Hello and welcome everyone to the Transactions Announcement Webcast. My name is Becky and I'll be your operator today. After the presentation, we will have a 15-minute Q&A. You can register a question by pressing star followed by one on your keypad. If you change your mind, please press star followed by two. If you are joining us on the webcast, please register your questions online via the question box. I'll now hand over to your host, Samar Khan, Vice President of Investor Relations at Borouge to begin. Please go ahead.
A warm welcome to everyone and thank you for joining us for today's webcast hosted jointly by Borouge and ADNOC. My name is Samar Khan and I'm the Vice President of Investor Relations at Borouge. The purpose of today's call is to address the strategic and positive announcements made by ADNOC and OMV regarding the proposed all-share combination of Borouge and Borealis to form Borouge Group International and the proposed acquisition of Nova Chemicals. Before we begin, we would like to point out that the presentation accompanying today's call is available on our website, www.borouge.com. During the session, there may be reference to some forward-looking and performance statements which are based upon reasonable assumptions and deemed useful information to investors.
Nothing in this presentation is intended to or constitutes an offer or an intention to make an offer by any person including ADNOC, OMV, Borealis, Nova Chemicals, or following its incorporation, the Borouge Group International, for shares in Borouge or a recommendation by the Board of Directors of Borouge under the decision of the Chairman of the SCA Board of Directors number 18 RM of 2017 or under the ADGM takeover regulations takeover code rules 2015. We will commence this call with a brief presentation about the proposed transaction terms, additional information on Borealis and Nova, perspectives around the strategic and financial rationale, and the indicative next steps, and then we will open it up for questions. For today's presenters, I have with me the Borouge Management Team, Chief Executive Officer Hazeem Sultan Al Suwaidi, and Chief Financial Officer Jan-Martin Nufer.
We are also joined by ADNOC representatives, Chief Investment Officer Klaus Fröhlich, as well as the President for Global Chemicals at XRG, Hital Patel. I would now like to turn the call over to Hital to start the presentation. Over to you, Hital.
Thank you, Samar, and thank you all for joining us today on what is, for all of us, a very exciting day because these transactions are a deeply strategic and landmark moment for the company and all of its stakeholders, which I'm incredibly excited about. We are creating a global industry powerhouse and strengthening our ability to capture long-term value in an industry that continues to offer very significant opportunity. Borouge and Borealis have a long history as strategic partners in so many facets, including technology and marketing and various other avenues. So the combination of both of these companies is a natural but also transformational progression of this relationship to become a unique, distinctive, and powerful global player.
Now, the joint acquisition of Nova through the newly formed company, Borouge Group International, will strengthen our global presence even further with a stronger North America footprint, an enhanced product portfolio, and a broader portfolio of production technologies. So if you think about it, Borouge today is a vertically integrated and feedstock competitive player, mostly selling into Asia, Middle East, and Africa. Now, with these transactions that we're contemplating, we are adding Borealis, a world-class technology-focused producer of comparable scale with a large footprint in Europe and North America, as well as Nova, which is a leading feedstock advantage North American player with proprietary technologies. So when you add them together, the new company will deliver a truly global footprint across the Middle East, Europe, and North America, as well as significantly increased scale, which is going to make us the fourth largest polyolefins player globally by nameplate production capacity.
Now, we're also reinforcing our advanced cost curve positioning with access to low-cost feedstock and exposure to lower energy benchmarks if you think about AECO in Canada and Henry Hub in the U.S. Now, all three of these companies are at the forefront of innovation with cutting-edge technology offerings that will enhance our positioning in the polyolefin industry. So Borealis has its Borstar technology. Nova has advanced Sclairtech as examples, and these technologies are going to underpin and complement the premium product offering.
Now, in addition to this, we're also adding to Borouge a portfolio of ongoing projects in sustainable and circular solutions that strengthen our readiness p articularly in circular solutions.
Importantly, through the complementarity of the three companies, Borouge Group International is expected to create around $500 million of synergies per annum that will be driven mainly through marketing and distribution opportunities, so in summary, we retain the characteristics that have always differentiated Borouge, which is cost curve positioning, premium products, and technological know-how, with also the added benefits from additional proprietary technologies, circular capabilities, and further strengthening our premium product portfolio, so these core and enhanced components to Borouge's story will allow us to propose an attractive dividend policy for Borouge Group International. This dividend policy will be accretive compared to Borouge's 2024 dividend and will provide further details later on in this call. This is a transformational moment in Borouge Group International's history and also creates significant opportunities for long-term value creation for all our shareholders.
With these transactions, three world-class businesses coming together synergistically under the Borouge Group International, which will deliver a true global polyolefins champion. Now, as I'm sure you know, Borouge is a vertically integrated, feedstock competitive, large-scale production base, all located on a single site in Ruwais, and is a leading provider of differentiated polyolefin solutions for multiple sectors in growing markets, particularly in Asia, Middle East, and Africa. The company has a polyolefins nameplate production capacity of 5 million tons per annum. This capacity is expected to increase by around 1.4 million tons per annum following the startup and recontribution of Borouge 4 in 2026. On average, over 2020 to 2024, Borouge had an EBITDA of $2.4 billion. Borealis is a leading innovator in polyolefins globally, with its production sites located in Europe and the U.S., and primarily serving Europe and North American markets.
Borealis has a world-class proprietary technology portfolio, including Borstar, which is a state-of-the-art multimodal proprietary technology for manufacturing polyethylene and polypropylene. The company has a polyolefins nameplate production capacity of 4.6 million tons per annum, including Borealis' 50% stake in Baystar, which is its joint venture with Total in Texas. Now, Borealis had an EBITDA of $1.1 billion on average over 2020 to 2024. If you take a look at the right-hand side of the chart, you'll see Nova Chemicals, which is a leading North American player benefiting from access to low-cost feedstock, proprietary technologies, and has a leading position in packaging solutions. The company has a polyethylene nameplate production capacity of 2.6 million tons per annum. It also had an EBITDA of $1.1 billion on average over 2020 to 2024.
Now, importantly, this is the historical EBITDA for Nova, but as you'll see later in the presentation, we will highlight the expected near-term growth projects that have been implemented and also what normalizing for the pricing cycle looks like. Now, these transactions will create a differentiated global polyolefins champion with leading technologies and, importantly, leading profitability. It will have a capacity of 13.6 million tons per annum if we include Borouge 4. If we take into account Borouge 4, the anticipated synergies, as well as the run rate operating rates and normalized prices, we get to a through-the-cycle EBITDA north of $7 billion going forward. I'll now hand over to Klaus to talk about the transaction overview.
Thank you, Hital. Hi, everyone. I'm Klaus Fröhlich. I'm the Chief Investment Officer of ADNOC. I can tell you I'm really very, very happy to be here today. It has been a very long journey, and we are all very proud that we can present to you today this landmark transaction. I'm saying landmark as I feel this is significant not just for ADNOC, XRG, and OMV, but also, of course, for the respective companies. What you see on this page is a summary of the high-level transaction structure. It shows three transactions that were agreed and signed today. The first part is that it was agreed between OMV and ADNOC to combine our joint polyolefin platforms, Borouge and Borealis, resulting in the creation of Borouge Group International.
The second part is that we signed today that at closing of the Borouge and Borealis combination, Borouge Group International will acquire Nova Chemicals from Mubadala. The third part is the contribution of Borouge 4. The Borouge 4 project is currently owned 60% by ADNOC and 40% by Borealis. The project will be taken out of the perimeter and given ADNOC currently owns 25% of Borealis. At closing, ADNOC will own 70%, and the remaining 30% will directly be owned by OMV. It is expected to be contributed once fully operational at the end of 2026. Importantly, we have agreed that this contribution will be at cost, which will be around $7.5 billion. This will be covered in detail later on in the presentation. Coming back to the broader group, OMV and ADNOC will have equal ownership of the new company with around 47% each.
As part of the transaction, at closing, OMV will inject approximately EUR 1.6 billion into the new company to equalize ownership and to strengthen the capital base. The free float of currently 10% will be 6.12% of the enlarged company at closing. Borouge Group International will be headquartered and domiciled in Austria with regional headquarters in Abu Dhabi. The listing will continue to be in Abu Dhabi on the Abu Dhabi Securities Exchange. As there will be a new company formed, there will be a share-for-share exchange for existing Borouge shareholders in 2026. As for financing, the first step, the combination of Borouge and Borealis, will be cashless, namely it will be a share-for-share merger. The acquisition of Nova's equity will be financed via a bridge loan that subsequently will be financed with a $4 billion capital increase in addition to term loans and bonds.
The contribution of Borouge 4 will be at the end of 2026 and therefore later than the closing of the first two steps. It will be financed by debt. Borouge Group International will obtain a credit rating that will be made public at closing. It is ADNOC's and OMV's intention that at all times, Borouge Group International will maintain an investment-grade profile, which we've simulated to be comfortably achievable given the EUR 1.6 billion capital injection by OMV and the up to $4 billion capital increase that we will do soon after closing. When I say market placement of this $4 billion capital increase, maybe two more details that are important for you as shareholders. Firstly, current Borouge shareholders will be invited to participate in this capital increase at the time of placement.
This means that you will have the right to subscribe to shares pro rata your stake when this capital increase happens sometime in 2026. Secondly, OMV and ADNOC will not take up our subscription rights of this placement. This means that the large majority of the capital increase will be placed with new investors. This will increase the free float of Borouge Group International to somewhere in the low teens percentage points and is intended to achieve MSCI index inclusion sometime in 2026. On the right-hand side, you can see a simplified holding structure following completion of the transactions where 10% Borouge free float today will become 6.12% at completion in the enlarged company. As usual, the transactions are subject to obtaining customary regulatory approvals, which will start as soon as possible. We're also going to actively engage in discussions with SCA and the ADX to move things forward.
We're confident that we will navigate the customary antitrust and foreign direct investment approvals efficiently and will provide regular updates over the coming months. While all this sounds fairly complicated, I'm sure you have many, many questions. One of the objectives of what we are announcing today is actually to simplify the ownership structure, aligning objectives and fully capitalize on the combined potential of these four companies. I say four if you include Borouge 4 as a company. One last detail before I hand back to Hital. Upon completion of the transactions, the shares of ADNOC's shareholding in Borouge Group International, so our 47%, will be transferred to ADNOC's 100% subsidiary, XRG. As you know, we recently formed XRG, and this will be one of our cores of our global chemicals platform next to Covestro.
For those of you who are unfamiliar with XRG, we recently launched this, and it is ADNOC's international low-carbon energy and chemicals investment company with three platforms: chemicals, gas, and low-carbon energy. Borouge Group International obviously will be one of the cores of the chemicals vertical. Now, let us take a closer look on the next page to see the full potential of these three companies with Hital.
That was great. Thank you, Klaus. Now, if we take a look at this slide, you can see how Borealis and Nova are truly complementary to Borouge from multiple perspectives. Number one, they complete the global geographic coverage. Nova is North America-centric with around 90% of its sales in Canada and the U.S., and all of its asset base in North America. This is truly complementary to Borouge, with North America being the market which to date remained mostly untapped for Borouge. Borealis, on the other hand, provides a comprehensive coverage of Europe, with the region accounting for more than 80% of Borealis' sales and being the second-largest polyolefins producer in Europe. Most of the asset base is also located in Europe, with main plants in Austria, Belgium, Finland, and Sweden. Second, both companies, similar to Borouge, are cost leaders in their respective geographies.
Nova, which has two integrated production centers, one in eastern Canada, one in western Canada, and then one merchant ethylene unit in the Gulf Coast of the U.S., enjoys unparalleled access to low-cost feedstock. Think about it, more than 75% of its feedstock is exposed to lower-priced benchmarks such as AECO, Henry Hub, and Mont Belvieu. Having its own pipelines connecting its facilities to these strategic resource bases provides further security of supply, and Borealis, with its production base spread across Europe, efficiently serves its clients in every corner of the continent and maintains a continuous first quartile position on the European cost curve for its olefins plants, supported by its feedstock flexibility. Third point, each of Borealis and Nova are innovation leaders. Borealis has more than 12,200 patents, including for technologies like its Borstar technology, Borseed, Borlink, and Borcycle, as well as having three innovation centers in Europe.
Nova has more than 2,500 patents, including for Advanced Sclairtech, Sclairtech, Novapol technology, and others, and it has two innovation centers in Canada. Finally, each of the companies offers solutions that are complementary to Borouge's existing premium products portfolio. Borealis' output is highly attractive, with around 45% or so being specialty grades, which allows it to work with blue-chip industrial names. It's also at the forefront of the circular economy in the polyolefin space. Nova is a leader in advanced packaging solutions, being a supplier to large players in the consumer packaging industry. Let me now hand over to Hazeem to go through the new entity's profile and positioning.
This is Hazeem Sultan Al Suwaidi, the CEO of Borouge. Thank you all for joining us today. We would now like to turn your attention to the proposed transactions and share our views around the strategic rationale, as well as the conviction we have around the future prospects that this new entity will create. The strategic rationale of the transactions is based on five distinct pillars. First, global scale is achieved through capacity and market reach into key geographic markets. Second, an advantaged cost position with access to low-cost feedstock. Third, focus on complementary value-added products and cutting-edge proprietary technology. Fourth, the new entity is primed to benefit from demand shift towards sustainability and circularity. Fifth, financial strength, best-in-class margins, strong foundations for the future, and identified potential synergies of approximately $500 million per annum.
Let me walk you through each of these points in a bit more detail over the next few pages. The Borouge Group International will be one of the largest polyolefins players globally and will achieve several landmark milestones based on its combined production base alone. With a pro forma capacity of approximately 13.6 billion tons per annum expected in 2026, the new platform will rank number four globally by polyolefins nameplate production capacity. Overall, the new entity will have 14 olefins plants, 36 polyolefins plants, and 12 compounding facilities across the three continents. Importantly, the Borouge Group International will achieve significant backward integration, i.e., the ratio of total polyolefins capacity to internal olefins capacity of more than 90%, underpinning the resilience of its margins and minimizing potential disruption to supply chain.
While scale is important, diversity in production footprint and global marketing reach are equally critical differentiators for success in the petrochemical space. From a production point of view, the company's worldwide footprint will provide the ability to optimize netbacks and have a flexible supply chain, which is resilient to regional disruptions on feedstock and product supply. Borouge Group International will benefit from sales centers spanning the world and, as such, will be able to tap into three key regions with significant polyolefins demand: North America particularly, Canada and U.S., which is a focus of Nova, Western Europe, which is a focus of Borealis, and Asia, the Middle East, and Africa, which is a focus of Borouge. Through this global presence and direct market access, the new entity's sales force will retain local insights into evolving client needs, which will enable us to directly respond to and anticipate these client demands.
In summary, Borouge Group International will be strongly positioned to capture the advantages from the growing markets in Asia, as well as benefit from the stability and strong customer relationships in Europe and North America. This global diversification is nicely illustrated by the revenue mix, which you can see on this page. The global production footprint that I explained on the prior page is showing in the revenue split of each entity as well. Borouge, with more than 60% of revenues generated in Asia-Pacific, Borealis, with over 80% from Europe, and Nova, with over 90% from Americas. Together, the three entities have generated more than $17 billion in revenue in 2024, with a much more geographically balanced combined split, as you can see in the chart on the right-hand side, where no region contributes more than circa 40% share in revenues.
On top of the existing footprint, the new entity will also benefit from the existing near-term and world-class growth project, Borouge 4, which will make the Borouge Ruwais Complex the world's largest single-site polyolefin complex, further reinforcing production capabilities with 1.4 million tons per annum of polyethylene capacity using Borstar's third-generation technology. In addition, Borouge 4 is expected to contribute through the cycle EBITDA of around $900 million. ADNOC and OMV will have 70/30 ownership in Borouge 4 and will continue to fund development CapEx through the completion. Total costs for the project are estimated at approximately $7.5 billion, including aggregate expenses and investments, financing costs, and owners' costs. Borouge 4 is envisaged to be recontributed at cost by the end of 2026 when fully operational.
The shareholders intend to retain flexibility with respect to the funding and timing of the recontribution, taking into consideration the overall market conditions, the credit rating, as well as cash flow generation and DPS accretion upon recontribution. Operating cash flow and DPS accretions are important principles that were agreed at the time of the IPO and that will be maintained. We also intend for Borouge Group International to maintain operational control of the assets, including the marketing of the volumes. In addition to current feedstock advantage at Borouge level, Borouge Group International will benefit from advantageous cost positioning in Europe and North America. Nova Chemicals has direct and ample access to low-cost North American ethane, natural gas, and energy, enabling a global cost advantage. Nova is more than 75% exposed to major U.S., and Canadian benchmarks, including Henry Hub, Mont Belvieu, and AECO, and has 100% ethene feedstock.
Nova produces ethane at two locations in Canada: Joffre, Alberta, in western Canada with 2.2 million tons per annum of nameplate capacity, and Corunna, Ontario, in eastern Canada with 1.3 million tons per annum of capacity. Corunna is strategically located near prolific shale basins, which grant it access to lower-cost ethene feedstock. The ethane produced at Corunna supplies three of Nova's PE production plants: Moore, St. Clair, and Rokeby, AST2 . Total PE capacity in the east is one million tons per annum, meaning the production is mostly integrated. In the west, Joffre's site is integrated with Alberta Ethane Gathering System, a series of pipelines connecting to ethane extracting plants. Further reducing costs, feedstock prices are linked to AECO. Usually trading at a discount to Henry Hub, production is integrated with 1.6 million tons per annum of PE plants.
In the U.S., Nova produces ethene in Geismar, Louisiana, which is located near ethene hubs in the USGC network. Borealis olefins plants have consistently been well-positioned on the European cash cost curve, with Stenungsund and Porvoo sites very first quartile in Europe consistently over the past years. This is in part because their crackers have high feedstock flexibility and can use a high share of light feedstock, which is economically advantageous. Additionally, these two sites benefit from strategic proximity to the sea and ownership of storage caverns. This means that Borealis can take advantage of a global feedstock arbitrage, such as low-cost ethene which is procured from U.S., via chartered vessels. Borouge, Borealis, and Nova have access to various end markets. The acquisition of Nova brings about access to advanced packaging solutions, including higher value-added products such as C8 film, ASTUTE Plus thermals and biaxial shrink, and more.
Used in consumer products, the company has focused its strategy in achieving a stronghold in its target end market: food packaging, rotomolding, hygiene, and others, by developing high-performance-grade polymer offerings. This, for example, includes Surpass octene resin produced using Nova's proprietary Sclairtech technology, which enables light weighting while retaining toughness and puncture resistance and maintaining a good level of processability. This know-how complements Borouge and Borealis' current offerings in advanced packaging, example in TOPE, Borstar PE, Borpure PE, and so on, as well as their leadership in wiring cable, pipe, auto, and other end markets. The energy and infrastructure applications are expected to show above-the-market growth, and therefore a focus point for the two companies. Borealis has more than 15 years of proven operational excellence and leadership in materials for high-voltage cables.
The result is a new entity that will have diverse access to end markets that are complementary to one another. Now, allow me to hand back over to Hital to talk through the innovation and technology capabilities of the combined platform.
Thank you, Hazeem. Technology and innovation are at the core of Borouge, Borealis, and Nova's strategy, and this is what is going to allow Borouge Group International to serve customers in the best way, keeping up with, or as I would prefer to say, being ahead of the curve. Borouge, Borealis, and Nova, each of them, have extensive and world-class innovation competencies. As a result, on a pro forma basis, Borouge Group International will include more than 800 research and development experts and over 16,500 patents following completion of the transaction. This foundation will enable us to offer differentiated products that are suitable for high-end applications as well as circular and sustainable solutions. These specialty products command competitive pricing, better margins, and benefit from more resilience through the cycle. Borouge Group International will have seven world-class innovation centers. These will be strategically located in the three key demand hubs.
In Europe, Borealis has three centers. In the Middle East, Borouge has one. Borouge also has another one in China, and Nova has two centers in Canada. Both Nova and Borealis also have demonstration plants where new catalysts, products, and processes can be tested to support commercial scale-up. Nova has a demonstration plant for advanced Sclairtech technology at its St. Clair site in Ontario, and Borealis has two demonstration plants in Austria, one in Linz and one in Schwechat. There are some existing technologies which are new to Borouge, such as Borseed, Borcycle, Advanced Sclairtech, Novapol, and Syndigo. So let's take a look at some of these technologies. Borseed enables flexible materials which have wide applications such as automotive, high-end flexible and rigid packaging, housewares, and wire and cable. Borcycle is a recycling technology that transforms polyolefin waste streams into value-added solutions.
The technology caters to both mechanical and chemical recycling processes. Advanced Sclairtech is a unique single-site catalyst solution phase technology that supports Nova's offering of advanced packaging solutions with benefits in customer processing and higher strength. Novapol is produced using Nova's proprietary tubular and gas phase technology, best known for its product's consistency, reliability, and versatility. Syndigo is Nova's brand of mechanically recycled polyethylene, which is FDA-approved for food use technology-wise, with the new entity going to deliver key competitive advantage that I will now cover on the next slide. The advantages looking at this slide are tangible and will enhance our competitive global positioning in the industry. First of all, we're going to be able to develop and roll out new technology and product innovations in markets where they create the most value.
The larger, extensive scale of the platform allows us to marry the best solutions with the most promising opportunities worldwide. So, as I mentioned, there are further opportunities for sales in Europe of C8 polymers produced with Advanced Sclairtech. And Nova's technology to produce C8 linear low-density polyethylene monomer is one of the few globally being complementary to the Borouge and Borealis portfolio. Second of all, we will be able to roll out new innovations faster, enabling a shorter time to market for new products and faster application at scale to serve customer needs across the globe. As we mentioned earlier, R&D personnel are going to increase eightfold, the number of innovation centers more than threefold, and we get access to Nova's and Borealis's three demonstration plants in Canada and Austria.
And thirdly, this will ultimately lead to more competitive, premium-quality products with better margins, which is already being demonstrated if you look at some of Borealis and Nova's high-end products. Looking at this slide now, as Hazeem mentioned earlier, one of the key elements of the transactions is maintaining leadership in capturing demand and expanding further our positioning in the sustainable and circular solution space. The polyolefins industry is showing strong growth over the coming years, and included in this growth are significant opportunities in the circular economy space. Borealis and Nova have several projects underway which are focused around providing sustainable solutions, which will give the combined entity the advantage of being an early mover and granting it the ability to be flexible as the industry evolves.
First of all, Borealis's proprietary technology, Borcycle, offers various solutions such as mechanical and chemical recycling and has already received the International Sustainability and Carbon Certification, the ISCC. Borealis has also made a number of strategic acquisitions in the post-consumer plastics, waste sorting, and recycling space, namely Renasci, Ecoplast, and MTM Plastics. These are leading and innovative players in their field and are going to allow us to capture future upside from sustainable and circular solutions going forward. Finally, Nova is developing a mechanical recycling plant in Connersville, Indiana, where around 50,000 tons a year of recycled polyethylene capacity is expected by the end of the year. Several contracts are already executed, showing that there is tangible customer demand for circular solutions. This plant is also going to serve as a blueprint for potential future growth as the recycled polyolefin market matures.
Now, in addition to this strong positioning in recycling, the combined product portfolio includes products and innovations which support the sustainability targets of our clients and worldwide energy transition, as well as circularity megatrends. For example, if you take Borouge's Borlink-based products, they support the transition to renewable energy by allowing connection of offshore wind farms to grids around the world. Borouge is also working on new innovations to support clean solar energy, and also Borouge is self-developing a self-cleaning polyolefin technology which reduces food waste and boosts recyclability to support the progress of the circular economy. If we take a look at Borealis, they have a plethora of products supporting sustainability and energy transition. For example, if you take Stelora, which is an engineering polymer with superior heat resistance capabilities and potential applications in power generators, inverters, and electric vehicles.
Borealis also offers sustainable packaging solutions with around 80% PCR content. Another example is the Queo Bornewables line, which is a range of bio-based plastomer and elastomers. So these megatrends are significant tailwinds already, and we do expect them to strengthen in the coming years, and as such, we believe we are well-positioned to be part of these through our rich product offering. I'm now going to hand over to Jan-Martin to take us through the pro forma financials of the Borouge Group International.
Thank you, Hital. This is Jan-Martin Nufer, Chief Financial Officer of Borouge. Warm welcome also from my side. The new platform builds on the inherent financial strength of Borouge, Borealis, and Nova. I would like to note that the numbers on this slide, but one, do not include any synergies on which Hital will elaborate shortly, as well as future benefits driven by contribution of Borouge 4. On a pro forma basis and excluding synergies, the new entity's EBITDA would total $4.5 billion on average over the 2020 to 2024 period. Quite a robust number and delivering significant scale with one of the largest petrochemicals' EBITDA in the industry.
Over the five years from 2020 to 2024, we have seen a lot of fluctuations on the global market, yet at any individual year, the new entity would have delivered at least $3 billion of EBITDA, going to as high as $7.2 billion in a peak environment. The combined company has consistently strong EBITDA margin profile, averaging to 26% over the last five years and going up to 35%. I just want to note that this is expected to be further enhanced by identified synergy opportunities and geographical diversification, lowering exposure to risks in any particular market.
This attractive EBITDA margin profile translates into meaningful free cash flow generation with a cash conversion ratio of approximately 61% on average over the period 2020 to 2024, which is significant despite the growth capital expenditure incurred at Nova over the last years to deliver the AST2 project, adding 425 kilotons per annum of high-margin PE capacity. While we don't show it here on the page, as you can imagine that through the cycle, free cash flow and cash conversion will be meaningfully higher than this, benefiting from the incremental EBITDA as well as lower total CapEx on average as the historical growth CapEx fall away. Along with strong profitability, the new entity is expected to have substantial balance sheet strength and is targeting a through-the-cycle net leverage of up to 2.5 times. We are very excited about what these transactions will bring in terms of financial capabilities.
We expect further substantial growth in through-the-cycle EBITDA levels brought by the startup of Borouge 4 and realized potential synergies between Borouge, Borealis, and Nova. Strong financials will allow us to pursue a more robust, more predictable, and enhanced dividend policy while also allocating funding for any organic and inorganic growth opportunities, with our shareholders ultimately seeing the benefits. Continuing from the last page, let us zoom into what would have been the historic relative performance of Borouge Group International to its peers. As you can see, the new entity will continue to have best-in-class EBITDA margins compared to select global listed petrochemical peers. The average EBITDA margin for the new company across the years 2020 to 2024 would have stood at 26%, well above the peer average of approximately 16%. Furthermore, the new platform will continue to demonstrate stronger margin resilience compared to peers through the cycle.
This robust EBITDA margin profile is supported by Borouge being vertically integrated and having feedstock competitive operations with a top quartile position within the global cost curve. Borealis benefiting from cracker feedstock flexibility, Nova's focus on specialty products and access to low-cost feedstock, Borouge's, Borealis, and Nova's differentiated and specialty products offering commanding premium pricing. To summarize, the combined entity will continue to have the same resilient and industry-leading margins due to access to cheap feedstock, cost curve positioning, and premium product portfolio. With that, I'm handing it over to Hital to talk about the foundations for the future.
Thank you, Jan-Martin. Next, we thought it would be helpful to walk you through what we expect the through-the-cycle EBITDA for Borouge Group International to look like by the end of the decade under normalized market conditions and how we get there from the last five years' pro forma average of $4.5 billion. First of all, as we mentioned before, we have several growth projects and efficiency programs coming online which will be additive to the group's EBITDA. For Nova, we have AST2 and the Nova at 50 efficiency program, which are expected to contribute around $500 million in annual EBITDA. For Borouge and Borealis, we have the Kallo PDH project, we have the EU2 and PE4 and PP5 revamps, and put together, these projects are expected to contribute around another $400 million in EBITDA alongside Borouge 4's $900 million through-the-cycle EBITDA.
In addition to all this, we expect the normalization of operating rates, prices, and spreads to contribute around another $800 million. Finally, with the inclusion of the run rate synergies, which you'll recall from before were around $500 million, we expect to achieve. We're going to land at an expected through-the-cycle EBITDA north of $7 billion. We believe in a favorable outlook for the industry, and this EBITDA represents a culmination of our view on the potential of Borouge Group International when considering recent capacity expansions that are currently ramping up, run rate synergies, as well as normalized operating conditions under a mid-cycle market environment. So, as I just said, we do expect a substantial increase in EBITDA for Borouge Group compared to historical levels, and this is going to be driven by new projects coming online as well as the cycle recovering.
Now, if you look at this slide, I want to draw your attention to the very large operating leverage of our business. You can see here the PE prices across our main three regions. So, at the peak in 2021, you can see we were between $1,200 per ton in Asia and $2,100 per ton for North America and Western European pricing crossing $2,200 per ton. Now, this drops to between $650 and $900 in Northeast Asia and North America, respectively, in the trough in 2020, with Western Europe at around $800 per ton on average over the past five years between around $950 and $1,300 per ton, almost reaching $1,400 per ton for Western Europe. So, let's take a look at where we are today. The good news is that we believe the trough is behind us.
If you look at current spot rates of $1,220 in Western Europe, around $855 per ton in Northeast Asia, and around $1,100 per ton in North America. Now, we're still around $160 per ton below the average and literally hundreds of dollars below the peaks. This means, as I said at the start of the page, that our company has massive operating leverage. As an example, at over 13.6 million tons per annum of production and a 90% operating rate, every $100 per ton price increase across all these benchmarks would imply over a billion dollars in revenue impact, and a large part of that would drop to the bottom line. Okay, now on this slide, let's talk a bit about synergies.
We've been working over the past several months to understand where can we unlock significant value creation through optimization, network benefits, and procurement synergies, in addition to the benefits of larger scale and a technology-focused platform. As the headline suggests, we expect these potential synergies to be around $500 million per annum on a run rate basis. Importantly, we expect the synergies to be able to hit the bottom line in the relatively near term, with around 75% of these synergies expected to be realized within the first three years after completion. There are a few key drivers for these synergies that I'd like to highlight. I think, first of all, there is what we call global sales and production network optimization, which is adding to Borouge's Asian, Middle Eastern, and African footprint a European and North American footprint. What does this enable?
So, first of all, it enables cross-selling products by leveraging the complementary offering of each of the businesses. Second, it optimizes the destination mix by jointly targeting the highest value markets, which means being able to move products from one market to another depending on where we see the best margins. And the third point is the global production optimization based on each of the unit strengths, especially between Borouge and Borealis, which share underlying technologies in their fleets. This is going to reduce downtime and switching time for the fleets. Now, the second big bucket in the synergies is procurement optimization. Given we're going to be a significantly larger platform, we're going to be able to leverage more attractive terms across our joint supplier base, and we're going to be enabled to renegotiate existing contracts to maximize value for the group.
We're also going to be able to leverage better our joint in-house production capacity of catalysts and co-olefins to reduce procurement costs. This is an immediate win as it internalizes key license payments for Borouge, which I'm sure you can imagine. Now, these identified initiatives are expected to bring a significant value. The implementation costs are basically one-off and likely to be in the order of around $150 million during the implementation period. Beyond what we've identified as potential synergies, you can see, detailed on this slide, there are further distinctive and exciting growth opportunities. So now I'm going to hand over to Klaus to talk about the structure and financial highlights.
Thank you, Hital. I will provide further details on the report's structure of the transactions, the governance, and more details on the financial framework of Borouge Group International, including the new dividend policy. Okay, slide 25. So, on governance, the new and large company will be listed on the Abu Dhabi Securities Exchange, obviously subject to regulatory approvals, and we will place in the share-for-share exchange the current listing of Borouge plc. The new company will be domiciled in Austria with regional headquarters in the UAE. The company will be incorporated in Austria to achieve a number of important joint commercial, legal, and tax objectives that seek the best economic outcome for all parties involved, including Borouge shareholders. ADNOC and OMV will have equal ownership and equal governance rights.
Both ADNOC and OMV will have rights to appoint the same number of representatives to the supervisory board of Borouge Group International. The chairperson of the Borouge Group International board will be nominated by ADNOC. There will be two vice chairmen, one nominated by OMV and one by ADNOC. The management team will be jointly nominated by ADNOC and OMV and communicated in due course. As a general principle, all nominations will be merit-based and will follow a structured selection and appointment process. The governance regime will be outlined in more detail at a later stage and will comply with applicable law in Austria and the applicable rules and regulations of SCA and the ADX. Lastly, ADNOC and OMV are combining all polyolefin activities and intend that Borouge Group International will serve as their joint global platform for polyolefin's growth in the future.
Coming to the next page, as highlighted earlier, we intend to implement the Borouge and Borealis combination through an all-share deal. ADNOC and OMV will initially contribute their directly and indirectly held shares in Borouge and Borealis to Borouge Group International in exchange for shares in the new company. As part of the transaction, OMV will contribute primary capital of around € 1.6 billion into Borouge Group International to equalize its ownership with ADNOC. This capital will provide further balance sheet headroom for Borouge Group International to fund the contemplated transactions and further growth. Upon completion of the combination, Borouge Group International will acquire Nova Chemicals for an enterprise value of $13.4 billion, implying a seven-and-a-half times through-the-cycle EBITDA multiple. This is an attractive multiple when considering Nova's feedstock advantage, upcoming growth projects, proprietary technology, and its leading position in its markets.
The deal is expected to be funded by acquisition debt, which will subsequently be refinanced in the capital markets, as mentioned earlier. To facilitate completion of the proposed combination, Borouge Group International will seek a primary listing on the ADX. As part of this process, Borouge Group International proposes to launch a share-for-share exchange offer to Borouge free float shareholders, allowing them to seamlessly exchange their shares in Borouge for new shares in Borouge Group International on the same financial terms as ADNOC and OMV. This is all subject to discussion and approval from SCA and ADX and will happen sometime in 2026. It is our intention to front-load all preparatory steps to minimize the time between completion of the proposed combination and completion of the just-mentioned ADX listing and share exchange offer.
After all this, there will be a cash capital increase by Borouge Group International in 2026 of up to $4 billion to support the investment-grade credit rating profile and achieve MSCI index inclusion. Finally, Borouge 4 is expected to be recontributed at total cost, which is estimated to be $7.5 billion, which includes aggregate expenses and investments, financing costs, and owners' costs. I now turn to the next slide on the proposed funding and capital structure. As I mentioned earlier, Borouge Group International, in line with the conservative financial policy of its parents, will target a robust capital structure and a strong investment-grade credit rating profile, with a through-the-cycle target net leverage of up to two-and-a-half times EBITDA. With regards to Nova, the acquisition is expected to be funded through acquisition debt, which is expected to be refinanced with equity and debt.
The equity piece is the already referenced capital increase of up to $4 billion that serves two purposes: one, to strengthen the balance sheet, and secondly, to increase the free float to qualify Borouge Group to be considered for the family of MSCI indices, very similar to what we've done a couple of weeks ago for ADNOC Gas. Just this time, it will be primary capital. Then, coming to Borouge, Borouge 4 is expected to be recontributed at the end of 2026 at cost. Total costs are currently estimated at $7.5 billion, and the recontribution price will be funded through a combination of debt and, depending on leverage levels at the time and market outlook, we might augment this with a small issuance of shares.
The exact mix will be determined closer to the recontribution, and the equity consideration to ADNOC and OMV will be limited to $660 million. This $660 million represents 60% of the total equity that the shareholders have so far contributed to Borouge 4, and it will be split equally between ADNOC and OMV to maintain equal ownership post-transaction. I would consider this $660 million not the base case, but more part of the toolkit if, from a rating perspective, this is necessary at the time. Further, and as another tool to manage capital structure, ADNOC and OMV retain flexibility with regards to the exact timing of the Borouge 4 recontribution, considering the market conditions, impact on credit rating at the time, dividend per share accretion, and cash flow generation at the time.
Now, moving to the next page, this page is about the dividend policy and what this transaction means for U.S., shareholders. Borouge Group International's financial framework will mirror Borouge's existing commitment to a robust capital structure consistent with a strong investment-grade credit profile. Borouge Group International is targeting a through-the-cycle net leverage below two-and-a-half times, which is expected to provide significant headroom to fund future growth. Specifically, on dividend policy, post-completion of the proposed transactions and capitalizing on the strength of combined future cash flow, Borouge Group International intends to continue with the current dividend floor, but this floor increases to AED 0.162 per share versus the current AED 0.1588. So, AED 0.162 will be the first dividend post-closing.
In addition, there's another aspect to the dividend policy, namely, we are planning to adopt a dividend policy on top of the floor based on a 90% net income payout ratio with potential upside for distribution based on free cash flow generation. We expect this to be a very attractive dividend policy, especially given the operating leverage of the business in a recovering chemical cycle, as mentioned earlier by Hital. Consistent with its listing on the ADX, Borouge Group International will pay dividends in AED as applicable. This dividend policy of the new company is expected to support an immediate and sustained accretion with a dividend floor representing an immediate 2% accretion versus Borouge's historical dividend per share, and obviously, then there's that gearing to the recovering chemical cycle. This transaction is also cash EPS accretive.
The ramp-up of capacity and delivery of growth projects, together with the realization of the synergies plan, are expected to be single-digit accretive to cash EPS already in 2026 and 2027, rising to double digits thereafter. For Borouge shareholders, nothing will change until the completion of the transaction. Borouge intends to continue paying dividends in line with previous guidance. We will keep you posted during the interim period, but no action is required until closing of the transaction, and there will be many updates upon closing, but for the time being, nothing changes. Okay, so where are we today? As of today, ADNOC and OMV have agreed on binding agreements in relation to the contemplated combination of Borouge and Borealis, as well as the 100% acquisition of Nova Chemicals from Mubadala.
The completion of Borouge and Borealis' combination and acquisition of Nova is subject to customary regulatory approvals, which we aim to receive by the end of Q1 2026, hopefully earlier. Additionally, we'll engage in discussions with SCA and the ADX in relation to the listing of Borouge Group International and then the subsequent proposed exchange offer for the existing Borouge shares. Importantly, until the transaction completes in 2026, there will be no changes for Borouge shareholders, and everything will remain the same, including the existing dividend policy. Let me finish off by saying that we are all hugely excited by the proposed transaction that will be transformational to its shareholders, to its employees, and to the global chemical sector.
This is a landmark milestone for the sector and also for us at ADNOC, with the creation of a platform capable of achieving significant long-term value in an exciting and attractive industry. The benefits of a global footprint, access to leading technology, production scale, and a premium product portfolio in this sector, in addition to the de-risked Borouge 4 capacity expansion, will create significant value for all of you shareholders. Thank you very much for listening. I will now hand over to our moderator to open the line for Q&A.
Thank you. If you wish to ask a question, please press star followed by one on your keypad now. If for any reason you want to remove your question from the key, please press star followed by two. If you have joined us on the webcast, please register your questions online via the question box. When preparing to ask your question, please ensure your device is unmuted locally. Our first question is from Riccardo Rosendi from Morgan Stanley. Your line is now open. Please go ahead.
Hello. Good afternoon. Thanks for taking my question. I have two questions, if I may. First one, it's on CapEx. When we look at your running rate, EBITDA of $7 plus billion per year, how should we think about maintaining CapEx at that time? And then the second question, it's on the China JV that the parties were analyzing. Is there any changes on this project, or you still continue to potentially FID this one? Thank you.
Hi, good afternoon. Thanks for the question. On your first question around the CapEx, I mean, I would think about it from a maintenance CapEx perspective in line with typically what we've seen historically, potentially some synergies, giving some tailwind to those numbers, and obviously then growth projects to be treated separately. On the China JV, there is no significant update at this stage. Discussions continue, and obviously, as a disciplined investor, we want to make sure that anything we do put together is going to be value accretive for the company. So we're trying to proceed on that basis.
Okay. Thank you.
Thank you. Our next question is from Alex Comer from JP Morgan. Your line is now open. Please go ahead.
Yeah, I've got a few questions. From my calculations, it looked like the Nova EBITDA in 2024 was around about $900 million. I wonder if you could confirm that. Also, what is the implied EV that minority shareholders are paying for Borealis? If you could just help me on that one. And then it looks to me like you're paying quite a high multiple for Nova in terms of dollars per kilogram of capacity. I'm just wondering, this is largely Canadian capacity exported into the U.S. I mean, surely with tariffs, you have a pretty big problem there going forward. And then I suppose if we look around the world, I think most people would admit that the petrochemical industry is in massive overcapacity. A large number of people are closing plants and looking to sell assets.
Why are you effectively buying capacity in Europe, which seems to be structurally challenged as a market going forward? Just a little bit more thinking on the strategic side of it. So thanks. No questions.
Good. And maybe a lot of questions. We try to take notes. This is Klaus Fröhlich. So I think on the Nova acquisition, look, we feel at seven-and-a-half times, I think it's a fair price. It's in line with Lyondell. And I mean, we believe Nova has very unique features that really distinguish it from its peers. As explained in the presentation, it has access to very, very cheap feedstock. It's gas-based. It has a premium product portfolio, and it has growth in builds, which is kind of delivered now. So we feel that's differentiated from the peers, which then warrants this, I would say, that acquisition multiple. So we feel this is a fair price. I think then on your, I think, other question, and maybe I directly answer because I think you asked around the kind of value of Borealis in the whole mix.
Maybe because I think there's been in writing some questions around kind of our statement that this will create a $60 billion enterprise value company. Maybe I can answer that in the realm of that. I think there's a number of ways how we can derive for $60 billion, $60 billion really is the number that we feel this company will be like when we are kind of done with some of the many of the steps that you've been hearing about today, including Borouge 4. If I take, go down the ladder, take Borouge market cap, roughly $22 billion. You take Borealis in there, probably $11 billion. You take the net debt of the two companies, roughly around $3.5 billion between the two. You then have the Nova acquisition. That's together $36.5 billion.
Then you take Nova on top of that, $13.4 billion. And then you add Borouge 4 at $7.5 billion. That gets you to almost $58 billion. You add some synergies, you're above $60. Right? So that's one way of looking at this, and that gives you the answer on your Borealis. But I just wanted to think that was another question in writing on the $60 billion. There's also other ways of getting there. Like you take the $60 billion, and you take our through-the-cycle $7-$7.5 billion EBITDA. Right? I mean, that multiple, given the margin profit of this company, looks fair. You look at it from yet another angle. You look at kind of the expected dividend payments, and you should look at the OMV presentation, what they're guiding to.
You put a yield on this kind of normal on the Abu Dhabi market, I don't know, 6% or so. You come to similar value after adding the net debt. So we feel quite comfortable that we'll get there at this level. So that's kind of on the kind of question on Borealis and Nova, and I hand now to Hital for the other question.
Yeah, Alex, thanks for the question. This is Hital from XRG. I think the other thing to think about when you think about the Nova valuation is sort of the EBITDA numbers that you were referencing. I mean, they're not quite the ones you should be using on a go-forward basis, right? Because they won't include AST2. They won't include the optimization programs. They're not sort of through-the-cycle pricing.
So I think, as Klaus was indicating, we have conviction on a through-the-cycle EBITDA number and typical sort of market multiples for a business of this quality. Right? On your question regarding tariffs, so look, we're not particularly concerned over tariffs, particularly because we don't actually believe, if you look at history, that they will be around for the long term. I think there's a few components that offset the tariffs also. Number one, as you've seen again, the Canadian dollar has weakened, which basically reduces the operating costs and feedstock costs for Nova. Right? So that partially offsets the tariff effect. The second thing to bear in mind is a lot of Nova's products, especially in the C8 sort of chain, are premium products. Right? It's difficult to find competitors in that North American market with these products out there.
So for some of the product space where it's a premium product, we would expect some level of pass-through. And then I think the third thing is you take advantage of every crisis. Right? So we will be able to move products more globally. We'll be able to build new customer relationships. And ultimately, we see this as a short-term thing that should not have material impact on value. And then your final question around overcapacity. So I mean, look, even though we have seen some oversupply in the past sort of few years and potentially at the moment, I wanted to share a few thoughts. First of all, I think we are seeing right now early positive signs from market pricing, right, and what we're seeing in the market at the moment.
We have conviction here that we have seen the trough of the market and that we should be moving now into some level of recovery. I think the second thing is, if you look at growth over the next 10 years, the growth in demand, it's going to be around a 2%-5% CAGR, depending on sort of which region you're in. But that's around sort of historical rates. So that additional capacity will get eaten up. And then I think the third part is if you look at what a lot of market analysts are suggesting, we may see some rationalization in older and less competitive plants, those in the fourth quartile of the cost curve. So when you put that picture together, that's where we certainly have conviction on our side that the market will right itself. It always has. We've seen these cycles before.
They're not new. And we know what's going to happen. It is a cyclical business. Thank you.
Just want to know what the EBITDA number for Nova was in 2024.
Yeah. I think the number you were saying, Alex, sounds about probably where it's going to land.
Okay. Thank you.
Good. And maybe I can answer another question that came in writing, I think, with Borouge 4. And I think there's two questions that I want to weave into that. One is, so I think someone asked whether the $7.5 billion, kind of what does that constitute when we're saying cost? And I think it's important here to differentiate. I mentioned it earlier in my presentation. The $6.2-$6.4, I think that many of you have as cost. And that is still the construction cost. But then obviously, there is interest. There's operationalization. There's the first fill. There's some OPEX. And we as owners, because we're keeping Borouge 4 outside the perimeter, we need to make sure that it's really up and running and operational when we contribute it. So all those costs, we expect to amount to $7.5 billion.
So we will deliver at that point a fully functional operational plant into the company that will be, yeah, kind of from minute one accretive. And maybe I combine that also because I think there were questions around what do we do if the markets change, etc. I think there's a lot of questions around capital structure. Maybe I'll give you a quick snapshot of the capital structure because I think you need that, obviously, for your model. So where are we today? So today, as I said earlier, the company has around $3.5 billion. The combined Borouge-Borealis would have a form around $3.5 billion net debt. Okay? Now, what are we doing? We're buying Nova. So that adds, on the one hand, existing Nova debt around $4 billion. And I'm rounding here. And then you have kind of the acquisition debt for Nova, which is another $9.5 billion.
You're at $17-$17.5 billion of debt at closing. That is before the capital increase of OMV, who are injected in $1.6 billion. After that, you are at $15.9 billion, which is really once the share exchange and all that's done, that will be kind of the net debt on the company's balance sheet. Right afterwards, we'll follow the MSCI capital increase that we talked about. That's a $4 billion capital increase, which hopefully, as soon as possible after closing, we will do. That will reduce the net debt to $11.9-$12 billion, around $12 billion. Very, very comfortably in our target range here. I think that should be below the two and a half times net debt to EBITDA. During the year in 2026, you will have the Borouge 4 contribution.
Here, I mean, don't forget this adds run rate of $900 million of EBITDA, but also it's a pretty chunky price tag. That's why I said earlier on, I think we will decide then towards the end of 2026, how's the market, how's the outlook. Our net debt levels, as I said, at that point are moderate. So we will be at roughly $12 billion net debt. Now, adding the full purchase price, $7.5 billion to the capital structure in debt, if the market can, if the rating can take it, we'll do it because that's obviously good for you as shareholders. If we feel we have to augment it a little bit with some equity issuance, as I said earlier, we said $660 million, we might do that as well.
Or we simply say, you know what, we're going to wait a little bit if the trough is prolonged. And at that time, Borouge will be running the plant. They will be operating it, and they will be selling the products. So from a shareholder perspective, that should not matter. And simply the acquisition, we might just term out. So I think that I just wanted to run through that because I think there were a lot of questions on capital structure. I hope I've answered some of them.
Amazing. Are you happy to go back to your audio questions?
Yes.
Amazing. Our next question is from Afaq Nathani from International Securities. Your line is now open. Please go ahead.
Hello. Congratulations on these announcements, and good luck for the completion of these. I have a couple of questions. Firstly, a little bit of clarification on Nova, please. I see that the EV/EBITDA ratio for acquisition is seven and a half times. The EV is $13.4 billion. So I was just wondering if one of the last questions said that the EBITDA is $1 billion. So how does that add up? If you could just clarify on that front. Secondly, on the motivation behind choosing Vienna as the HQ over Abu Dhabi, are there any tax implications, any sort of considerations that went into this decision? And thirdly, more on the strategic front. Pre this, all of these transactions, I believe ADNOC had a 60% plus stake in Borouge effectively. And now it'll have about 47%.
I understand that there have been other assets added, but those assets are more dominant towards Europe and North America. So it seems like there's a little bit of a regional shift for ADNOC in terms of exposure, with lesser exposure into the Asian markets and more towards that. So has there been any thought behind that decision? Just these three questions from my side, please.
Okay. So, on a Nova question, look, the seven and a half times is at the kind of through-the-cycle EBITDA, which is around $1.8 billion. And look, I mean, as you know, in the chemicals trough, for many companies, the EBITDAs are smaller. So, look, we're not doing this transaction for one year or two. This is a long-term strategic move. And because of that, we look at the through-the-cycle multiple, which is seven and a half times if you take the through-the-cycle EBITDA. On your second question, the Vienna listing, look, I think this company will be listed in Abu Dhabi. And we will then, as mentioned, and as ADNOC has done also with other companies, we'll see to make sure that this company gets included into the MSCI family of indices for the UAE, in this case, as a country index.
And for that purpose, we do this capital increase where we're placing up to $4 billion kind of in the market with new shareholders. Again, similar to what we did with the other companies, just this time it's primary. That should get us in the index. And then thereafter, probably during 2027, we'll look at that additional listing in Vienna. So that's kind of the sequence on that question. For the third one on the strategic question, I hand to Hital.
Thank you. And thanks for the question. So as far as I understood the question, the question was ADNOC reducing its share from 60% to 47%. Does that imply a regional shift in our thoughts on the regions? I mean, look, it doesn't really imply a regional shift. Our focus is on value creation and driving synergies and a stronger, more resilient business. And each of these three companies are the best ones in each of their regions. So for us, bringing them together is what was really the driving factor behind this, rather than thinking sort of our regional exposure. And if you look at Borealis, right, in particular, and I think that's a bit where your question was directed to, Borealis is first quartile on the European cost curve. The demand centers that exist in Europe are right there.
This is where we see sort of our future strategy is around what is going to drive value creation for the shareholders. We have some regional implications of that, but it's really where we see the most money. I think if I transition that to a question we also received online around future growth opportunities, where people were asking what's coming next, I think the reality is it's a bit too early to say at this stage with precision, but we do envisage further growth of the company going forward. Again, as I said before, whatever we do will be value-accretive and disciplined investing. If you look at our near-term organic growth projects that we already have on the go, they include Baystar in the USA, AST2 for Nova in Canada. We have the PDH-Kallo project in Belgium.
And we have sort of the PE4 and PE5 expansions at Borouge. We have Borouge IV coming. We've talked about potential projects in Asia. So there's a lot of stuff that's coming. And just remember, all of these projects that I just mentioned have all been paid for, except for B4. So that's important to cover up as well. Thank you.
I think, and that is also kind of maybe coming back to the Nova $900 million EBITDA question. I mean, there is a lot of growth, right? I mean, we're having a large project coming on stream. And I think that's across really all the portfolios. I mean, we've really invested heavily over the last couple of years, and we're now bearing the fruit in the next year or two. So this is, yeah, on the EBITDA ramp-up. Right. Should we get back to the?
Wonderful. Thank you so much. That's all from my side.
Thank you.
If you are ready for our next question.
Do we have any additional live questions?
Yes. Yes.
Sorry. Our next question is from Sriharsha Pappu from HSBC. Your line is now open. Please go ahead.
Yeah. Hi. Thank you for taking my question. Just a couple of quick questions, please. I'm still trying to sort of square the circle on Nova's earnings, really. And obviously, we have limited financial information, but if you look at 2022 or 2023, they made about a 10% margin in 2023. They made a 20% margin in 2022. And I'm just trying to, and you spent a lot of time talking about their cost position. So I'm just trying to figure out if their cost advantage is so strong, why isn't it more profitable, especially when compared to its peers in North America? So that's really the first question. And the second is around, you mentioned that Borouge minorities would have an option to subscribe to shares of BGI. What's the other side of that option? If they choose not to subscribe, then what happens? Thank you.
Thanks. So this Nova question seems to come up a few times. So I'll have a go at answering this. This is Hital. So I think, look, it's really difficult, given all the changes that we've seen at Nova, to really take historical and just try and extrapolate that into the future. So I think that's point one. Point two, you said how come they've seen weaker results over the past couple of years than one might have expected if they have such a cost-advantage feedstock? I think the reality is that they've had a couple of issues that maybe led to them having lower volumes over the last couple of years that were sort of one-off events that we wouldn't expect to be repeated, but had an impact in year on those.
I think second, while there is feedstock advantage, Nova still remains subject to market pricing, right, which hasn't been the best over the past couple of years. So there's no protection from that. So we still see that strong feedstock advantage coming through. Canada's got enough gas for the next 200 years. It's not going anywhere. Now, if you think about Nova's EBITDA build-up from what the numbers you've seen, I would add to that. So you've got the base business that you've mentioned, but you've got to add on AST2 on top of that, right? You've got to add on they've got a value improvement program that they've been working on. And then you have the cycle recovery. And once you start sort of looking at this on a forward basis, almost raw, you can easily bridge the gap around valuation.
So for us, we even looked at it on a through-the-cycle basis, not NTM or LTM, but really, we're through-the-cycle investors. We're in this for the long term. This is how we think about the business.
But maybe I can then take the next question on the capital increase. So look, I think this is some time away. We really haven't finalized yet the structuring of how exactly the capital increase will work. And I think you're alluding specifically to whether there'll be subscription rights or not. And look, this is all new to the UAE in that respect. So I think we're still thinking through how exactly we're going to structure that. Yeah. But I think the important part here is every shareholder will have the right to participate. That's granted. And the kind of the shares corresponding to OMV's and our stake will be placed in the market in order to create a larger free float. And then what we exactly do with the rights if someone doesn't participate is to simply structure at a later stage. Maybe I just one more.
There was a couple of questions on integration. Someone asked how we're going to deal with the operational issues, etc. Look, this is obviously a large project. It creates a global company across three continents. We feel there's a lot of complementarity, right? This is like really three companies that are operating already in their respective continents. From a merger integration perspective, it's probably much easier than other companies because they're kind of complementary rather than overlapping too much, which is why we feel this is such a compelling story. That's answering one question. The other question was on tax. Is there a change in the taxes? Look, this is overall positive tax implications. Really, just to be clear, for Borouge itself, as an entity, it's not changing domicile. It stays as an ADGM-registered company as the operating entity for the UAE activities.
That doesn't change. And similarly, we'll deal with the other entities. And then you obviously have the new company, Borouge Group International, on top of that. Okay? And then obviously, there is. That's a different taxation then. But from that perspective, we've, I would say, worked hard from a structural perspective to not have any negative tax implications from this transaction.
And Klaus, maybe I'll just build on the operational challenges question that you were just referring to. Because actually, rather than operational challenges, I see operational opportunities. That's how we need to think about this deal. So what do I mean by operational opportunities? Right now, each of those three companies can be producing similar grades, and then they switch, right? So they're able to sell volumes in different markets. Now, when you start consolidating these assets, you can minimize your number of switches that you do on your equipment. That will save you significant time. You can then move your production closer to where your customer is, reducing your variable costs. So when you start looking at all the sales and operational planning that you can do across these three entities, when you start looking at all the procurement synergies, that's where I see operational opportunities.
I think that's really important for everyone to understand how this deal will drive value creation across the group.
Thank you. On next questions.
Maybe it's the wrong one question. Yeah. Okay. Go ahead. No, go ahead. I'll weave in the next one. No problem.
Sorry. From Rany Salwan from Jadwa Investment. Your line is now open. Please go ahead.
Yes. Hi. Thank you for the opportunity to ask questions. And congratulations on the historic transaction. I was just wondering, in terms of EBITDA, you shared the numbers, but in terms of profitability, if you could tell us what the net profit for both companies, Borealis and Nova Chemicals. So what is that in 2023 and 2024? From what I see, Nova made a loss in 2023. And also, if you can discuss the exact feedstock, is it 100% gas for both companies? Thanks.
Sorry. Can you repeat the last part of the question?
Yeah. If you can discuss the feedstock, is it 100% gas, or is it a mix for Nova and Borealis?
Yes. Why don't I say that? Nova is basically a gas feedstock company is the way to think about it. And Borealis is a mixed feedstock company where it has some integrated operations with OMV and tied into OMV on some of their refineries. And then there's some third-party equity relations. And maybe, Klaus, I'll let you take the first question.
Yeah. Look, we are not disclosing at the moment the pro forma net income, but I give you a hint. Go to the OMV investor presentation who is guiding to what they're expecting as dividends for themselves on the third page of their presentation, and you can then take a guide because they're splitting chemicals and others, and you can probably get a sense of the kind of cash flow and dividend generation capacity of this company.
Maybe I'll just pick up because we've talked about this Nova EBITDA breakdown and build-up time and time again. I think the other thing I'd get everyone to think about is that historically, if you look back over a longer time period, Nova's done consistently well over 25% EBITDA margins. In 2021, the margin was 46%. This is really where we see the business trading towards the higher end of that range as we move forward. And if I just weave in a couple of written questions as well. We had one about how this Borouge Group International will be managed by XRG vis-à-vis Covestro. The reality is they will be managed as two completely separate companies. They will not be I mean, there's no synergies between them, right? They're in two different businesses. And we need management to focus on getting returns for shareholders on both of those companies.
They will be managed separately as two different verticals.
Okay. Then I think there was another question. Unless, Rany, there's another one from your side. Otherwise, I'll answer some of the written questions.
We have a couple more on our side.
Yeah. Sorry. Let me just one other point because I think people asked how's the actual first share offer going to happen. So this is obviously something that in the UAE is not very usual. I think international participants will probably understand this better in an M&A process where you're having an existing kind of listed stock, and then you're creating a new company and doing an exchange offer for the existing shares. And the question was what ratios it's going to be. So this is going to be, at that time, one for one. And the valuation that we're going to be using as free float will have exactly the same valuation as that we are having OMV and ADNOC for this transaction. So there's no difference in that. Yeah. I just wanted to clarify that because that was one of the questions that came back to you, Samar.
We have a question from Faisal Al Azmeh from Goldman Sachs. Your line is now open. Please go ahead.
Yeah. Thank you for the opportunity to ask questions, and congratulations on the announcement. Just two questions from my end. The first is just on the feedstock pricing in the UAE itself. So obviously, you've talked about that $7 billion of mid-cycle EBITDA, but it does also take into consideration the historical performance of Borouge itself. But obviously, as we know that with the IPO that you've announced that you are planning to increase the feedstock price to Borouge from 2028 onwards. So my question is, how do you think about that normalized EBITDA with the feedstock hike? Or is that now off the table post the merger and the company is wanting to continue to receive the same pricing dynamics for its existing business? That's my first question. And my second question just relates to the UAE itself.
So obviously, Abu Dhabi is planning to add a lot more gas over the next five years. Do you envision some of that growth actually coming from the UAE, as in you can have a Borouge 5 or more of a focus on building more capacity in the UAE, or do you think that that will be largely international expansions? Thank you.
Why don't I take at least the first part of that question? So the $7 billion, in terms of feedstock pricing in the UAE, that's all factored into the $7 billion. So when you think about that number, that's including any effects from that. The UAE, more gas, do we get B5? I mean, it's probably not one that I can answer today because it depends on so many factors. And certainly, gas planning for ADNOC itself is a long process. So maybe I can take this. Look, obviously, we're having a significant kind of CapEx program to reach UAE self-sufficiency from a gas perspective. And with that, also a large program to expand into LNG. So there's going to be a lot of gas that we're producing. So a large part of the CapEx program that you've seen publicly is for that purpose.
With that, some of it is rich gas. So we will certainly have the option to grow further within the UAE. But look, I think from an overall growth perspective, we have, as you had said, Aaron, like five, six projects live that will come on stream, new stuff globally over the next two years. And yes, we are planning, of course, already the next step. But whether there's going to be Borouge five at this point, we don't really want to comment on. Look, I think we probably have time for one more question. I think we've probably answered also most of the written questions. And then obviously, I think we're available later today and tomorrow also to have obviously direct investor engagement if that's necessary.
We currently have no further questions on our side. So unless there's anything more on your side, we can hand that for closing remarks.
No. That's it.
Thank you all for your time.
Yes. Thank you very much, everyone. It's been a long call, but it's a lot of things that we're doing at the same time. So hopefully, it's worth your time.
This concludes today's call. Thank you for joining us. You may now disconnect your line.