Yara International ASA (YAR) Earnings Call Transcript & Summary

Good morning from Oslo, everyone. My name is Hilde Steinfeld, and I am the Communications Director in Yara Clean Ammonia. It is with great pleasure, I welcome you to the Capital Markets Day for Yara Clean Ammonia. We've been looking forward to this day, and are really excited about getting started. Today's event is split in 2 parts, and it will last for a total of 3 hours. Firstly, we will make a deep dive into Yara Clean Ammonia's business and strategy which will be presented by the management in Yara Clean Ammonia. And it will last until approximately 11:15. Secondly, there's a question-and-answer session. That is scheduled to last until 12:00. Please note that questions can be submitted online underneath the webcast window. And we encourage you to submit questions as we go along in the presentation. Today's presentation is an abbreviated version of the full material. Both presentations are available on Yara's website, and you can download them from the menu item called Investor Relations. Before we kick off the presentation, I would like to welcome Lars Rosaeg on stage to give a few preliminary works on behalf of Yara. Lars is the Executive Vice President, Corporate Development and Deputy CEO in Yara.

Thank you so much, Hilde. Good morning, good afternoon, everybody, depending on where you dialed in from. Today, we are proud to host Yara Clean Ammonia or YCA's first Capital Markets Day. It will be a packed 3-hour event with a lot of interesting material, so I will try to be brief, leaving as much time as possible for Magnus and the team to cover YCA's exciting story in more details, as well as any questions that you may have. I want, however, to touch on 3 points in relation to our earlier announcement on 4th of May that Yara is evaluating a potential IPO of YCA on the Oslo Stock Exchange. First, I'd like to echo what we said in May regarding the rationale for evaluating a potential IPO and what this could achieve for both Yara and YCA. A potential IPO would raise capital to accelerate the growth of YCA, visualize the value of the business better and support increased management focus for both YCA and Yara. I think this provides some helpful context to bear in mind during the Capital Markets Day presentation. Second, I just want to make it clear that Yara provides no further update on the evaluation of a potential IPO of YCA as part of today's Capital Markets Day. We're still in the evaluation phase. As such, no decision has yet been made to proceed with the potential IPO. Third, I'd like to conclude by reiterating that YCA remains core to Yara's strategy, and Yara will continue to provide long-term backing to YCA as its majority owner and preferred partner. As you will see during the presentation, Yara and YCA are important to each other, supporting synergies for both companies. And going forward, YCA will retain its interconnected and integral role in handling all ammonia from Yara's production system in order to optimize ammonia flows to and from Yara plants. I am now pleased to hand over the word to Magnus and the team, and I sincerely hope that you will enjoy what I'm sure will be an insightful event. Magnus?

Thanks, Lars. I'm very pleased to stand here for the first inaugural Capital Markets Day for Yara Clean Ammonia . Ammonia is heading up as a significant growth opportunity worldwide, particularly given its role and possibility to decarbonize hard-to-abate industries in a lot of different sectors that are today struggling to decarbonize. And Yara Clean Ammonia with its unique business model, integrated across the value chain from production through downstream has specific and unique competitive edges to take part of the massive growth opportunity that ammonia represents going forward. What we will present to you today are the competitive edges of Yara Clean Ammonia and why we believe that this specifically is a great opportunity for us, and not least, how we believe that we will leverage our competitive edges in our existing business model take part of the significant growth opportunity that we have ahead of us. And with me today, I have a selection of our team who will join us in presenting. I've Hallgeir Storvik, our CFO; I have Joacim Christiansen, Corporate Development and M&A.; Murali Srinivasan, Commercial, who will be joining from a prerecorded speech; Lise Winther, Projects and Technology; and Csaba László, VP, Ammonia Sales and Logistics out of Geneva. And I myself, Magnus Ankarstrand, I'm heading up Yara Clean Ammonia. I've been doing that for the last 1.5 years since we established it as a separate segment in Yara. And prior to that, I've been managing our activities in North America and been a total of 10 years in Yara focusing a lot on ammonia all through my career in Yara. And starting out with the company in Yara Clean Ammonia and what it is today, Yara Clean Ammonia is the #1 leading global platform for ammonia distribution. We base that on an existing business model with Yara, where we are the sole off-taker and sole supplier of ammonia to Yara, which also enable us to build a significant platform for global distribution of ammonia with a 20% market share and roughly 4 million tonnes of ammonia that we handle every year. This platform has a significant opportunity. It's been established this way for quite a while. It's a long-term entity within Yara in its own right. And that means that our track record and EBITDA and business model is long-term tested and proven as a setup that has specific competitive edges that fit very well the opportunity that lies ahead of us. With our global midstream platform, our vessels are accessed to terminals. We are very well positioned to capture the massive growth opportunity that clean ammonia represents going forward. And to be a bit more specific about our business model and what we are, it's important to highlight that the strength of Yara Clean Ammonia is our integrated business model where we start out with our #1 worldwide global midstream platform. That connects very well with upstream backing from Yara, as well as a very strong position in the downstream markets for ammonia. And this integration across the value chain is a core competitive edge that we represent. As you can see from this slide, we have highlighted what is the part of Yara Clean Ammonia and what is a part of Yara. And today, as mentioned, Yara Clean Ammonia represents 4 million tonnes of volume annually run on 12 specialized vessels. In addition, we base our current business model on an evergreen supply and offtake agreement with Yara, which is the model that we've operated within for decades. And it means that Yara Clean Ammonia has the exclusive offtake of ammonia from Yara's plants and is the exclusive supplier of ammonia to Yara's plants. And this provides us with a significant baseload and scale in our business model. And on top of that, that enables us to source volumes from third-party sources, as well as sell ammonia to third-party customers. It also gives us exclusive access to 18 Yara terminals worldwide, which is the core strength of our business model. And with this integration, Yara Clean Ammonia is integrated across the value chain in a unique setup that gives us scale and flexibility without owning the gray ammonia production plants today -- without owning the terminals today, but accessing it in a way that gives us that global scale. Going forward, this is the business model that we will scale up and leverage to capture the growth from the new ammonia applications and new ammonia user segments. And this is a unique opportunity in the sense that we can scale our existing model. We do not require any significant business model innovation or technology innovation, but we can scale up what we already have in line with the market. Going forward, as is shown on the lower end of this slide, in terms of scaling up the midstream platform, we will basically expand what we already do today. But also, we will need new molecules to fuel the growth that we believe will come on the downstream side. And for that, Yara Clean Ammonia will invest in new clean upstream production both on our own balance sheet in addition to being an attractive offtaker of third-party produced clean ammonia. And we will work and are working with all the new segments that look into using ammonia as a clean fuel, as well as we will continue to sell ammonia to Yara and clean ammonia into clean fertilizer sales. And all in all, this business model, we believe, is specifically well suited to capture the growth ahead of us. And importantly, our business model integrates the operations across the value chain. And this is more than just a shipping company, and it's more than just shipping ammonia from A to B. The core part of what we do and the core success factors and competitive edges we have really come from the optimization of that ammonia value chain, which entails both sourcing, transportation, but also operations and inventory management, sales and delivery. And that's vital in a market that has not -- that does not have a lot of liquidity and it's vital for a market in a very specialized product with specialized infrastructure. And our ability to be flexible and our global scale in this market is our core competitive edge. And that also positions us uniquely to grow in a market that is expected to add new production plants and add a lot of new customer segments that will require significant scale and flexibility to handle both the physical volatility as well as the financial volatility that comes from such a market. And later today, Csaba and Murali will talk more about how we operate this today and how we plan to operate that in the future. And our business is quite simple. It consists of our Ammonia Sales & Logistics segments, which today makes up what we call ASL1 which is our first segment, which is essentially our existing business, the 4 million tonnes of ammonia. In addition, we have established a new segment that we call ASL 2, which will incorporate the new market segments for ammonia. And these Ammonia Sales & Logistics segments really represent a volume multiplied with margin business. And our third segment, Clean Ammonia Projects and Production will be the one that will provide us with the new ammonia, the new clean ammonia to fuel the growth, which will be a matter of ensuring to pick the best projects and ensuring a good return on the capital employed. And it's 1 product, 3 segments, and it's a very straightforward and transparent business model. In addition to that, the integration with Yara is essential. And as mentioned, the evergreen supply and offtake agreement is a pivotal part of our current scale. And this is a setup that we've operated for years. It's very transparent. And it's based on transferring ammonia on market terms and market references, which provides both a long history of profitable performance, as well as a business model that's been tested and proven in many different market scenarios. In addition to that, when it comes to project development, Yara Clean Ammonia will have the expertise to manage and lead a large-scale CapEx project within ammonia and clean ammonia development, but we will also rely on the scale of Yara and the experience of Yara when it comes to ammonia plant project development. And Yara has a strong track record in building ammonia plants. Our latest plant was built in 2018 in Freeport. And in addition to that, we will then leverage on the scale of the different disciplines that you need to -- for project development, such as engineering, such as contract management, et cetera. And finally, we will also base ourselves on support from Yara on corporate services, such as accounting, HR, et cetera, which provides us with scale and provides us with the ability not having to build those resources on our own. So all in all, our relationship with Yara is well established, and it provides us scale and security for the future. Importantly as well, Yara Clean Ammonia is positioned to become a key enabler of the energy transitions. And some examples of that, our portfolio that we plan for has the ability to remove 3 million tonnes of Yara's existing greenhouse gas emissions. But also importantly, it has the ability to remove up to 70% of our customers' greenhouse gas emissions. And this is obviously a very important value proposition that Yara Clean Ammonia offers, both to Yara, but certainly also to our prospective customers in the new market segments. So the key highlights of what we are and what we offer and what we want to become really summarized in this slide. And clean ammonia, which we will talk about in a second, represents a massive opportunity for growth. driven by the need to decarbonize hard-to-abate sectors. And this comes on top of our base load of conventional ammonia. In addition, the dynamics of the market and the way that we believe it will develop are very supportive to what's the core competitive edge of Yara Clean Ammonia, and that's essentially to handle the complexity of a specialized market. And we have the #1 global midstream platform to handle that. In addition, that enables us to choose and pick the best projects for upstream development, given that we are present all over the world, we have the whole world as a stage when it comes to choosing the best project. And we also have the flexibility in our system and in our integrated business model to incorporate both projects that we do on our own as well as being a credible offtaker from third-party projects. The business model that we present is tested and proven over time, and is profitable. But perhaps most importantly, in a growth perspective, it is very scalable. We can scale up our business model in line with the market growth, and we can incorporate a lot of growth in our existing model as well. And finally, our organization is experienced. It's performance oriented. We've been focused on ammonia for almost 100 years. And we have significant experience both commercially, operationally and also from a safety perspective that makes Yara Clean Ammonia uniquely positioned to fuel the growth and to develop the markets that are needed to enable this massive energy transition that ammonia represents. Diving a bit more into the market opportunity, and I will start out with a general overview and then will hand over to Joacim, who will present a little bit more detail on what we see going forward. Clean ammonia represents a massive opportunity for growth. And it's primarily driven by the 4 segments you see on the lower end of this slide. The shipping fuel market which can represent up to $87 billion revenue in 2050, very much driven by the need for the shipping industry to decarbonize and ammonia as a shipping fuel, is uniquely positioned in the sense that ammonia contains more than 1.5x as much energy as hydrogen. It is easier to handle -- it is -- and importantly, there is a global infrastructure to handle ammonia already today. And all of this makes ammonia a very good fit and the most promising clean fuel that does not emit any CO2 for the shipping industry today. And of course, the shipping industry, very much driven by the IMO targets to reduce 50% of CO2 emissions by 2050. And the clock is ticking because 2050 in a vessel investment perspective is relevant already now. Secondly, is the power generation market, which is to use ammonia as a fuel for electricity production, particularly relevant in countries like Japan, where renewable energy such as solar and wind is expensive and scarce and where the government has a very specific plan to implement ammonia as a part of the energy fuel mix. Finally -- or not finally, but thirdly, we also have the existing market, the fertilizer and industrial markets, which already consumes most of the ammonia being produced today. And also here, the decarbonization need is significant, driven by consumer demand, but also importantly driven by regulation, particularly in the EU, such as the European Trading Scheme, and the Carbon Border Adjustment Mechanism. All of this putting a cost on carbon and as such, putting a value on clean ammonia and clean fertilizer. And then finally, ammonia has the potential as the hydrogen carrier as well, the LNG of hydrogen, which we also feel can represent a significant opportunity in the future when technology for cracking ammonia back to hydrogen improves and energy efficiency improves in that segment. And all in all, we believe that this can represent a $220 billion market in 2050, which is roughly a tripling of the current market size. And this will be fueled by existing ammonia but importantly, by clean ammonia through blue ammonia and green ammonia. And the important part here is that these are technologies that are available today. And these are technologies that can be scaled today, which we'll touch upon later. And importantly, this puts ammonia ahead of a lot of other different technologies for decarbonization in the sense that the market and the logistics and the technology is very much present already. And the drivers for this are several, but importantly, of course, it's a regulatory environment. where, particularly in Europe, measures like CBAM, like ETS will drive the need and demand for clean fuel. But also supportive regulatory environment such as tax credits in the U.S. as an example, or other measures to support development projects are fueling the growth of clean ammonia. From a market perspective, we see that several market actors are requesting clean transportation, clean shipping, for instance, Amazon, IKEA and others, and that's also providing a significant pull for development of clean ammonia. Technology will be vital. There is a technology development need particularly in terms of making electrolyzers more efficient. But here, ammonia, as mentioned, has the advantage that quite a lot is done already. And then finally, infrastructure is required. But this is probably the most competitive part of ammonia that the infrastructure exists today, and it is worldwide, and it can be scaled. From a production perspective, ammonia is also very much ready to tackle this transition. Essentially, there are 2 ways of achieving clean ammonia and taking away the CO2 emissions from the ammonia production. An ammonia plant basically consists of 2 parts, the front end where natural gas today is cracked into hydrogen and CO2, and then the hydrogen and the nitrogen is combined to ammonia in the synthesis loop, the second part of the plan. And this means that a significant portion of the CO2, roughly 2/3, is already captured in the production today. And this is, of course, important because that reduces the capture cost of CCS significantly, and you only need to compress the CO2 and store it which makes CCS for ammonia and blue ammonia very competitive. And for future plans, ATR technology is the most likely technology to be used, which will enable capturing more than 90% of the CO2 as an integral part of the process. From a green ammonia perspective, that would entail to take away the front end of the plant and replace the SMR with electrolyzers using renewable energy, to split water into hydrogen and oxygen and get the hydrogen in that way instead. In terms of technology development, that's technology that exists today but it is also a technology that requires development, both in terms of efficiency and also to reduce CapEx. But importantly, green ammonia and green hydrogen requires massive amounts of renewable electricity which is not easy to get today at the scale you need with a few exceptions. And this is also why our portfolio is very much tilted towards blue ammonia. As we see that blue ammonia is something that can be scaled fast and particularly in parts of the world such as the U.S. Gulf, blue ammonia projects are very competitive given the relatively affordable cost of storing the CO2, as well as the tax credits associated with that. And we will talk more about the project plan and the different models of projects that we have later. Touching a bit more onto the market details, we see that market studies, and this is a study done for us by Arkwright, indicates significant growth of ammonia. This is a 2050 picture illustrating that ammonia could grow to more than 400 million tonnes from the current 180 million tonnes by 2050, driven by the new applications. And as you can see, the shipping segment is a major part -- but also the Power segment here is quite significant because this represents 20 million tonnes on its own, which is equal to the entire traded market of ammonia today. And it is a market segment which is quite firm, particularly driven by the Japanese government's plan to introduce this into the fuel mix, but also other countries such as Germany are following suit. And we believe that long term, there will be a market for both green and blue ammonia. Eventually green both from a technology development perspective and availability of renewables catch-up. But we believe that there's a long-term need also in 2050 for blue ammonia to fuel this market. And importantly, for Yara Clean Ammonia, the way that the market is structured will also change materially going forward. Today, only 10% of the global market is traded, meaning that most of the ammonia that's being produced is consumed locally and upgraded to fertilizer in the same location. But in the future, we believe that this will change. And more than 50% of the market will be traded given the fact that customers will be in very different geographical positions than where production is today. And this is important for Yara Clean Ammonia because our core competitive edge is exactly to handle that part of the market. The ammonia market is very specialized and complex. It is not a very liquid market. You require specialized infrastructure. And this is the infrastructure that we have built and Yara has built over the years in a global context -- global position in ammonia. And this also -- this scale and flexibility enable us to handle volatility in this market in a very good way. We have flexibility with different vessel types, we have the flexibility to handle a lot of different situations in the market. And this is our core competitive edge, which is a very, very good match to the specificities of this market. And we believe that this challenge will grow even more in the future as new customer segments come along with strict delivery requirements and also projects will come up in different points in time. And we believe that for the foreseeable future, the complexity of the market will increase, and this will be a very, very good fit to Yara Clean Ammonia and our core competitive edges. And with that, I will hand over the word to Joacim Christiansen, who will take you a bit more into the details of the Yara Clean Ammonia or the clean ammonia market. Thank you.

Thank you very much, Magnus, and good morning, everyone. I'm Joacim Rød Christiansen. I've been with Yara for roughly 10 years, leading Yara's strategy and M&A activities and later various global business units. And since September, I had Corporate Development and M&A in Yara Clean Ammonia. And I will now go through these segments that Magnus mentioned and the drivers behind each of these, but also how they can develop over time. And as Magnus said, shipping fuel as the largest one and power generation as another one which represents a significant potential, but also one that is a bit more firm and potentially earlier than shipping fuel in terms of market development. The agricultural and industrial segments which I guess many of you know very well from before, which also provide a robust basis for the existing business of Yara Clean Ammonia and also going forward. And finally then, hydrogen carrier using ammonia to transport hydrogen has some more longer-term opportunity. So starting with shipping fuel, ammonia as a clean shipping fuel is expected to be a market of 182 million tonnes of ammonia in 2050. And this is a number that is equivalent to the total ammonia production in the world today. So a significant number for sure. And in shipping, the transition towards clean fuels is driven primarily by IMO regulations, but also regional and national regulations play a key role. And you see here the main segments driving that demand, which is long distance deep sea shipping. And that's where ammonia due to its high energy density and scalability is very well suited. In 2050, ammonia is expected to stand for roughly 24% of the total shipping fuel market. Meaning that Arkwright assumes that there will still be fossil fuels like MGO, LNG but also alternative clean fuels in the mix at this point in time. And this is mainly a newbuild market where dual fuel engines that can be run both on ammonia and fossil fuels or a mix are what is expected to be installed on the ships. And then also what we can then call the blend-in rate. So meaning how much you run that dual fuel engine on fossil fuel or ammonia plays into the demand development over time. It is also expected that this market will require a phase of proof of concepts and building comfort with ammonia as a solution before the market can start to reach scale towards the end of this decade. But still, with this limited proof-of-concept phase in start, the market is expected to be 3 million tonnes of clean ammonia in 2030 already. And 3 million tonnes is a significant number in itself, especially if you consider the total traded market for ammonia is today around 18 million tonnes globally. And as I mentioned, regulations are the main drivers behind clean fuels in shipping. And in particular, the IMO regulations. The IMO 2030 and 2050 targets play a key role. The IMO has set a target for 50% absolute reductions by 2050, but also the 40% intensity reduction target by [ per work leg ] , if you want, in shipping, are important. And if we look at the existing toolbox that shippers have available today consisting mainly of efficiency measures, this is expected to be able to deliver around 20% to 25% reductions in emissions in shipping. And if we then look at the intensity target of 40% in 2030, this toolbox will likely not be sufficient. And we need to start looking at clean fuels. And as we then move towards the 2050 and the 70% intensity reduction target, there is clearly no way around clean fuels. And also regional regulations can play a key role. A good example is the proposal to include shipping emissions in the EU ETS. And this proposal, which was agreed and put forward by the commission last week basically suggests to include 100% of the emissions from shipping in the EU already in 2024. It also includes 50% of emissions from routes outside EU, where this increases to 100% in 2027. And it's also quite strict in terms of scope of what ships are included. Now this proposal is being put forward for negotiations with the member states, and obviously, need to be ratified. But if this is implemented, it can play an important role in bridging part of the cost gap between fossil fuels and more costly clean fuels. So this is another important and supporting driver for clean fuels. If we then believe clean fuels will be required. The question then becomes which clean fuel should you bet on. Ammonia scores very favorable overall versus the typical alternative clean fuels, and in particular, within long-distance shipping. Ammonia has a high-energy density. It does not contain carbon. And due to this, it basically has 0 emission when being combusted. Ammonia is a scalable solution and the infrastructure is more or less in place. For example, we have Yara Clean Ammonia, and we have ammonia available worldwide today. And then finally, the engine technology is being tested with the first ships hitting the water in 2023 and 2024. E-methanol is a bit different. It contains carbon and will thus emit CO2 when combusted. And that also means that methanol naturally requires a sustainable or ideally net 0 source of carbon into the production of the product. This is expected to be costly and/or difficult to scale when you, especially sort of, think about the large scale of the shipping fuel market in total. Hydrogen is more similar to ammonia in the sense that it doesn't contain carbon, but hydrogen has a lower energy density and is more complex to handle, which makes it less suitable for long-distance shipping. Also, hydrogen infrastructure is generally not available worldwide today. However, hydrogen can be a very good solution for more near-shore and shorter distance shipping segments such as ferries and so forth and some can also batteries. But for deep sea shipping, ammonia is expected to be the preferred solution. And also from our perspective, it looks like the shipping industry is very much gravitating towards ammonia as the preferred solution. And the comment I typically get is that people say regulations are all fine. But what does the economics look like? And as I said, regulations and the need to comply with them and/or face penalties if we don't do play a key role. However, let's imagine a world where there is no regulations pushing clean fuels in shipping specifically. And then the question becomes what is the economics of running a ship on ammonia versus MGO or LNG. And if we then assume an oil price of, let's say, $80 per barrel, corresponding MGO price around $750 per tonne. And ammonia, blue ammonia, for example, produced at a cost of, let's say, $500, then basically, ammonia will be cost neutral to MGO at the CO2 price of around $200 to $250 per tonne of CO2. And this shows that depending on what you assume there are definitely scenarios here where ammonia can be competitive in fossil fuels on a pure cost basis without the IMO regulations as such. Another perspective is what the impact of a clean fuel is on the price of transport for a final end product. And if you take green ammonia at around double the cost of blue, for example, this basically translates into roughly $0.03 per , for example, a T-shirt. And for these $0.03, you basically get your green transport. So clean fuels are needed. Ammonia is expected to be the preferred solution. So when can ammonia be available in shipping? And there are 2 elements to this. First is the technology and the other is to fuel availability as such. On the technology side, the dual fuel engines are here. They're currently being tested by the engine manufacturers, such as MAN, Wartsila, and so forth. And the first pilot vessels are hitting the water in 2023, '24 and '25. The other important part of this is when the engine's maintenance services and all of this are available at scale, and that the yards are able to support this worldwide. And this is expected to happen around 2028, 2029. So not that far out. Fuel availability is not seen as a key issue for the adaptation of ammonia as such. And as I mentioned, ammonia is available worldwide today. The missing piece is really the last mile sort of bunkering solution to get the ammonia on board a ship. Over are here, we as YCA are working actively, and we will together with partners, have flexible and robust bunkering solutions in place in order to support the first vessels in 2023 and 2024 starting in Scandinavia, but also quite soon worldwide. And from the YCA side, we currently see a large interest in ammonia as a shipping fuel. We see it from shipowners, shippers, cargo owners and there's many ships which are being ordered and multiple proof of concepts ongoing. We are involved in many of these pilots where we work together with shipowners, engine manufacturers, classification companies, ports, authorities and so forth to make this proof of concepts a success and to build and position us for this initial demand. And we think this phase is very important as shipowners need to see this working in practice and they need to get that experience and comfort with ammonia before sort of the larger investment decisions are taking on a more fleet-wide level. And then that the market can start to scale towards the end of this decade. And the second very important market for Yara Clean Ammonia is the use of ammonia co-firing in coal-based power plants. This is a market that is expected to be 20 million tonnes in 2015 which might look small compared to the shipping numbers. But 20 million tonnes is more than the total traded ammonia market today, so a significant number in itself. It is also a market that is expected to be more firm earlier on and very much driven by the mandate and clear targets of the Japanese government. So why does ammonia in electricity production makes sense? Ammonia makes more sense in locations where you have unfavorable conditions for renewables, meaning both a high cost but also high intermittency of that production. And we also have a large share of coal-based power production. And ammonia then offers basically a simple and efficient solution to decarbonize existing coal plants. You basically substitute part or all of the coal and burn clean ammonia instead. And this basically gives 3 benefits. It allows to decarbonize the power generation, it allows for a continued use of these power plants, which might have a long remaining lifetime as well. And also very importantly, it enables decarbonized baseload capacity in the grid. And this baseload capacity can again enable more renewable capacity to be introduced into the grid. The base case here is based upon the clear mandate of the Japanese government to introduce ammonia in the energy mix in order to decarbonize power production and reach the national climate targets of Japan. This market is a key focus for us as we see that the action plan from the Japanese government is concrete. And we also see tenders for ammonia coming out these days. As YCA, we work very closely with the key players in Japan to enable this introduction, and we're well positioned to capture this opportunity. It is also indicated here an upside potential of 62 million tonnes in 2050, driven then by other countries than Japan which share similar characteristics as Japan. And such countries are, for example, South Korea, Taiwan, potentially Indonesia. But we also see now countries such as Germany looking at ammonia to decarbonize and diversify energy supply. So also a very important and interesting market for us. Then coming to the existing use of ammonia, which is mainly fertilizer and industrial use, also this segment is expected to grow and amount to 232 million tonnes in 2050. All of the growth is expected to come in the form of blue and green ammonia, and the results of conversion topic here where existing green ammonia production is converted into blue and green over time. And this market is, as Magnus said, driven by the food companies and consumers that demand sustainable and decarbonized food, but also regulations such as EU ETS and CBAM. And most of the new capacity is expected to be integrated sites where ammonia is upgraded into fertilizers at the site or if there is a conversion of an existing plant, also that ammonia then typically stays at the site. And this basically means that these volumes are not that relevant for YCA's midstream position as most of them will essentially not be shipped. On the marketing side, it will be Yara that develops these markets for clean fertilizers. And as such, YCA will not be active and not have a downstream or midstream margin related to these volumes as we essentially have an overall in marketing that. However, the robust outlook for this market supports the existing business of YCA, and it also provides a third strong leg for our upstream projects through Yara then developing these segments going forward. And then finally, the fourth growth segment, ammonia as a hydrogen carrier. This market is expected to be 36 million tonnes in 2050 but is also a market that is expected to take longer time until it reaches scale, and mainly be a market post 2030. The drivers behind this market opportunity is basically that ammonia is the best way to transport hydrogen and especially over long distances. The alternative is typically the pipelines, but this is not very feasible if you go above, let's say, 1,000 kilometers. So here, we then have basically regions with low cost of renewables, low cost of producing hydrogen. And examples of that could be Middle East, Australia and Chile, but also whether then is typically limited local demand for this electricity or hydrogen. What we basically do is that you take that hydrogen, produce ammonia, ship it and crack it back to hydrogen in the locations where there is a large demand. The main problem with this today is that this last part of the process where you crack ammonia back to hydrogen currently has high energy losses. And this means that it's better to use the ammonia in applications that can use ammonia as it is. For example, fertilizer, shipping fuel which we talked about, rather than converting it back to hydrogen. However, this cracking technology is expected to improve and is being worked on, and it's also expected that this will take some time. And that is basically what makes this an opportunity mostly post 2030. And this basically concludes the demand side of the market with 4 distinct segments of growth and where Yara Clean Ammonia has a pole position within all of these 4 segments. Then turning to the supply side, and how all of this new demand can be supplied with clean ammonia and the economics of such production. Blue ammonia, where we produce ammonia based on natural gas and capture and store the CO2 is what is expected to reach scale first. Green is more costly to produce initially, but the costs are expected to reduce over time. And then green volumes are expected to eventually surpass blue volumes. For blue ammonia, most of the conditions for economical and scalable production are already in place. Natural gas is available, the technology is mature and easy to scale, and in certain regions, such as the U.S., also the regulatory incentives are already in place for blue ammonia production today. On the other side, green ammonia is dependent on access to very large amounts of cheap renewables and ideally with 24/7 availability. And that is not so easy to find at scale today. Also the electrolyzer technology has not developed that much in the last 50 years, and there is massive technology development going on. And this is expected to improve the efficiency and reduce the costs over time. But with green having a much higher cost, it also means that significant state support or incentive mechanisms needs to be developed and put in place in order to have a profitable project on green ammonia today. However, as costs decline over time, green is the fully renewable option, and it is expected to play a major role in the future of the clean ammonia market. And then let's look at these costs and how they are expected to develop over time. Starting with gray, we see that the costs increase over time as carbon costs are expected to be imposed on gray ammonia production. Looking at blue ammonia, which has very limited CO2 emissions, we see that gray and blue is expected to be competitive on a pure cost basis between 2030 and 2035. And for the most competitive projects on blue ammonia, they can basically be in the money already now. Green ammonia is more costly currently, but the green costs are expected to decline as renewable electricity becomes more abundant, and we get higher load factors and cheaper electricity costs over time. And other drivers are in this development of the electrolyzer CapEx but also efficiency, which is expected to improve as the industry develops and scales. And all of these factors ultimately then leads to that the expected cost of green ammonia has reduced by roughly 50% by 2040 and then eventually becomes competitive with blue and gray ammonia. And given this picture, blue ammonia is expected to play a key role in enabling the energy transition. The reason for this is that many of these new segments like shipping and power will require a cost level and a scale that only blue ammonia can deliver. And then looking at the regional picture for blue ammonia production. On this slide, you basically have the natural gas costs on the Y-axis and the cost of storing CO2 on the X-axis. Then you basically see that North America stands out as a favorable location for blue ammonia production. Also regions such as Middle East and Australia has potential. But another element, specifically in the U.S., is the 45Q tax credit. The 45Q is implemented in law and it essentially gives you a tax credit of $50 per tonne of CO2 that is geologically stored, and you get that for 12 years. And this basically represents an incentive, which provides further support to blue ammonia production in the U.S. So then as we conclude the market outlook, there is 4 key messages I want to leave you with. First, the clean ammonia demand is expected to grow significantly and more than triple, providing excellent growth prospects for YCA. Second, demand is driven by 4 distinct segments, which all represent a sizable opportunity on their own and where Yara Clean Ammonia is well positioned and taking the lead to develop these new segments. Third, that the future market is expected to change from mostly a captive market to a traded market, lending itself very nicely to YCA's integrated midstream position. Our competitive edges and making us well positioned to capture attractive market shares in this market as it develops. Fourth, on the supply side, the existing market for ammonia is expected to remain robust, giving a good outlook for YCA's existing business. Blue ammonia production is scalable and can be profitable already now. U.S. stands out as a particularly attractive location. And blue ammonia is expected to play a key role in enabling the decarbonization of shipping and power due to it being lower cost and more scalable in the short term. And finally, green ammonia will become competitive over time and will be the long-term fully renewable option. And with that, we conclude the market outlook, and I give the word back to Magnus, and that will start taking us through the existing business of YCA.

Thank you, Joacim. So we will now dive into the business and a little bit more detail in terms of how it works today, and that will be presented by Csaba László, who heads our Geneva office, and Murali Srinivasan in the prerecorded session. I'll give a brief overview first. I think this picture is important because Yara Clean Ammonia today represents a global network of ammonia distribution. And as you can see from the map, we are present worldwide in all corners of the world. And this is very much based on our midstream platform, the 18 terminals that we've talked about and the vessels that we own and control ourselves. But is also very much fueled by the upstream integration with Yara with the evergreen supply agreement, which enables us to access the Yara production plant, as well as the supply to Yara's consuming plants. And the combination of this and external -- third-party sourcing and external sales, enable us to operate a scalable and very flexible global system of ammonia, and this is the core essence of our competitive edge and this is core to how we make money as a company. And importantly, it is core to how we plan to grow this to capture growth as ammonia markets accelerate. Giving a brief overview of the organization and how we structured, we operate a very lean organization today based on the significant asset base that we have. And it's basically put together by 3 main organizational pieces. We have the commercial part, who today takes care of the existing business, the supply optimization, the logistics and the sales, as well as market development in terms of new customer segments. Then we have our upstream projects and technology who has responsibility for developing the clean ammonia projects. So those are the blue and the green ammonia projects that Lise Winther will talk about later, where we have the core competence for the overall management of these projects, but where we also benefit from the scale of Yara's project organization and their long experience in developing ammonia plants. We also have significant focus on business development and scanning the market for projects, both in terms of a market intelligence perspective to understand the market, but also to evaluate potential candidates for offtake in the future. And importantly as well, we should highlight the certification and product management because certification is an area where we are quite advanced, and it's a critical part of clean ammonia in the sense that certifying the carbon footprint of the product obviously is essential to the value of the product. So all in all, this green organization, combined with the scale that we get from Yara makes this a very fit setup for the future. But to talk a little bit more about the current market and how it operates, I'll give the word over to Csaba, who's come up from Geneva, and will present how they operate the business from there.

Thank you, Magnus. Good morning. My name is Csaba László, I'm Head of Ammonia Sales & Logistics in Yara Clean Ammonia. I'm based in Geneva in Switzerland. And as for my background out of my 25 years in Yara, I spent and worked for 16 years in Geneva in Yara Switzerland, the last 5 years as Managing Director. This is a company, an international trading and procurement hub for Yara covering ammonia up to today and also various types of raw material sourcing for the group. So back to ammonia sales and logistics, this is part of the commercial function. And it covers all ammonia operations today. It's not only a platform for the future business development. But as you heard already, a #1 in global seaborne ammonia trade. It's a fully integrated midstream business. And what does that mean? We do have a large asset-backed network of ammonia supply. So sourcing is covered. We regularly call 15 to 20 ports to load products globally. We have a corresponding diverse customer base. This means another 20, 30 ports to discharge products in the world. And we have a network of storage tanks and the vessel fleet of 12 ammonia carriers to cover the supply chain. It's important to note that most market players rely usually on 2 of these pillars of integration. And usually, our regional players have a lower scale. Only few players have these 3 pillars. And it's Yara Clean Ammonia that stands out as the only one that has all these 3 players developed on a global scale each of them. And being diversified, that offers also a number of benefits. We can manage change in the most flexible way better than competition. It gives us superior planning opportunities and reap benefits of optimizing the supply chain, optimizing freight and save cost and also using our international network gives us opportunity to take advantage of also spot opportunities. I mentioned planning as well, which is key how to take out benefits of this synergy. Our business model is basically a worldwide network that connects regional market intelligence into a central planning and action hub. Each region, and you see in the central map, we have region Asia, Americas and Europe, and we have colleagues in Singapore and Tampa in addition to the Geneva office. So each region plans its own supply and demand and build its own range of impact around the offtake and the consumer points that we have in each region. And then we look at that together, and we will see also we have a view of how the global market development is going to look like and we decide and look at it on an annual basis and refresh what kind of position we want to take in the coming period in terms of long and short and what opportunities we want to use in terms of also using these regions and connecting them on a global scale. And what is exciting is that how it develops into an action plan into what we're going to do tomorrow. And that's the operational planning that answers that. We have an in-house software in which we have the inventory and stock level planned in the next 6 to 8 weeks and the routing of each vessel that we have with the cargo, with the dates of arrival and departure. That gives us the opportunity to have a worldwide overview of our next coming deliveries and also to help us manage the operational risks and see how we can take opportunities along the way. And that is the kind of business model that has proven also to be very attractive to suppliers and customers. This is the most important that they look into is predictable, reliable offtake and reliable supply. These are also large operations, fertilizer plants with excess ammonia for offtake, various chemical customers and fertilizer customers. On the other side, that also run robust operations on a 24/7 basis. So for them, reliability is key. Another very important aspect is that Yara Clean Ammonia has a very good track record of safe handling of ammonia. This is a very important aspect. Ammonia is a dangerous product. You need specified equipment onshore and offshore vessels, training for staff, and that's something that is challenging to develop overall. But Yara and Yara Clean Ammonia has done this in the past decades. So overall, this business model makes it very normal and very logical that a lot of customers and suppliers come to Yara Clean Ammonia to discuss their needs. I mentioned that we have a large asset-backed network of ammonia supply. Where does -- where is that a large proportion of the sourcing is coming from Yara Ammonia producers and joint venture partners that covers most of our need, our base load. It is in Australia, it is in the Americas, in Trinidad and United States and also in various parts in Europe. This kind of sourcing is covered by a long-term contract on market price or arm's length principles. The Yara contract is an evergreen agreement and also the joint venture agreements are long-term agreements that give us a very solid, very stable supply. And it's supplemented by third-party sourcing. The sourcing is mostly concentrated in the European region because this is where our large customer base exists. And these historically have been covered by 1 or 2-year contracts, but with much longer relationships with suppliers, sometimes also topped up by the spot opportunities in Americas or in Southeast Asia. Here, it's important to note as well that the sanctions that currently due to the Ukraine-Russian war impact our Russian suppliers. And also -- although good portion of the supplies came from Russia, the DSL team has managed well to perform all contracts and buy third-party volume from alternative sources. It needed for us to rearrange and diversify the third-party portfolio. I also said we have a corresponding diverse customer base. Here, you have a more even split between Yara customers and third-party customers. The Yara consumers are in Europe. It's about 10 plants that we regularly supply. And as I mentioned, this is the evergreen context that they are part of, together with the suppliers in one agreement. And this supply has really proven very stable and predictable over the past decades and very good coordination and cooperation with the plants. The third-party consumers are partly fertilizer companies, nitrogen or phosphate fertilizer producers and partly industrial chemical companies producing a wide range of different products, plastics, food additives, animal feed, rubber, various diverse materials. What they need is also predictable and long-term supply, which we cover also with a 1- or 2-year customer contracts that we'll negotiate on a regular basis. They are -- due to our geographical presence of offtake points, they are mostly located in Asia or in the American region. And coming back to also the supply chain, we have access, exclusive access to 18 terminals worldwide, which has a very large storage capacity. These are not only exclusive access, but also we have the task and an opportunity to manage the inventory levels ourselves. So instead of discussing every delivery date with customers and suppliers, we just decide based on our optimization software and based on the decision of the team, when we come and load, when we come and discharge, which again secures the optimization possibility. On the other hand, this is a network of terminals that are linked to production plants. So this is 18 production plants. It's a very difficult and costly task to reproduce this network. One thing, of course, that it's costly to build new terminals but also there's a number of environmental regulation and various other restrictions to build ammonia terminals. So this already gives a superior starting point for YCA. And also the expansion, in terms of brownfield expansions is more offering better opportunities than greenfield ammonia storage building. Another important element of the supply chain is the fleet. We have currently 12 vessels. Five of them owned by YCA, 2 midsize and 3 handysize carriers and 7 under time charter. The most important here is that this fleet, given the opportunity that we have on optimization is very value utilized. It's above 90% utilization, very often up to 95%. So it's basically fully running in our system. The composition of the fleet is more flexible. On the other hand, it is the management team that decides and regulates or evaluates on a continuous basis what should be the composition of this, which part of the fleet we could own or which could be time chartered long term or short term with the main purpose to create value overall and secure competitive freight long term for the operation. So with that, I conclude to describe the main pillars of the business. And in a recorded message my colleague, Murali, will describe a bit more about the business model and the competitive landscape.

Thank you, and good morning. I'm here to describe Yara Clean Ammonia's business model, which is resilient, scalable and profitable. A combination of our fully integrated platform along with scale factors puts us in a very good position to profitably grow in the future in the new markets. If we were to look at our integrated platform, we have from an offtake -- from a volume perspective, we have a stable volume portfolio, which means that historically, for the past 10 years or so, we have been moving around 4 million tonnes of ammonia by deep sea. We have offtake agreements both from Yara and Yara's JVs and also from third-party suppliers. And we also have corresponding sales contracts with some customers. This puts us in a position of having stable flows of product across the globe, and we are also able to have stable demand patterns and we're also able to predict the demand patterns based on our existing supply services and also our existing customer portfolio. All this calls for limited short-term volatility. The ammonia business is volatile, and there, there will be short-term volatility, but our integrated platform progresses with a solid foundation to manage short-term volatility quite well. We source from both from Yara and Yara's JV plants at market prices. And then we sell from -- to the customers at market prices as well. So -- and I would say both the sourcing and sales is based on market references and also based on negotiations on a monthly basis, which means that we are able to use market references and price the product based on the customer's best alternative. And the combination of our midstream position where we have highly optimized logistics with our shipping fleet and also terminals in the right position, we are able to deliver the product to the customer on a highly cost competitive basis. So the difference between what we buy from the producing entities of Yara and the JVs and third parties and what we sell is basically leading us to the gross margins. However, we also have highly optimized system for logistics, which means that we also have margins that is in the midstream part of our value chain, and those margins can be scaled right across our portfolio. So that gives us a clear complete advantage and a fantastic value proposition to the customers. Like I mentioned, we have a stable volume portfolio. And the volumes can really change because the plant can have an outage, some plants can have an outage. Plants do go through a maintenance turnaround. And we can also have new supply coming in and some unprofitable supply going out. And we have managed all that quite well in the past years. For example, we had new Freeport supply that came in, in 2018. And in the end of the following year, we basically closed down our other small units in Trinidad. So we were able to not only maintain our portfolio -- volume portfolio, but we also increased by having a large scale plant from Freeport which Yara has a JV with BASF. We also have a set of capabilities along our integrated activities that make us a pretty unique player in the ammonia value chain. If you were to look at these capabilities individually, it may not make a big difference like many of our competitors may have the same capabilities, but it's how we intertwine and how we work by playing on those capabilities in a very integrated fashion towards our offtakers and also towards our customer is what makes Yara as a very attractive partner for an offtaker and also a very attractive partner to a set of customers. Just to take an example, when you look at our customer relationships, it's not just having monthly price negotiations and agreeing on volumes to be sold. Actually, we have in-depth discussions with the customers. We look at their cost, we look at their infrastructure, we do safety audits. We provide them with some market information. So they are very well aware of what is happening in the ammonia market. And in some cases, we also manage the inventory. So we basically take away the headache of having to handle ammonia away from the customer, and that is one of the key value propositions that we use to price the product based on a market reference. And we have a leading integrated midstream ammonia platform where we have sources both from Yara and from the JV plants of Yara and also from third-party sources. And these sources give us a stable offtake possibility. And we also have a stable customer portfolio, both long term, many of them for the long term, where we can safely load the products to the customers. But in between, we have something called our midstream logistics and optimization, where we are able to optimize not only on the product flows, but we are also able to optimize on our fleet capacity and also on our logistics so that we have the lowest possible cost along the value chain. And this is a significant contributor to our EBITDA margin as well. And we have an EBITDA margin of roughly around USD 30 per tonne or slightly higher, and we are easily able to improve on it as well going forward. And then if we have an integrated midstream to upstream capabilities, we are also very attractive towards other partners in the value chain who can -- whom we can also work with and collaborate to further improve the value in the value chain and also take down unnecessary costs, and we're also very attractive towards customers as they look for long-term customer supplier partnerships. And if you look at the new markets, for example, in the shipping bunkering market, we are very attractive towards our customers for shipping companies because we can offer them a full one-stop integrated package and they don't have to worry about reliability of supply or safety or even how we are able to get the product to different bunkering hubs. And to facilitate that, as an example, we have started on working with Azane Bunkering Systems to establish the first bunker network in Scandinavia, which would basically ensure product reliability and availability and safety towards the end users. So this again, brings down to the point where -- we have an integrated model and a differentiated approach that makes us a clear leader in the ammonia value chain. The slide speaks for itself, but it's very important to note that in terms of traded volumes, we are 2x to 2.5x bigger than our nearest competitor in terms of number of terminals owned, which many of them are very close to bunkering sites. If you were to look at the shipping bunkering for the future. We have more than double the number of terminals or 3x the number of thermals than the nearest competitor. In number of traded vessels, we also are #1 that we can really scale up as and when required and we also have an asset-backed supply. And combining all this, what really gives us a significant competitive advantage is that we also have a global footprint. Most of our competition may have some of those attributes, but none of them have a real global footprint like we do with asset-backed supply. So in sum, our integrated position gives Yara Clean Ammonia, the #1 or the leading position in ammonia value chain. We have an excellent infrastructure support both in terms of terminals, which are strategically located deep-sea terminals and also with the ships, which we can expand and make it fit for the purpose. We have a very significant value proposition towards customers, where reliability of supply, scalable supply and safety are very key to first of the customers. We have an attractive business model, which is underpinned by robust margins and which is also profitable and scalable and very resilient and reliable for the operations. And our positioning is also so -- is good in the sense that our fully integrated presence in ammonia value chain imposes natural entries of barriers to our competition. Thank you.

Thank you to Murali. And then for the next portion of our presentation, we will focus on growth and strategy, and I will give an introduction to that and the downstream portion of it. We will also get to hear from Lise Winther, who head up our Projects and Technology, as well as Hallgeir Storvik. Yara Clean Ammonia's strategic ambition has been defined. YCA aims to significantly grow its leading global position as the world's largest ammonia platform driving the development of clean ammonia globally. That is our ambition. And why do we do this? Because we are uniquely positioned to handle and enable this energy transition. How will we do it? We'll do it by leveraging our current integrated platform. And who would you do it with? We are now engaging with a lot of very active and forward-leaning companies who want to buy clean ammonia into their sectors to decarbonize their hard-to-abate industries. Looking a bit into the overview of our strategy and competitive edge and competitive edges are key in the strategic sense that we need to make sure that we have the edges that we need to succeed in the market. And what you need to succeed in this market? Well, you need a global scale, you need global flexibility and you need multiple outlets and captive sources of ammonia production to fuel your system. You need multiple storage outlets and you need a flexible fleet that you control. And you need experience both within the market perspective but also an operational perspective and not least safety in order to be a credible player in this market. And all of this we have in our existing integrated business model that encapsulates upstream, particularly the midstream and downstream. And this is what we plan to leverage and scale up in line with the market growth. And to focus a little bit deeper on how we plan to do this. We plan to basically focus our strategy around these 3 elements. The midstream platform we developed in line with the market growth, and we use that to provide confidence to our future customers and our existing customers that we can deliver the molecule worldwide safely and reliably. And we also plan to expand this in line with the market growth and adapt this to the customer needs, but also the upstream portfolio that we, over time, will develop. And we will use this integrated midstream platform to also enable to do other important elements, which are downstream and upstream. On the downstream side, we will use our current presence to develop new customer segments and also help new users of ammonia and new segments of ammonia use to understand the product, to develop the market and also the utilization of the ammonia in a safe and reliable way. In addition, we also will secure partnerships and long-term outlets for the ammonia and not least go deeper into the bunkering solutions that are required to enable this market. On the upstream side, we have a very focused project portfolio, which will enable profitable projects and which will enable the growth that the midstream platform needs. And we will use our global position to both choose the right projects as well as our experience in project development to make sure that the projects that we invest in are profitable and create value to our shareholders. And not least, we will use our existing platform to also be an attractive sourcer of ammonia from third-party green and blue ammonia projects. Diving a bit more into our midstream platform and what that is, essentially, it is a very scalable platform to handle the global distribution of ammonia. And the molecule is the same, whether it's gray, blue or green. And the core elements of that midstream platform is very scalable and requires less than proportional CapEx to scale it up further. Our organization and systems are already in place and can handle significant growth without any material investments at all. On the terminal and infrastructure side, we can also increase throughput through our terminals quite significantly without any investments, and we can also scale it in a nimble way in line with the market growth. And on the vessel side, we will, of course, need to scale up our vessel fleet as the volumes grow. But given our starting point and our significant scale, we can do that in a very flexible manner and compare to the situation where we had to build this from scratch, we can also avoid having to oversize our fleet in order to meet the market demand, which is a significant advantage for Yara Clean Ammonia. Moving a bit further down on the downstream side and the way we will develop that part, we are, of course -- there will, of course, be a need for terminals where the ammonia is needed. And as mentioned, many of our existing terminals, if not at all, are located very close to the key bunkering hubs worldwide. And we will continue to develop this as we see the demand points develop using our existing infrastructure, but also collaborating with partners and customers in order to grow that in a nimble and efficient way. On the vessel side, as mentioned, we will also add additional capacity and use our current fleet and flexibility to optimize that in a way that suits the growth in the market in a nimble way and also creates value for us as a company. And then importantly, on the downstream side, there is today a missing link in the actual last-mile bunkering solutions, how do you actually bring the ammonia over to the vessel that needs to be fueled. And there, we are working very actively with a commercial relationship with Azane Fuel Solutions. We have developed a bunkering concept using ammonia barges and bunkering technology, which enables us to provide the ammonia where it's needed in a very low CapEx way compared to having to build on land infrastructure. And this is a perfect fit as the market grows because we can downscale the size of the hubs and adapt those to the market growth. And combined with our large-scale ammonia fleet, we will then be able to fuel that infrastructure in a very efficient way. Looking at how we work with the market for these different segments and the strategic approach that we take, we have a significant focus now on the shipping fuel market. And we work with many like-minded partners, a very big portion of forward-leading shipping companies who see that ammonia will be the only or the best long-term solution to decarbonize. And they know that they are dependent on a zero-carbon fuel. And we work with them not only to determine demand and for commercial solutions, but also very much focus around safety, operational aspects to actually enable this market and be a very active part along the value chain to actually enable this market and make it work. On the power generation side, this is very much a point-to-point delivery market, not very different from the way we supply ammonia today, but also here, we work very actively with the key players such as the Japanese players on the power side in order to match their supply needs and make sure that we are able to deliver as they grow their plans and that they have the supply they need to meet the government mandated fuel mix in Japan. On the agriculture side, we work actively with Yara, but it is Yara, who has the responsibility to develop the market with green fertilizer. And this is, of course, a big advantage for Yara Clean Ammonia being the exclusive supplier to Yara, and then indirectly benefiting from the vast global network that Yara has in more than -- with sales in more than 160 countries worldwide. The deep position that Yara has taken into the fertilizer value chain which enables them to grow the market for green fertilizer worldwide. And then longer term, of course, we are also looking at ammonia as a hydrogen carrier, although that is currently not a major focus for us given that we believe that this is somewhat further out in time. So our focus now really on the shipping market and the power generation market, and we see a significant traction and development and a vast opportunity to grow there as we are able to have the molecule available worldwide for these customers. And that means that when it comes to the midstream and the downstream segment, our focus is very much on the commercial operations. We will obviously need to do investments and scale up our fleet and we will -- as the market grows, and we will also grow our current platforms in terms of terminals with partners, and we will also invest towards bunkering solutions in collaboration with partners as we see that market grows. And we will very much focus on commercial operations in that area. On the power generation side, limited investments are needed. From a commercial operations perspective, we're working very, very actively with the key customers in that segment as well. And on the fertilizer side and the industrial side, also the logistics and the value chain is already in place. And there, the change from an investment point of view needs to come on the upstream side, whereas on the downstream side, there is limited investments or limited activities that are needed from an infrastructure perspective. But obviously, the market development work of clean fertilizer is significant. And there, Yara's very vast and advanced downstream system is working very actively on that. So all in all, our midstream and downstream segments are really focused on developing these markets and using our existing knowledge and position to actually enable the customers who wants to be ahead of the game to make this energy transition happen. And in line with the growth, we will then develop our midstream portfolio, and we will do the investments that are required. But this is something that we can do in a very nimble fashion as we see the market growth. And this is, of course, a significant derisking factor for Yara Clean Ammonia that we already are present and can utilize existing infrastructure to a large extent to be able to serve the market when the demand occurs. And this is, of course, also important in the sense that we will already in 2023 start to market green fertilizer and green ammonia from our pilot project, the 24 megawatt project in Porsgrunn. Going 1 level deeper on the downstream side and particularly on the shipping side, we have, as mentioned, a commercial collaboration and agreement with the same fuel solutions who have now -- are now developing the last-mile solution of actually bunkering vessels with ammonia. And this is important because the vessel supply points will be spread out and particularly in the beginning can be relatively small. And this enabled us to serve those markets with relatively small assets as opposed to the large-scale assets you would need to build if you would build something on land. And in combination with the Azane relationship, we have an MOU with NorSea who operates a range of vessel basis and vessel supply bases in the North Sea. And this 3-party collaboration will enable us to have ammonia ready for fueling already for 2024 in key locations in Norway. And this is, of course, important to get the market going. And this will, among other things, help serve some of the pilot projects that we are a part of, where we together with other partners in the vessels and related industries are developing pilots, that is vessels in different vessel segments, who will actually use ammonia as their fuel. And obviously, to enable that, those vessels will also need a supply point, and in that regard, this collaboration will enable us to actually serve the market already from 2024. And it is a credible solution that we can demonstrate to the shipping industry that this can actually happen. This is a great example of how we work downstream in our organization. But also, we obviously need the tonnes to supply this significant growth in the future, both by converting existing Yara Ammonia production as well as establishing new production. And to talk a little bit in depth about our upstream plans and our project plans, I'll give the word over to Lise Winther, who heads up our project and technology team.

Thank you, Magnus. Yes, my name is Lise Winther, I'm responsible for the Upstream project and technology in Yara Clean Ammonia. I have more than 30 years' experience of large -- managing large capital projects and technology, where 13 of them has been in Hydro and Yara. Magnus has described how Yara Clean Ammonia developed the new customer segments and the demand for clean ammonia and to be able to deliver on this demand, we also need to develop the supply. So I will now go through the upstream strategy, focusing on our approach to how to develop the new supply of clean ammonia and also a bit more details on our robust value-creating project portfolio. With our global presence, combined with a unique platform, we will take a flexible approach to the upstream investment principles. This means that we will be flexible related to hydrogen production or if we take third-party sourcing. For instance, that we will have flexibility on brownfield project or greenfield project, and also related to blue and green ammonia. And this means that we are in a position to select the best and most robust project that can help us developing the new markets and deliver attractive return on the investments. And with this, we also have the robust portfolio project that have been carefully designed to match the market development in a profitable way. So in the short term, we have a selected pilot project. As already mentioned here, we will have this already in execution and will be online in operation in the next year 2023. And more on the midterm, we will build commercial scale capacity where blue projects is key, but we will also look into a green project if we have sufficient government funding. On the longer term, we will have large supply growth to meet this demand, where we'll have both large-scale project in both blue and green ammonia. And to summarize, if you look into our portfolio, you will see a portfolio that is focusing towards a large-scale blue project with green becoming more important on the longer term. Before I go into more details on the project, I will just explain a bit of different project models. If we go to the left side here, we have the blue ammonia project, where we have 3 different models. And for all these models, Yara Clean Ammonia will be the commercial offtaker of the blue ammonia volumes. The Model 1 is where Yara Clean Ammonia will take the offtake of from an existing plant in Sluiskil in the Netherlands, where Yara will invest in the CCS and also third-party offtake of the CO2 for transport & storage. But Yara Clean Ammonia will market the blue ammonia. The second model; we will offtake the blue ammonia of a converted gray plant in North America to blue CCS. And in this project, Yara Clean Ammonia will pay for the CCS that will be provided by a third party. The third model is where Yara Clean Ammonia will invest in a greenfield, fully integrated new blue ammonia plant in North America. And on this, we will have then ammonia production, we will ensure a CCS and also then the clean ammonia offtake. And this project will be -- have -- where we will have a large CapEx exposure. On the green models we have 2, where the first model is quite simple, where Yara Clean Ammonia will have a third-party offtake of green ammonia and take the commercial exposure of the -- and marketing the green ammonia. And this will have -- there we will have no CapEx exposure. The second model, we will invest and take ownership in the full green ammonia production by converting an existing plant in Norway to green ammonia with full electrification of this plant. And in this project, we will also have quite high CapEx investments. If you look into the project pipeline to 2030, we will have 4 commercial-scale projects where the first 2 projects will be asset-light project, and we will actually then have an offtake of approximately 1 million tonne per year of blue ammonia without any CapEx exposure. The first one is in North America with 600,000 tonnes with a start-up around 2026 to 2029. The second one is the project in the Netherlands, Sluiskill, where we have an offtake of 400,000 tonne with a start-up in 2025 to 2029 depend a bit on the CO2 offtake solution. The third project is the most important project. This is a greenfield project in the North America with a capacity of 1.1 million tonnes per year. And here, we will have a majority stake up to 70%, giving a corresponding CapEx exposure to USD 1.5 billion to USD 1.8 billion. And this project will be in operation in 2028 to 2030. As I mentioned, this project will be in the U.S., and this is because the U.S. has the most favorable conditions for producing blue ammonia. And that is based on that you have long-term low gas prices. In addition, you have a very good infrastructure for storage of CO2, including pipelines, and the third one, as already mentioned, also the tax incentive with the 45Q. So with this strategic location, Yara Clean Ammonia will leverage the existing midstream market and serve customers with shipping fuel and power generation also. And then the last one, last large project we have is the HEGRA project. It's the full electrification of our Porsgrunn plant in -- the Porsgrunn plant gives us approximately 400,000 tonnes of green ammonia. Here, we also will have a majority stake. I would just like to mention that this project will be the most competitive project -- green project in Europe. And the basis for that is because we will have available -- we have the possibility to utilize existing infrastructure. We will be connected to the grid, and the grid will be RED II compliant, and that gives us a 100% capacity utilization and the third element is that we will remove 800,000 tonnes of CO2 emissions. It's not a clear framework for that project yet. So we have not mentioned the CapEx. But we will also not do this project if we're not getting a satisfactory return on our investments. The last project I would just mention is that we already have the pilot project that will be in operation next year. So to summarize, we have 4 large projects expected to give a 2.5 million tonne of owned asset-backed clean ammonia supply. And in addition, we will have third-party delivery where Yara Clean Ammonia have a key role in unlocking this project with a long-term offtake. But to be able to actually commercialize these upstream projects it's also required to have a robust certification scheme to enable this transition. I will not go into the details here, but there are 4 main reasons for why global certification system is needed. And because ammonia is the same molecule, if it's gray, blue or green or any other color, the only difference is how it is produced. And another example is also that a large share of initial production is expected to be produced from the same sites where we have existing gray production, and it is very difficult or impossible to physically separate these volumes. Yara Clean Ammonia has taken a lead in developing a robust certification system based on a multisite mass balance principle for Yara's plants, where DNV will certify and prove the scheme. And just to give an example of how this will work is that, for instance, if we produce blue ammonia in Sluiskill in the Netherlands, then they will generate blue certificates. And these certificates can be transferred to, for instance, Australia. And then the ammonia volume produced in Australia can then be swapped with the volume in Sluiskill and then exported to Asia. So certification scheme will benefit the customers and will also benefit Yara Clean Ammonia. And with certification scheme, this certification scheme will be ready over the next year because then we are going to deliver the volumes in the market. So then I hand over to Hallgeir.

Thank you, Lise. I assume that the right starting comment is still good morning, and I will move gradually into more relevant detailed financial messages. I think as the CFO of Yara Clean Ammonia, there is an important task to contribute to the development of the value creation of the business. But in addition to that, it will always be important to be able to communicate the business story in a good way as a starting point for explaining the financial numbers of the business. So that was with the process when Yara was demerged from Hydro in 2004 when I was the CFO. That was a key message that was split between improving the business of Yara, but also being able to communicate the right messages to the financial market. And in that respect, we are into a similar process right now where I think we are aiming today to explain the business study, as you have heard of Yara Clean Ammonia in a more detailed and precise way. Being a CFO, there is 3 starting points, a bit irrespective of which business you are in, and that is to start with evaluating the quality of the existing business. And we will revert to that, but when we see the financial performance of Yara Clean Ammonia over the last decades, then that has given the investors profit that goes beyond their minimum requirement. Then the second part will be to evaluate the growth prospects of the business. And you've heard earlier today that the growth expectation of this business is second to none. And the third very important element for a CFO to kick off is the competitive edges where I think we have spent a lot of time today to explain the competitive edges of the terminal system, the shipping system and the integrated business model that differentiates ourselves significantly from a typical competitor. This slide is showing that the EBITDA contains what we do today, where we are disclosing the EBITDA numbers for '21. We are illustrating the ASL 2 and the growth perspectives on the midstream part there. And we are also adding the CAPP segment, the clean ammonia project and production segment, which will take care of the upstream growth of the business. Integration is a word of honor for all companies that are able to create synergies across several parts of the value chain, so also for Yara Clean Ammonia. The circles on the slide show where we start, and the arrow represents synergies. Firstly, on the supply side of ammonia, we have more sourcing options than any other company, which will positively impact our midstream position. For instance, when we will source for new markets through certificates, we can use our existing production system and get closer to the customer and avoid extra long distance transport. Secondly, the existence of upstream and midstream presence will create a supply security ability for us that the customers will appreciate and our commercial contracts will reflect this value. Thirdly, development of new market segments in ASL 2 will create additional scale in all parts of Yara Clean Ammonia. And finally, the downstream and midstream presence create attractiveness for Yara Clean Ammonia among upstream producers with regard to future offtake contracts. YCA will continue its asset-light philosophy within the midstream and downstream business areas. Within the CAPP segment, we will pursue 2 asset light as Lise mentioned, and 2 asset-heavy projects for implementation before 2030. Initially, 2 smaller pilot projects are under implementation right now. The basic incentive framework is in place for 3 of those projects, while the HEGRA project will require state support levels that need to be anchored with Norwegian authorities. The upstream portfolio is expected to bring 2.5 million tonnes of capacity to the new clean market segments. We will also, for the future, aim to add additional third-party sourcing to our portfolio. Expected CapEx number for the growth initiatives is USD 2 billion to USD 2.3 billion, plus the HEGRA CapEx. We will inform about the HEGRA CapEx number later in due course. So then moving into a bit more concrete numbers on the financials, and we start with the historical performance. We will for the future contain 2 reporting segments initially, ASL and C-A-P-P or CAPP. ASL comprises today's commercial activity in Geneva and will add the activities that will be developed for the new clean market segments. The ASL segment has historically obtained impressive results over long periods. CAPP will comprise the project portfolio for all upstream projects and defined management and group administration costs. The project will expense development costs up to the point of principal decision. YCA has, for the first time, booked more than USD 3 billion as revenue over the last 4 quarters. Even more interestingly for the financial area is that the EBITDA numbers have improved from an already satisfactory level in 2019 and 2020. The floor earnings over the last years have been USD 107 million or USD 117 million if we take into account a delayed implementation effect of IFRS 16 for 2019. The difference between EBITDA and operating income is reflecting the low capital intensity of the current business model. I will later revert with the explanations of sensitivity and volatility in connection with our guiding messages. This simplified illustration reflects YCA's past performance over the last 9 quarters. In fact, if you look closely at the slide, it resembles a vessel or a ship. For the first 5 quarters here when the average ammonia price was below $250 per tonne, the EBITDA per tonne was in the magnitude of $30. Since we sell 1 million tonnes on average per quarter, it's also possible to use the Y axis to see how much earnings is in million dollars approximately. So $30 per tonne here represents roughly USD 30 million also. So it's a dual interpretation of the Y axis on this slide. For the 2 quarters after the first 5, then the ammonia price gradually moved up towards $600 and the EBITDA per tonne increased to roughly $40. The last 2 quarters also show an average earning of $40 per tonne approximately. Quarter 4 2021 reflects an extraordinary situation where ammonia prices increased sharply. Roughly USD 450 has increased over the quarter per tonne of ammonia. As YCA has a portion of its sales contracts lagged with 1 month, this in isolation contributes negatively to results in such situations where prices surge. When prices decline, we will have the opposite effect. Moreover, the fourth quarter was also negatively impacted by increased logistical costs due to reduced production levels from Yara's ammonia plants which led to a less optimal sourcing pattern for YCA. For quarter 1 2022, we were back to a more normal situation and results picked up beautifully. This slide explains the 2 key sensitivities for Yara Clean Ammonia. First, the business takes the benefit from increased ammonia prices due to the fact that an important part of earnings is created from sourcing agreements with a fixed percentage of the ammonia price. On an annual basis, $100 improved ammonia price will represent a positive EBITDA effect of some USD 12 million. Secondly, an increased sales volume of 500 kilo tonne or 12% increase will imply an improved EBITDA of some USD 15 million to USD 20 million annually. The volatility for the business is created by several conditions that cannot be fully controlled by Yara Clean Ammonia, one factor that we can quantify is effects from ammonia price change. USD 100 up on the ammonia price will imply a negative EBITDA effect of USD 5 million, where the main explanation is a lag effect from sales contracts. As an example, part of July sales will be priced at June levels. When such a price change is reversed in later months, the accumulated EBITDA effect will be awash or neutralized. The balance sheet is now updated with the so-called combined numbers at the end of first quarter 2022. On the noncurrent assets category, Yara Clean Ammonia's 5 modern ammonia ships bought in 2016 are booked at USD 218 million. Net operating capital calculated as inventories plus receivables minus payables amounts to USD 164 million. The payable amount is increased by USD 93 million due to the fact that we have not been able to repay this amount to sanctioned companies related to Russia. This will effectively be retained by Yara and not Yara Clean Ammonia, reducing the amount payables. The adjusted net operating capital is therefor USD 257 million in the relevant balance sheet for Yara Clean Ammonia. The increased net operating capital from high ammonia prices will represent the strengthened balance sheet for Yara Clean Ammonia that will be translated to cash when and if the ammonia price declines. In 2019 and 2020 with low ammonia prices, the net operating capital was a modest below USD 50 million. The underlying cash generation for Yara Clean Ammonia has been solid and increasing over the period when we adjust for the changes in net operating capital following the ammonia price increases. And also the conversion of EBITDA to cash has been above 70%, which is high compared to lots of other companies, explained by low CapEx and an optimal tax structure. If we then move into the future and the target description, then for ASL 1, the existing business, Yara Clean Ammonia targets to maintain its market-leading position and replaced any converted grey volumes with new sourcing arrangements. Conversion means grey volumes that are upgraded to blue or green. For ASL 2, we target to sell our new production from our clean ammonia project and production segment of 2.5 million tonnes added by some third-party product. Out of the 2.5 million tonnes, we assume that 300,000 tonnes will be sold to the fertilizer segment in 2030. The projects, combined with our leading midstream starting point is expected to make our market share increase considerably medium term. Longer term, as demand is expected to rally, we will approximately -- we will increase our volumes but reduce our market share to approximately the level we currently have. Of course, there is a question in respect of timing between projects and sales. What is the chicken and what is the egg, and our expression is that in this case the chicken comes at the same time as the egg, if you want a tabloid simple explanation of that point. If we then look into the margin guiding for the future, as we have seen earlier, ASL 1 has achieved an earnings level exceeding $30 per tonne over the last periods. We target to minimum maintain this level for the existing business going forward. For ASL 2, we will do more of what we already are doing in ASL 1. Consequently, we expect that we are able to achieve incremental scale factors related to ships and terminals in addition to optimization effects from our competitive edges. We have also included USD 400 million as CapEx up to 2030 for the midstream segment, which represent a higher CapEx level than in the past, which is also explained -- expected to contribute to increase the EBITDA per tonne all other things being equal. We have targeted an EBITDA per tonne for ASL 2 of $40 due to the above-mentioned reasons. The 0.3 million blue and green tonnes that are assumed to be sold to the fertilizer market is expected to achieve materially lower margins. Any third-party sourcing dedicated to the shipping and power segments is targeted to achieve the USD 40 level. If we then move back to the CapEx slide, which is, of course, the most relevant slide for the clean ammonia projects and production segment. So we have earlier explained the 4 shortlisted projects. Total volume is 2.1 million tonnes from the blue and 0.4 million tonnes green from the HEGRA project. Each project will target a minimum return of 7% real return on an after-tax basis, 4 projects that have an average risk. The main part of the capital is related to the new projects in North America, where we believe that the region is the most competitive for both grey ammonia production and attached low CCS costs. Those new integrated projects will always start with grey but we will then upgrade the grey part of the production to blue from doing the CCS. So we have flagged that the CapEx number for this asset heavy project is reflecting a 70% ownership in the project, but we will be pragmatic to also evaluate other ownership levels. We also aim at being in the forefront of contribution to creation of a certificate system that can allow the business to optimize volume streams going forward. And here, we believe that we are in a position to be able to contribute to the shaping of that part due to our scale in the area of ammonia. The last slide here is summarizing some key points. Yara aims to profitably invest an amount in excess of 2 billion for growth measures in addition to a potential investment in HEGRA. Most of the earnings for Yara Clean Ammonia today is taxed in Switzerland with a lower tax rate than elsewhere. The average tax rate for Yara Clean Ammonia is expected to increase somewhat from today's levels when the new expansion projects start production. Over the near to midterm, Yara Clean Ammonia expects to maximize value creation by executing on its growth plan. Accordingly, Yara's current intention is to reinvest any cash flow that it may generate going forward in the period up to 2030 when we assume to have finalized our CapEx portfolio. So with that, I hand over the word to Magnus, who will give some closing comments before we move to the Q&A section.

Thank you, Hallgeir. So to summarize this first Capital Markets Day for Yara Clean Ammonia, hopefully, we've been able to present to you both a snapshot and an in-depth view of our business and the growth prospects. And we do believe that the significant market growth opportunity that clean ammonia represents is very interesting and a new path for Yara Clean Ammonia going forward. And that Yara Clean Ammonia, with our unique business model, integrating upstream, downstream through our world-leading midstream system is extremely well positioned to take part in that growth but also to enable that growth and develop these markets. And we believe that with our integrated system, we were able to both have a significant downstream presence and be ahead in terms of the market development, as well as choose and pick the best projects for upstream development to actually fuel the growth as well. As mentioned, we have a significant structured portfolio with multiple options for projects in North America. And in addition to fixed projects like the one we explained in Sluiskil, and the possibility we have in HEGRA in Norway. So all in all, we believe that this platform is scalable, it's ready for growth, and we are looking very much forward into taking Yara Clean Ammonia into the future. And with that, I'll give the word back to Hilde who will lead our Q&A.

Right. So we were a bit quicker than anticipated. It's only 11:00, but we'll start the Q&A session now. [Operator Instructions] We'll start with the first one. And here it goes. Have you noticed an acceleration of government support for blue and green ammonia in light of the Russia-Ukraine war?

Yes, maybe I can answer that one. I think a lot of governments have acknowledged the significant CO2 reduction that comes from blue ammonia and the fact that you can get more than 90% CO2 reduction from blue ammonia. And I think that belief has increased dramatically in some countries that were maybe a little bit hesitant prior to the Russia-Ukraine war. But we see that both the European Union has very much welcomed blue hydrogen and blue ammonia as is Germany, who's maybe a little bit more skeptical in the beginning. So I think I think the momentum has been there very much all along as it is, the production method that can be scaled quickly and within this decade. But I think that's even more acknowledged now than what it was 6 months ago.

Okay. The second question coming up here now. Could you comment upon the safety aspect of using ammonia as a shipping fuel, how does ammonia screen versus other alternatives in this regard and other alternatives like LNG or methanol?

No, I can start very initially and then can hand over a bit to Lise. I think it's important to point out that we've been handling ammonia on vessels for several decades. That's the essence of what we do. But of course, safety will be incredibly important, and that's a very important part of the market work that we do. But Lise, do you want to add something?

Yes, I can add something there. And related to the safety for using it as fuel. You can say that typically, system we will use will be based on the same experience as you have for LNG, where we have typically do piping system, et cetera, to avoid leakages. And related to the -- I think it is important also to know this compared to, for instance, hydrogen, ammonia is not very explosive compared to hydrogen. It is poisonous, but it's easier to handle compared to a very, very explosive fuel. So with the experience from LNG, combined with -- you can see the nature of ammonia, I think -- and also our experience in handling ammonia, the safety aspect is manageable.

And maybe just to add as well that it's important to highlight that the ammonia industry today has very, very high safety standards, and there's a strong collaboration among the players within the ammonia industry in the U.S. as an example, but also in Europe in order to ensure that those safety standards are implemented in our own facilities, but obviously also towards customers.

Okay, good. Then moving on to a question about third-party ammonia contracts. Do you use back-to-back contracts? Or do you take speculative positions?

Csaba, do you want to?

Yes. As I mentioned, the third-party contracts are historically covered more by contracts, by 1, 2-year contracts with established and relationship suppliers. The spot element is also present there, but this more is to fill in gaps to look at spot opportunities to a smaller extent and also just to manage the fluctuations with supply-demand, any planned maintenance or unforeseen events that we usually support with spot contracts, much less from, let's say, from speculative purposes.

And maybe also just to add that most of those contracts are related to reference prices. So it's not a fixed price type of speculative contract arrangements that we are into.

Okay. The next question is about pricing. How do you think about the premium price point for clean ammonia and the components for that price?

Yes. I think that's, of course, a very important part of the market development work and also obviously, something that the market as a whole is very interested in discovering. I think, clearly, what we see is that there is -- there will be a link between the cost of carbon and the premium that you can achieve for a clean product based on how the carbonized it is to sort of simplify. So in a way, we believe that the degree of carbonization of the product and also then for ammonia will be, of course, a significant portion in determining what kind of premium you can achieve. And this is, of course, important also on the customer side in the sense that customers will obviously look at their alternative costs in terms of using, for instance, the fossil fuel instead. And add to that, what type of ETFs or carbon tax or whichever instrument is in place and then see what the alternative is. I think in addition to that, of course, comes a specific regulation, as for instance, has been proposed in Norway to have specific decarbonization areas on the coast and so on which sort of forces the use of a clean fuel that would sort of add the premium as well. And of course, finally, there is a consumer demand and its consumer push as well for clean shipping. And with that, comes some willingness to pay as well. But I think the important element is that when you distribute the cost, the added cost of ammonia as a fuel through the value chain, for instance, in shipping and then distribute that to the iPads or the sneakers or whatever is being shipped. The cost is insignificant.

Following up on the new question when it comes to pricing. Does not historical figures include internal pricing and joint venture margins? How can we be comfortable that the margins being real margins on full arm's length?

Hallgeir, do you want to answer that?

Yes, of course, that's an intelligent question and issue that we have worked a lot on internally. I think the starting point in my answer is that we have a system up and running that we have had for decades where the principle is arm's length pricing of all these internal contracts. And that has been necessary also to regulate the tax situation across different tax regimes. So we have a system up and running. We have entered into evergreen volume contracts with Yara and also the price logic for those contracts have been fixed. For joint ventures, we will, of course, not only negotiate with Yara, we will negotiate with the partnership. And there, we do not have the same security on existing terms, but we will use our strength in the midstream system to also try to maintain the good contractual structure that we have with joint venture companies also going forward.

But I think it's important to highlight that the business model of Yara Clean Ammonia historically always has been at an arm's length between Yara supplying plant and Yara offtaking plant. And sort of the value generation of Yara Clean Ammonia, which then is obviously reflected in the historic figures, it's based on what we are able to achieve in between those market differences in terms of optimizing the system and utilizing our scale to bring down cost and so on.

And if you then look at sort of also the margins that we get across the portfolio since the business model is the same for Yara and for sort of external customers, it very much sort of is similar across the portfolio as a whole.

Okay. [Operator Instructions]. The next question coming up is regarding emissions. How do you perceive the potential issues around higher nitrous oxide emissions that come from using ammonia as a shipping fuel?

Joacim?

Yes, I can take that one. So basically, that is an issue if you burn ammonia, but also there is very good technology in place to reduce that emission and abate that emission. Yara has also done that with our marine technologies in the past and sort of the NCR technology. For doing that, it's well established. So when the engines now come and the ships are being designed for ammonia that is included. And it has to be included because that is -- if you don't abate that, that would be an issue. But it really is a solvable problem. And of course this technology also then is part of the package, and it should be ready to scale along with the engine technology as such.

Okay. Next question. Today's ammonia market is very much driven by volatile gas prices. How do you see the market change with the introduction of green ammonia?

Yes, no, I think the market will be probably on a longer-term basis in terms of long-term pricing as today will be -- will reflect replacement, the full cost of replacement capacity for blue and for green for that matter. On the long-term basis, that's in a way the basics of a commodity market and how it works. And then on sort of a short- to medium-term basis over time, normal supply/demand constraints will sort of determine the pricing as well, where obviously, the product will all need to be priced at the marginal cost of the last tonne needed into the market. But obviously, there will be a differentiation there on what that cost is based on the cost of them achieving a certain degree of decarbonization. So we believe that the dynamics will, to a very large extent, follow the commodity market principles. However, of course, we do believe also that with a significant need for green and blue ammonia going forward, covered by the different segments that we talked about today, that there will be a significant demand drive on top of that as well, which, of course, will be conducive to market values and pricing, given that all of the ammonia that needed for this growth also has to be produced and those projects have to be developed, and that takes some time. So I think all in all, the demand-driven element could be very, very strong going forward. But obviously, gas prices also relevant for blue ammonia and will impact pricing until green ammonia becomes cost competitive with blue ammonia, which we believe is quite far into the future.

Good. Next question coming up is about upstream projects. Why is Yara Clean Ammonia responsible for blue and green upstream projects instead of leaving this to Yara as you do for grape ammonia? And secondly, how did you decide a 7% return as upstream targets?

Yes. No, I think -- maybe I can start and then I hand over to Lise and then Hallgeir can probably answer the last part. I think it's important here to distinguish between production and running the assets and actually developing the projects. And what we defined in our business model is that in the future, there will be a need to have asset-backed clean ammonia production to fuel the business model. And that fits well and also then from a business model perspective, fits well into the portfolio of Yara Clean Ammonia. And -- but the way we will run this is that we will have the overall management of these projects. And of course, these are large projects, but they're projects that sort of include more than just the technical aspects, but also public funding, but also different types of technologies for CCS, electrolyzer, et cetera. But sort of for the scale of running a project and the scale in terms of technical resources and so on. We will definitely rely on Yara's technical project organization, and we have an SLA in place for that. So that will operate very much as before. And I think in terms of plant operations, is also a likely concept that it will be Yara who actually operate the plant on our behalf even if we own it. And I think that's -- it's also important in the sense that in terms of the flexibility that we need to have in the portfolio as well. For instance, North America, we're looking at several different options for new production. And that task as well is something that's very close to our business development whereas that Yara can bring in the expertise and the scale once we've actually selected the projects that we want to do. But Lise and Hallgeir, do you want to add?

Yes. Maybe I can add on the financial requirement for new projects. I think what we have done is just to follow the textbook. So we have started what the shareholders' requirement will be for a typical project in our portfolio. And we have studied over decades what the typical shareholder requirement would be. And of course, the risk is that we have a too low number here. So the 7% is meant to give the shareholder the needed value creation for a typical average risk project. And of course, that's one element of the overall profitability for Yara Clean Ammonia. But we are also looking upon the upstream projects as an enabler of growth in the ASL 2 segment. So the 7% is our guiding on the upstream portfolio in isolation, but then there will be some synergies also into the midstream, integrated midstream part, which should add profitability to that level.

Maybe if you can add a little bit on how we work with the [indiscernible] now together with both production and ITP.

Yes, yes, yes. For instance, when we developed the project, you can see Yara Clean Ammonia have our owners organization. And then we work together with Yara, both the technical part and also the operational part. The technical part is the project execution where they perform the execution of the technical part of the project. And Yara will then be responsible for -- the Yara operation will be responsible for operating the plant when it's ready. And -- but within the Yara Clean Ammonia, we still have the responsibility for sourcing the energy and also then you can be responsible for, of course, the commercial offtake. So that is a bit the responsibility split. So Yara Clean Ammonia have the commercial part and heading, you can see the direction of the project. The technical project organization in Yara heads the technical development and then the operational part in Yara heads the operational part.

Okay. Next question coming up is on the EBITDA. Do your targets imply USD 40 per tonne EBITDA margin on the 2 million tonnes from blue projects to 2030, meaning EBITDA target in 2030 would be USD 200 million, that is [ USD 120 million plus USD 80 million? ]

Yes, I will probably not comment upon the arithmetic used here. But just stating that our ambition is to sell 2.1 million tonnes of blue ammonia plus the 400-kiloton of green ammonia totaling 2.5 million tonnes in 2030. And then we have guided on the fact that 300-kiloton of this will be sold to the fertilizer blue and green market that will not give in a way the logistical $40 margin that we get on the 2.2 million tonnes. So what we have said is that our project will bring 2.2 million tonnes being transported plus whatever we can create on the third-party part. So -- if you -- I think your arithmetic is correct, but we are not guiding precisely on the total volume that we would be able to sell, including the third-party part of it.

Good. Moving on to North America projects. Do you already have confirmed partners for the North America project?

I think when it comes to that part of the portfolio, we are working on several different options. But I think the target is to sort of land on the portfolio that we described earlier, but we are working with several different options and discussing with several different partners. And this is, of course, from the ammonia perspective, a market that we know very well and where we are very present already today.

Good. And then next question. Can you elaborate on how you are planning to finance the USD 1.6 billion, USD 1.9 billion expected CapEx for HEGRA, and how much could be acquitted from an IPO -- how much could be equity from an IPO?

I think maybe just to start, I think the question referred to HEGRA. I think the numbers that we put up in the presentation were not for HEGRA. But in terms of the financing part, Hallgeir, do you want to go into that?

Yes. I cannot be very precise on the numbers because first, we need to know whether we have an IPO or not, which is not decided. If there is an IPO, that will be a major part of it, it will be a prime offering that will bring some cash to the company. And then we have a significant [ income stream ] from the company as such that will be used also to fund the growth development of the company. So that's about how far we are going. I could add that our target is to create a sufficiently strong company to be independent of Yara in relation to future funding and financing.

Yes. No, I can maybe just add that from the Yara side remains committed to the BBB rating and the capital allocation policy, which we have with an average annual CapEx of $1.2 billion per year. So that's why Yara aims to establish a stand-alone capital structure for YCA, where both CapEx and YCA -- where CapEx and YCA is expected to be funded from of the sourcing, including YCA's existing cash flow generation, debt capacity and additional potential equity financing. And we've also said that in accordance with IFRS Yara's reported accounts with in addition to CapEx related to its target of $1.2 billion also include 100% of capital expenditures in YCA, and we would provide a breakdown of those CapEx components as part of quarterly reporting and would, of course, come back with more details if Yara decides to proceed with a potential IPO.

Okay. [Operator Instructions] Then the next question here, there appears to be several other certification initiatives. Could this be a hindrance in terms of providing clarity for consumers by not having 1 scheme?

Yes, maybe I can start there. I think -- I mean, the obvious answer to that is yes, but I don't think there's that many different schemes. And I think they are to a large extent, converging towards 1 setup, and I think they're converging to a setup where the certification is very much based on the CO2 footprint of the relevant product as obviously, that's the only sort of number you can add together when you sort of use the ammonia with other products and later down in the value chain. I think we are definitely a part of many of those different certification schemes and -- or working groups. And of course, it's on us combined together with many of the existing ammonia players as well to sort of use our knowledge and competence on this to try to drive these different initiatives towards sort of a common standard. And also importantly, there are government standards being developed among other -- others by the European Union as well, which, of course, will be important, and we're also a very active part of those discussions. But the certification work, it's complicated work. It requires a lot of experience. And it's more than just defining color or sort of how the production method it is. And it's -- and that we're working very actively on with key partners. Joacim?

And maybe also add when we develop this certification for Yara, we do it primarily because we will have production already next year. So many of these processes go beyond next year. So we need this in place in order to sell the green volumes next year from our pilot projects. So we need to be forward leaning and developing this. And as we do that, we basically also build it upon what we see as sort of the gold standard. So we look at the EU taxonomy [ and read ] and all of the ongoing developments. And we try to be robust in what we do and have a very good system in place, which align with many of the developments we see. And also our projects as such, the 4 main projects we described also the premise would, of course, be also that they would be EU taxonomy aligned and so forth. So what Magnus mentioned about the EU also sets a certain standard for developments going forward.

Then moving on to another question. What needs to happen to promote low emissions ammonia in the fertilizer sector on a wider scale?

I think first of all, I mean there's a need to sort of distribute the cost of that through the value chain because obviously, farmers do not have the margins today to absorb the cost, the increased cost of the fertilizer. That has to be reflected also in the prices of the crops that they produce. So meaning that the farmer needs to be paid for decarbonizing whether that's through use of clean fertilizer or other measures on the farm to reduce the carbon footprint. And I think the good news in that story is, of course, that when you distribute that cost all the way to the end product, bread or your corn or whatever it is, that cost increase is quite insignificant. But it does require a collaboration along the value chain, including, of course, the food companies in order to make that happen.

I think the other good thing is that basically, this adoption require very little changes in that value chain because it's basically -- the only thing you do is that you change how the ammonia is being produced. The fertilizer is produced in the same way, it's the same molecule and so forth, meaning that the farmer buys essentially the same fertilizer has just been produced in another way. So there's no changes needed in this value chain as such. Other than finding how that cost can be covered. And as Magnus mentioned, sort of a bread typically, if you use green ammonia, for example, and green fertilizer, you will have a CO2 reduction of 15% to 30% of that bread. So that's how much the fertilizer part means in agriculture. It's a large part of the end product. But the cost is only a marginal increase of 1%. Or if we take coffee. It's EUR 0.5, which is sort of the impact on the cup of coffee. So not that large as such, but still important that the value chain comes together and really drives the decarbonization of food and agriculture.

Right. Moving on to a question regarding competition, do you expect more competition on trading ammonia as the amount of traded ammonia increases significantly over the coming decades?

Yes. I think it's natural to assume that in a growing market, there will be competitors and certainly new entrants as well. I think and that's something that we are used to dealing with competition both on the production side on distribution and sales across the value chain. I think our -- we need to focus on our strength with our competitive edges and our current platform and scale that and stay ahead of competition just as we do today.

Good. Then will EBITDA sensitivity to changes in the ammonia price evolve over time as the product mix shifts to blue and green ammonia given the different project structures?

Hallgeir?

I think the simple answer is probably not that much because when we develop our projects and increased ammonia price will have a sensitivity effect on the CAPP segment because it will lift the earnings and increased ammonia price will lift the earnings for that segment. For the AT&S 2-part it depends a bit on how we structure the contract between the upstream part and the midstream part. And that will be, I think, a minor issue in relation to the overall Yara Clean Ammonia sensitivity exposure to the growth. So I would say that it's better probably to relate to how it impacts the upstream earnings than to go deep into now the midstream part.

[Operator Instructions] The next question then coming up. Can you comment on margin differences between Yara volumes and third-party volumes?

I think we're not commenting on the EBITDA margins beyond what we've already done and what we have in the material. So I think we'll have to stick to what we've said there.

Okay. Then the next question, what are the major risks that could derail your target of plus 7% after tax returns on projects. Is inflation affecting your plans?

I think when it comes to project execution, I mean, that's -- and the risks associated to that, obviously, a lot hinges on good project execution. And I think there Yara has a strong track record when it comes to ammonia plants. For instance, our Freeport project finished on time [indiscernible] in 2018. And I think -- so those risk factors were used to handle. I think in terms of inflation and sort of the current inflationary environment, that is obviously something that we monitor very, very closely. And as that changes as well, it's important also to keep in mind that both that these projects take time to develop, but also that we have with our platform the flexibility to handle changes in the timelines here. So we can also choose when to execute and sort of fine-tune this as much as we can to sort of the market, both the commercial side of the market, but certainly also the inflation side and the sort of the factors that impact the cost of a project and so on. So that's also why we are sort of -- and the description quite flexible on the timing of these projects because we have the flexibility to grow with the market nevertheless.

Maybe just to add to that point, that inflation is probably not on top of the worries that we have and we want to develop commodity projects. It's much more the supply-demand balance that will decide this. And I think Yara has a very good record in timing, both, I would say, in respect of geographies and but also timing of new projects. And I think if you take a Yara list of typical commodity projects that have been developed, I think it started probably with Trinidad. We added Pilbara and then we had also Belle Plaine and Freeport into that category, which I think Yara has shown that to handle in a way the future demand supply-demand balances and I have a view on that has been, I would say, excellently managed by Yara over many, many years.

Good. Then a question coming up on carbon taxes. Now countries are reverting to coal and gasification amidst Ukraine war, do you still see authorities will be still so ambitious in increasing carbon taxes in the future?

I think what we've seen with the developments in the European Parliament and the European Council just over the recent weeks, demonstrates that the commitment towards that is still very, very strong, and it's followed up with concrete actions as well, even though those actions are both difficult and to some extent, costly for the society as well. And that will develop in line with the fact that in order to essentially then replace Russian energy into Europe, there are an increased use of coal as well. But as you know, signs that the EU is giving up on their climate agenda.

Okay. And then a question coming up regarding the IPO. When can we expect a decision on whether there will be an IPO for Yara Clean Ammonia or not?

Yes. So we're not providing any further update on the evaluation of a potential IPO. Today, we will take the necessary time to thoroughly evaluate the options and Yara and YCA would update the market in due course.

Then the next question is on offtake agreements. Will you be working for long-term fixed price offtake agreements for ammonia or do you expect to sell at spot prices?

I don't think it would be wise to comment on future commercial tactics and planning. But I think the way we see the market developing is very much in line with the commodity principles that we operate after today. And I think that's also sort of core strength of our business model. But I think we're very flexible in terms of what kind of models we can handle, and I think we will see as the future markets develop, how that will work out.

Then the next question, can you please share how your traded EBITDA per tonne has evolved over the last 10 years? To which extent does this rely on the ammonia price?

Hallgeir, do you want to...

Yes. I think we have just put in a limit to how concrete we are on the guiding of the past. I think we have consciously been able to manage this in a good way over decades. So I would just limit the answer to say that the sensitivity information that we have disclosed now is what you should use in order to understand the exposure of today's business.

Good. And then I think we're coming closer to an end, [Operator Instructions] The next question is regarded -- goes as follows. Do you have a target of the percent of traded volumes that are asset backed?

We don't have a specific target as such but I think it's fair to say that we believe that our current model is a very -- has a very, very good balance between asset-backed sourcing and third-party sourcing. And I think what we could add is that it is absolutely crucial to have own production in order to also be a credible and profitable sourcer of ammonia. So the combination is important. But I think our current set of functions very well. And then there's quite some flexibility there up and down as well. And that's, again, the strength of our business model.

I think just adding to that, I think we also see that sort of we are very attractive for third-party projects as well. So many of the projects out there need someone to offtake that ammonia and many of them come to us. And of course, that plays into our strategy as well. So we see sort of our position as very attractive for third-party producers as well.

Good. Then the next question. You talked about the potential in power. Do you see ammonia as a baseload power source in competition with coal, nuclear, natural gas rather than renewables?

I think -- I mean, I would say it's a replacement of those fuel sources in combination with renewables. But it is particularly relevant in countries where renewables are scarce and/or come at a high price. I think Japan there is a very good example with very high energy imports in there today, both in terms of fossil fuels, but also to struggle to cover their energy mix with the renewable sources. And then ammonia is a very good alternative as it is a source of clean energy that can be shipped in and then can replace for instance, coal in a coal-fired plant.

Great. Next question is short and sweet. Is Yara Clean Ammonia a shipping company?

No. I think that's the easy answer to that. We are that too, but I think -- obviously, we operate a fleet of vessels. But I think it's very wrong to look at Yara Clean Ammonia as a shipping company. What we are, we are an integrated company with a large midstream platform. And the way we define that is that we use that both to source, to sell, to optimize within that system. And importantly, also to integrate the upstream assets of Yara with the consuming assets of Yara, and that enables us to also add to that scale with third-party sources and third-party sales. And it's sort of the optimization of that system, that's core to our competitive edge, and we're certainly not a company that ships ammonia from a to b.

And if I could add to that, Magnus, I think I will definitely not want to work in a shipping company as such. I think we are the enabler of this energy transition, and we are profitable today, and we have excellent growth prospects.

Good. Then moving on to a question regarding HEGRA. Could you elaborate on the advantages of HEGRA being good connected?

Lise?

Yes, I can take that. Yes, I think it's extremely important when you look into the cost of especially the hydrogen projection because today, electricity plant is quite expensive. So by being grid connected, we are able to utilize this electrolyzer plant 100%. And the benefit also with the grid in Norway is that it lead to compliant. So that gives us an additional value for that. But for instance, if you compare with the renewable grid or off-grid solutions based on renewable on solar wind, you maybe have availability of the power of 25%, maybe 50% if you have a combination of solar and wind. So then you to be able to get the same production, you need to more than double your capacity of the electrolyzer plant. And of course, that drives cost. And in addition to that, you also need to have in between that, the storage capacity and/or battery to back up this supply. So that gives the benefit for HEGRA with being grid connected extremely good compared to when you are off-grid and on the 25% to 50% available power.

And I think it's also important to add to that, that the reuse of existing infrastructure as well is a very significant benefit there, and also important, which is a bit more of a technical detail, but important one is that an ammonia plant is dependent on running 24/7, which, of course, means that you need 24/7 power supply in order to keep the plant running. And that's, of course, also is an important element of being grid connected.

Good. Are there any threats from environment bodies, NGOs on questing CO2 into the ground. It will saturate ultimately with consequences underground.

I think CCS is a technology that's been in use for many, many years, both in Norway, as well as in the U.S. and in other locations. And I think CCS is the only opportunity to significantly scale up a clean hydrogen production fast. And I think both companies like ourselves but also the CCS operators as well as relevant authorities, whether that's in the United States or in Norway are very much focused on ensuring that, that exactly does not happen. And I think that's -- so that's -- that will be well regulated, and it's also the reason why, for instance, you need to have bilateral agreements between countries to ship CO2 across borders for storage so that there's no doubt where the accountability lies on that. So I think that technology has come far. And certainly, as we go forward, that will be developed further as well.

Good. Then we're coming up with the last questions now. Would you expect prices for green ammonia be more fixed than those dependent on natural gas?

I think that's difficult to sort of predict the future and the future pricing environment. But I think -- at the end of the day, it is a commodity, and it is a commodity that's impacted by supply and demand. And I think it's likely that at least longer term, ammonia, regardless of how decarbonized it is, we will continue to follow the same principles. So a pure fixed price regime, we don't believe in.

Good. Then the final question in today's Q&A session. When will Yara Clean Ammonia be clean in the sense that the majority of the volumes will be clean, that is blue or green?

Yes, good question. I think it will develop on the project development side, obviously. And to the extent that we -- the timeline of developing the project. We will have the first green molecules already next year. So that's, of course, a very important milestone in that regard. And it also, it will develop, it will depend much on the market and demand growth for clean ammonia as well. So but we are, of course, is a core part of our plan to clean or to have a portfolio of green and blue ammonia as fast as we can.

Good. That was the last question from the audience. And then let me just thank you for following the webcast, and participating in Yara Clean Ammonia's Capital Markets Day. Thank you.