that, I'm going to bring Peter back to the stage for a few closing comments and then Q&A.

Thank you, Michael. And before we go to a Q&A, again, let me wrap it up. I'm very confident that, as you have seen, this team has developed a strategy. This is not a strategy that has been developed by 1 person. The team will develop -- that has developed the strategy has asked continuously, now what's different? How will we as a company outperform our peers? How will we deliver superior results? And of course, you may say, yes, but you're not the first management team to ask all those questions. But I'm extremely confident that based upon the 3 pillars that we have, the focus that we have, the framework that we have set ourselves, that we will be able to execute this strategy and deliver that $3 billion improvement in terms of our normalized EBITDA by 2027. Remember, growing and upgrading our core, be clear about what our core is, grow it, upgrade it, deliver nearly $2 billion in normalized EBITDA. Secondly, the initial contributions because we have just started on building up the Circular and Low Carbon Solutions business with a bit more than $0.5 billion. And third, stepping up our performance and culture. That initiative, again, starting, part of our DNA, $700 million in that time frame. So all of that will be enabled by our Value Enhancement Program where we have our people, as you heard, that are very excited about the opportunities that we have. Initiatives that were not just there in the next year or the year after the next year, initiatives, they are actively working on them as we speak. And that will deliver $750 million already exit run rate 2025. Now we concluded what sets our strategy apart are 3 things. First is our focus. We know and we grow our strengths. We reallocate resources. You heard a couple of examples to where we believe we have leading positions in the market and we will strengthen those positions in the market. So our focus number one. Number two, our scale. Impactful moves that are enabled by our global reach. We're one of the top chemical companies. We have the people that can do it. They've proven it in the past. You see our PO/TBA plants up and running. We said it's going to be up and running by the end of this month. It's up and running. Leading positions that we have and our advanced technology position, I hope you're convinced about the fact, I mean, how important that technology position is to continue to create value, not once but twice, and it would add 3 times. And urgently moving forward simultaneously, we can do this. We've flattened the organization. You've seen the Executive Committee. There's clear accountability, clear P&L responsibilities, ownership. We've reduced, I mean, the delegation of authorities in such a way that people have more line of sight management. Actually, it's increased the delegation of authority. So we're urgently moving forward simultaneously and globally so we're not waiting to build up the future. We are building up the future. So you've heard I mean from our experienced and diverse team that is empowered and accountable also to win in these markets. Cost position, global scale, investment-grade balance sheets that will all help I mean to meet our goals. And let there be no doubt, what we have as our heritage, we will treasure and continue to work on it. We will transform our industry. We will be a value-creating ESG leader in our industry and we will maintain a very disciplined, we're at the hip, Michael, on this, a very disciplined capital allocation to position LyondellBasell for the future and for great shareholder returns. So with this, I think we're ready for a second Q&A. Thank you very much.

So before we get underway, I just want to acknowledge the extended IR team. First of all, Alex Gumbert, who we borrowed from our communications group. She did everything from the video, the webcast to the M&Ms and did a fantastic job. We have Anna Cheng over on the side from the Investor Relations group. We were able to borrow Jen Clark from our strategy group and Nicki Hubatch, is again a part of the core Investor Relations group.

I just want to prove -- I just want to prove that we are getting questions from the webcast. So I'll take one from Arun Viswanathan at RBC. He actually has a 5-part question, but I'll take 1. Can you discuss why the plastics industry has not yet developed material scale in molecular and advanced recycling in the past and why the industry and LyondellBasell will be successful in the future?

Well, it's a very good question, of course. Who wants to give it a chance. Ken, Yvonne? Yvonne?

Sure. Indeed, advanced recycling of [indiscernible] is not a new technology in the past. I think what has been driving the momentum for this market is really the demand. So before, it wasn't there. It wasn't there based on plastic waste, if at all. 10 years ago, it was there for renewable fuels.

So let's go to the audience. Alex, how about this gentleman in the front? Dave.

Thank you. Dave Begleiter, Deutsche Bank. Just on the circuling portfolio, what are the price premiums you're getting today? And what types of premiums are you expecting or forecasting going forward?

Let me be clear, David. We're not talking about price premium. What we are talking about, and that's the reason why we have also set up the strategic business units with a full P&L responsibility, this is a separate market. It's a market that will have its own supply and demand. It will have its own price point. It's value-based pricing. This is not what you can compare to a classical O&P business. So you hear other people talk about price premiums, I know, yes. We sincerely disagree with that. We believe this market is setting its own benchmark, it's setting its own, I mean, value creation. And as Yvonne said, I mean, it is substantial. And actually, if you look at her numbers that she had in her business plan, she also said it. I mean it's rather conservative the way how we look at it. I personally believe, I mean that the opportunity that is there because it's all going to be about who brings the supply to the markets and who can ramp it up fast. Therefore, that scale, I think, I mean, the opportunity is huge that we have.

And if I may add, it's really a different operating model. It's not based on master or LPGs. It's based on waste, plastic waste. It has its own dynamics. It's completely different price.

Go back to the first -- yes, go ahead, Michael.

Attractive margins, lower capital intensity -- capital -- and then, therefore, very attractive returns.

And I go back, I mean to the first question there as well. I've been also in this industry since more than 30 years. I've never seen an inflection point that the willingness to pay was there. I've mentioned it as well, and you heard some examples and testimonies and so on. I've met so many customers, brand owners, OEMs, one of the biggest converters and we had a meeting together, I mean with biggest converter in the world. It was not about price. It was about, can you get me the products? Can you get me the entire family of products, depending on the different demands that I have. So this broadness of the circle and family. In addition to that, can you get it quality? Can you guarantee me the supply? So it's not in and out and in and out. And can you scale it up because -- so it was about the value. It was not -- the discussions are not about a premium or about a price; it's about the value.

And can we please accelerate urgently?

Yes, definitely.

Alex, the gentleman right in front of you there.

Chris Willis from Exothermic Global. I have 2 quick questions. One, pretty straightforward. Can you just comment on what the operating rates are of your 3 major divisions currently, just sort of the average operating rate in North America, EAI and I&D? And then second, I realize it's a complex world. But if you look at your normalized EBITDA over the last 6, 7, 10 years, there's about $1.2 billion coming out of Europe. Can you just walk us through some sort of path of how we're going to get back there? I realize it's a highly volatile unusual situation, but just any thoughts about the European situation looking forward?

Yes. You know that we have been very disciplined. I mean, for example, like Q4 last year in -- I mean, because of that sudden move, I mean, in the market with all the different things that were happening. So we reduced, I mean, the operating rates. And then in the earnings calls, we gave guidance on that for that quarter. We just did the same also when we closed, I mean, in the year 2022. And so also, we talk about, on average, approximately, I mean 80% of operating rates, but happy. I mean, Ken?

Yes. So specifically for North America, we're operating our assets around the mid-80s right now. And just for Europe, interestingly, we're actually operating around that same level because we've got the Berre, France cracker back online, and we are short of ethylene in the European market. So we -- there's margin in the cracker. So we like to run our crackers differential. Today, in China, we're still operating at 80%. That's really the minimum that we can run that asset at and I would say you're looking at operating rates in the industry in China that's in that same range, still quite challenging there.

And, Kim?

I would say, for Intermediates & Derivatives, it's between 75% and 80%, and it's really the difference is not so much regional as co-product. So obviously, we're running our PO/TBA assets to produce oxyfuels at very high rates, almost 100%. And where we've got our PO/SM assets at a slightly lower rate because we really don't need a lot of styrene right now.

And, Michael, on the second question, do you want to answer that?

Yes, can you remind me what it was? Oh. My point of view on Europe. Sure, I'm happy to give the finance perspective. So I mean, listen, last year, Europe was kind of dealt a double whammy, both from a demand perspective and then massive, massive energy inflation. And so I think systemically going forward, energy cost in Europe is probably going to be higher for longer, nothing like we experienced last year. And I'll let my business people give a few comments as well. I mean, generally speaking, our European portfolio is pretty well placed from a competitive point of view. And we see that business both from an O&P perspective and I&D and APS as having good earnings potential going forward.

I'll just add though, I mean, it was a perfect storm for Europe last year between lower demand, higher energy costs, higher feedstock costs, supply chain issues, you name it. It was the lowest result that we've seen in over a decade. But like I said earlier, the team did a really good job managing through that and passing through a lot of those costs to the market. And frankly, we're seeing improvement this year because we're getting some tailwinds with the reduction in -- especially in the energy costs.

Okay. Another question from the web from [ Melissa Braun at PDM ]. Could you provide more color around the change in your leverage target from 1.5 to 2x gross debt to EBITDA to less than 2.5 net?

Yes. There's no big mystery. I think it's just a simpler and more effective way to communicate what our targets are.

Right. Stella, I think there were some questions in the front row on this side.

Matt Skowronski, Credit Suisse. A few you mentioned there will be additions and subtractions from the current Lyondell portfolio. What guides your thought process when disposing of an asset? Do you look at supply/demand, feedstock advantage or lack thereof, CO2 footprint or something else?

Well, we go back, I mean, to the criteria that I mentioned. Remember this morning, in my presentation, the set of criteria, and then we gave a couple of examples. I mean, the obvious one, I mean, on the refinery in Houston, PP in Australia and actually, also what Kim mentioned, the decision that we have taken to look for strategic opportunities for the ethylene oxide and derivatives business. So our guiding principle is looking at those criteria.

Sabrina, I think there's a question on the back corner there.

It's Vincent Andrews from Morgan Stanley. Peter, I wonder if you can talk a little bit more about within the circular aspect of the portfolio, do you think there's an opportunity to have contract-type structures with customers or co-investment, long-term take-or-pay, automatic cost pass-through, something that will really crystallize what you're saying about it being a different market with value-based pricing versus just a premium or a discount? Is that opportunity available to you?

Yes. I mean, of course, we don't exclude, I mean, these opportunities. But on the other hand side, I must say, I mean, this is a market where actually the demand is there. So it's about bringing the supply, I mean to the market. And as it is normally, I mean, in value-based pricing, you need to be extremely careful that you don't lock in, I mean, a business where the price point can still move as demand is huge. So I never say no. Yes? I mean, Yvonne is running the business, of course. I never say no, but I think it is very, very important that we are, first of all, focusing our attention on building up our hubs, the big hubs that Yvonne was talking about. What we did not talk about so much today is, of course, apart from the big hubs, we are looking at also building up some smaller hubs. That's the focus. We need to bring that supply to the market.

And just as a follow-up, is there any M&A you need to do within the circularity platform or anything you need to bring in from the outside?

Well, you have seen that our operating model is -- and that's another reason, I mean, that we have built up a separate business unit and you have heard, I mean, from the examples that Yvonne gave is we are extremely agile. There was no one concept fits all. It's not just, I mean, we invest in organically and build this all up on our own. We look at where do we find partnerships that can actually accelerate how we bring these products, I mean, the range of products I mean to the marketplace.

Correct, it will be mixed.

Stella, I think we had some more questions in the front row here.

Matthew Blair from Tudor, Pickering. Peter, my experience covering you when you were at Neste, really showed that you were able to unlock new markets. And as a result, Neste traded at pretty considerable valuation premiums. Is that part of your value creation for Lyondell? Do you think about that, that expanding the multiple is part of the long-term value creation here?

Well, I personally, I mean, I always believe of line of sight management, looking outside in. So first of all, what are the requirements that the customers, the value chains, but not just your immediate customer, but also the different players along the value chain have. And what kind of value proposition do we need to offer them. And if you're clear about your value propositions, then, as a consequence, you're going to develop your operating model. And that's where we made big changes also. Look at the APS business. If you look at what our customers are requiring from us, well, that's a different value proposition than in Ken's business or in Kim's business. So we articulated those value propositions and said, look, our operating model needs to be different. And that's why we run this business now, I would say, very much at arm's length compared to the integrated way because that's how you start structuring then your end-to-end processes in the company. The same is also when we looked at the Circular and Low Carbon Solutions business. We looked at the outside in and not say, you know what, we're going to do it the same way like we have run, I mean, an O&P business or an I&D business because it is a different market. That's why I'm continuously reinforcing that message. It's not a premium. Yes? It's a separate market that is being developed, and it will be a separate market for a long, long, long time, probably going to be retired until we're going to see that change. And it's a huge opportunity. So those value propositions leading to business models that we have to our operating model, and that's why we have a separate line of sight management, clear accountability, own team. We're hiring people that know the value chain in Yvonne's area.

Different competencies.

They come, I mean, out of the white goods business out of the automotive industry, out of the packaging industry, different -- I mean different positions they had along the value chain. That's what makes a difference. Talk the language of the value chain of our customers and capture value by doing so.

Stella, another question from our very shy front row here.

John McNulty, BMO. So a question around accountability and management compensation and the incentives. Do you need to change anything that's in place currently with regard to how people hit their targets, both on the financial ones, but also on the circularity in ESG? Can you walk us through that?

Yes. I mean we did already do a change. And one change is on the short-term incentive. We used to have costs as part of the criteria in the short-term incentive. We already had sustainability before I came on board in the short-term incentive based upon sustainability, based upon clear targets, which is more project driven because it's the beginning. Now in terms of the change that we made from last year on the STI to this year, we agreed with the Board that we would move, I mean, from cost to value. So what we have seen, I mean, is -- and I explained that all the years where we had that cost target in the STI, I mean, we over-delivered on the cost targets. So this is an extremely disciplined organization. You put the STI in place. I mean, you make sure, I mean, that people are going to make sure that you don't reach, I mean, 100% on the cost target, but you reach 180% or even above that with, of course, I mean, what we explained to eventually value that is staying there and is that not being captured. So that is an important change that we have made. And then, of course, during the course of 2023, we will then further evaluate how the short-term and long-term incentives do fit because it needs to be fit to purpose, I mean, how we are implementing, I mean, our strategy.

Can I just add to that? So another change that we made is with the organizational change. The award units now are aligned so the manufacturing and business are in the same award unit. We used to be functionally organized, right? So now we're all in the same team, and we're going to deliver the $750 million together, right? So that is -- within the company, that's probably going to drive that culture change pretty significantly.

Yes. That's a very important point. I mean what you highlight, and this is in all the businesses because it's line of sight management, clear accountability, P&L responsibility, manufacturing reporting into the businesses. And as such, of course, a consequence is the award units. The targets were clearly set, much more business targets that we have now compared to the past.

Alex, we have a question in the middle.

Matthew DeYoe from Bank of America. I guess, 2 separate questions. One, how would you think about the guidepost decisions on the pace at which you roll out MoReTec? Does a underperforming European business accelerate it? Is it all demand call? Is it a commitment to annual CapEx spend? Like how should we think about the way you -- the pace you're going to roll it out? And then secondarily, so you paid a special dividend last year, and you haven't done it in some time, but it's not your first. So when you look at the CapEx -- or I should say, the return of cash, I mean, what's the opinion of the Board and the management on the efficacy of buyback versus special dividend going forward?

Yes. First question, as fast as we can. Yes. That's -- I mean, the business case is there. You heard it from Yvonne. So the discussions that we have, I mean, intensively in the Executive Committee was, I mean, how fast can we bring MoReTec and scale it up?

And have then 2 integrated hubs.

Yes, so we talked about, I mean, MoReTec in the context of the Cologne hub, but we alluded also in the context of the Houston hub. So 2 regions. So that's important. And secondly, I mean, Michael talked about it last year, I mean that we took the decision apart from continuing to do certain buybacks, that we also leveraged upon continue to increase our dividend, plus also then we have the extra dividend. So the way we look at it is we're not now saying, okay, this is going to be always the case, I mean, that we have a special dividend. Definitely, I mean, we want to -- I would be the last one to say, I mean, I'm going to discontinue that very impressive track record of 12 consecutive years and increasing, I mean, dividends. So I think that message, we're also close at the hip there, Michael, isn't it?

Yes. I mean what I -- let me make a couple of comments.

Yes.

I'd say when it comes to capital allocation, and specifically kind of thinking through buybacks versus specials and the like, it's as much art as it is science. I think going back last year, I think the timing of that special was almost perfect kind of given the broader market backdrop and kind of where our share price was. And so it's kind of hard to give you a predictive model as to when we're going to do specials versus when we're going to do buybacks. I mean obviously, the amount of cash we have and where our share price is and our point of view, on long-term value matters. Now from a modeling perspective, what we've showed you today was growing our recurring dividend. And as part of that 70% and the balance, all going to repurchase activities, that's from a modeling perspective. It could be different. So we could do a special. But again, it's as much art as it is science and will be very dependent upon kind of what the overall market backdrop looks like and our share price. And we had vigorous debate at the Board.

Absolutely, yes. And special is special, no? It's not a dividend.

I think we have time for one more one-part question from the gentleman with a microphone.

Nothing like pressure, Dave. Kevin McCarthy, Vertical Research Partners. My sole question is on propylene. You're very clear today that you don't intend to build another ethylene cracker. However, in the past, I think Lyondell has talked about some on-purpose propylene of perhaps 400 kilotons a year with a final investment decision by the end of this year. So my one question would be, is that still on the table? And if not, how would you plan to manage your short position in propylene that seems to be growing with the PO/TBA start-up and the future refinery exit?

It's a good question. I mean, I'm going to give a short answer, and then I'll give it to Ken. We talked about not building on our own steam cracker. So the project that we have and that we are continuously progressing upon is, of course, not off the table that doesn't fill -- fit into that box. I mean, grow and upgrade the core.

Yes, look, we've got technology Flex technology to be able to produce propylene from ethylene, Aaron, who's sitting right in front of you is -- that's part of his portfolio, and we're going to continue to progress that project. We've got a lot of knowledge about how to do this in the past and create a lot of value, and it's going to continue to progress, and we'll make a decision at the end of the year.

And we're long ethylene.

And we're long ethylene.

In the US.

Great. Well, thank you all for joining us. We appreciate the folks on the webcast for sitting with us [indiscernible] room. I think there's several of you or most of you have table numbers on your tags. We're going to go upstairs to the seventh floor for some brief lunch, and you'll have more opportunity to talk with the management team. So thank you again.