Hello, and welcome to Alpek's Third Quarter 2021 Earnings Webcast. I am Alejandro Lissondo, Alpek's Investor Relations Officer, I have the pleasure of being joined by our CEO, Pepe Valdez and our CFO, Jose Carlos Ponce. This presentation is divided into 2 parts. First, Mr. Valdez and Mr.
Pons will comment on Alpek's Q3 2021 performance and update on relevant events. Afterwards, we will move on to Q and A. Please note that the information discussed today may include forward looking statements regarding the company's future financial performance and prospects, which are subject to certain risks and uncertainties. Actual results may differ materially and the company cautions the market not to rely unduly on these forward looking statements. Alpiq undertakes no obligation to publicly update or revise any forward looking statements whether as a result of new information, future events or otherwise.
I'd like to remind everyone that today's webcast is being recorded and will be available on our website at alpac.com. I will now turn the call over to Mr. Pepe Valdez.
Thank you, Alejandro. Good morning, everyone, and thank you for joining us today. I hope you are all doing well. This morning, I'm pleased to begin by reporting that amid a favorable margin environment, Alpek has delivered another strong quarter. During this period, we set 3 new company records, Including our highest ever quarterly volume and comparable EBITDA for the Plastics and Chemical segment as well as highest overall comparable EBITDA for the 1st 3 quarters of any year.
Let's start by reviewing the main topics of today's webcast. First, Alpek has greatly surpassed financial performance Thank you for the Q3. Jose Carlos will review this in greater detail. 2nd, we recently reached an important ESG milestone. As such, we will discuss new targets and action plans for our material ESG issues.
And third, We will provide additional insight into our revised 2020 wide guidance as per the earnings report released yesterday. Providing some context for our results, the Q3 of 2021 was marked by continuous strength in the global economy and higher Marine Freight Co ops. Demand for petrochemical products remained strong this quarter. Asian Integrated polyester reference margin averaged $3.18 per tonne. This was higher than Alpek's revised guidance figure of $300 Return, which was based on the supply demand balance expectations prevalent at the end of the previous quarter.
As I mentioned, an important factor supporting these higher than expected margins were marine trade costs, which have increased the gap Between the Chinese and Asia polyester reference margin to $90 per ton in this quarter versus only $46 a year ago. North American Polycomy reference margin reached a new record with an average of $0.52 per pound, An 11% increase quarter on quarter, partly due to continued demand strength, the impact of Hurricane Ida on the U. S. Gulf Coast And inventory levels as well as the aforementioned high cost of Asian import alternatives. At this point, I would like to turn the call over to Jose Carlos, who will go into more detail regarding the impact of this event on our financial results.
Thanks, Pepe,
and thank you all for being here with us today. I would first like to highlight Alpek's outstanding overall performance throughout the quarter by focusing on some of our main achievements. A strong overall volume of 1,200,000 tons, a record quarterly high for the Plastics and Chemicals segment. Record comparable plastic and chemical EBITDA of $124,000,000 Overall comparable EBITDA of $234,000,000 A record accumulated figure for the 1st 3 quarters in a year as a result of strong volume and higher than expected PET and polypropylene margins as discussed by Pepe, and a further leverage reduction to 1.2x as last 12 months EBITDA significantly increased. If we take a look at volume, Alpek reached 1,200,000 tons this period, basically flat quarter on quarter.
In the polyester segment, volume was 2% lower quarter on quarter, largely due to the extended effect of the drought That took place in the Q2 in Altamira, Mexico affecting 50A production, which partially carried over into the beginning of 3Q 'twenty one. And lower pet production from one of our facilities in the U. S. Gulf Coast resulting from a short precautionary shutdown in anticipation of the arrival of Hurricane Ayda. Volume would have been similar to last year's record levels had it not been for these 2 nature related events.
In Classic and Chemicals, Alpek set a new volume record with a 16% increase year on year, mainly due to the increased EPS output from our recently acquired facilities in the United States. However, excluding these new EPS sites, Volume would have still been 4% higher versus last quarter. Moving on to raw material price dynamics. As the global economy has continued to show its strength, demand for refined products has kept rising despite a slight supply reduction, leading to an increase in average spot Brent crude oil priced to $73 per barrel, 6% higher than in the 2nd quarter. Correspondingly, U.
S. Reference peroxylene prices also increased by 7% versus last quarter. In plastics and chemicals, propylene prices averaged $0.82 per pound, a 23% increase when compared to the previous quarter given the impact of Hurricane Aida on inventory levels and the high cost of import alternatives from Asia. These rising prices generated a positive inventory adjustment and a carry forward effect across both of our business segments. Switching over to our EBITDA breakdown for the Q3, we can see that comparable EBITDA was $234,000,000 4% higher quarter on quarter, primarily due to PET, polypropylene and EPS reference margins Significantly higher than expected as well as record plastics and chemicals volume.
Reported EBITDA was $279,000,000 56% higher year on year as these results also includes a non cash inventory gain of $22,000,000 and a positive carry forward effect of $21,000,000
In terms of results by key segment,
we can see that polyester comparable EBITDA was $107,000,000 increasing by 5% quarter on quarter. Our results largely benefited from a strong Asian polyester reference margin averaging $3.18 per ton, which remains high due to the strong demand on the wireless spread between Chinese and Asian margins. In Plastics and Chemicals, comparable EBITDA reached a new quarterly record of $124,000,000 An increase of 123%
year on
year, mainly due to the record polypropylene reference margins of $0.52 per pound, also resulting from a strong supply demand balance and the effect of high marine prices. With regards to free cash flow generation, Net working capital investment increased by $245,000,000 partly due to the continued rise in pit stop prices from product siding and propylene during the quarter. CapEx totaled $32,000,000 and was mainly used for maintenance and minor asset replacements. Free cash flow totaled negative $27,000,000 as the increase in net working capital offset EBITDA for this quarter. Finally, regarding our financial position during the Q3, Alpek's net debt increased to $1,320,000,000 However, Last 12 months EBITDA increased sharply, resulting in an improved leverage ratio of 1.2x net debt to EBITDA, for exceeding investment grade requirements.
If considering net debt to comparable EBITDA, we can also see that Alpek has further improved this ratio to 1.6 times. Thank you, everyone. I will now turn the call back to Pepe.
Thank you, Jose Carlos. Regarding recent events and as we announced in the press release last week, Alpek reached an important milestone Regarding its work on ESG, over the last over the past 2 years, we have found ways to improve the manner in which we identify ESG risks and opportunities, how we proactively address these issues And how best to disclose our progress. In our 2020 annual report, we published an updated ESG model, and we have continuously improved our scores with the major rating agencies. The next step In our journey was to set clear and ambitious goals for each of these topics. During the Q3, We carried out a deeply analytical review of the global ESG landscape as well as our progress to date, which culminated in a set of 12 targets and corresponding action plans on which the company is fully aligned.
Of the 12 targets, there are 4 topics that we would like to discuss that are likely most relevant Today's audience. Let us begin with carbon emissions and eco efficiency. Alpek believes the size is clear on the need for urgent and decisive action with regards to climate change. In accordance with the Paris agreement, we plan to reduce greenhouse gas emission from our global operations By 27.5 percent before 2,030 and ultimately reach net zero emissions by 2,050. To do so, we must accelerate the transition to fully renewable electricity sources, find energy saving Opportunities across all of our sites and explore new technologies that will allow us to produce carbon free steam.
On the topic of PET secularity, where mechanical technology has already achieved recycling rates of 59% worldwide, we have formalized our intent to further expand our water recycling capacity To 300,000 tons by 2025, allowing us to meet customer targets for recycled content. For polypropylene and EPS, where waste gathering efforts are not yet as advanced, we are also focusing on finding circularity solutions Through chemical recycling and biodegradability. In terms of occupational safety, Alpek has a long history of achieving better than industry average metrics. However, while our goal has always been To have 0 accidents every day, today we are setting a quantifiable target to be in the top dead side of the industry in recordable incident. To reach this target, we will focus on increasing the reach of frequency of external safety audit, complementing with increased use of technology and performing company wide campaign to reinforce the importance of our individual actions on the company's safety level.
Finally, regarding corporate governance, we have seen evidence that empowering a diverse team with the right information Leads to better decision making. As such, we will present proposals to improve board diversity at our upcoming Annual Shareholders Meeting. In parallel, we will increase access to our relevant ESG performance indicators by year end. Rest assured That we maintain the same level of analysis, ambition and action plan for all over other material issues not presented today. This might be all this might all be found on our website.
We are confident that via this new approach, we will achieve all our targets, maintaining a level of commitment to EASG equaled only by companies at the forefront of this movement. Moreover, we intend to keep an open mind periodically reviewing and adjusting our approach as needed by these ever changing topics. Finally, Regarding our outlook for the remainder of 2021, we have observed a strong margin From previous quarters carryover into Q3 'twenty one and with elevated marine freight costs likely to continue Providing support to an already strong supplydemand balance in our main products, The company has decided to update the guidance figures and underlying assumptions. In the polyester segment, Alpek expects the continuation of Strong demand relation in the credit margin now expected to average $3.50 per tonne for the remainder of the year. In the Plastics and Chemicals segment, the strength of polypropylene margins is also expected to last through year end, OCO has led us lower than current figures, but the very surprising of our most recent forecast for the year.
As such, we expect average reference margins of $0.45 per pound for the 4th quarter. Our updated guidance figures are still based on an average Brent crude oil reference price of $70 per barrel for 2021. Unchanged from our previous guidance as demand for refined products has remained steady. Based on these assumptions, guidance for overall comparable EBITDA in 2021 is now set at $850,000,000 And $1,050,000,000 for reported NDA, as we still expect to end the year with a net positive inventory adjustment and carry forward It's worth noting that it met this figure to be the highest comparable EBITDA ever in Alpek's history. Volume guidance remains unchanged as performance across both segments continued in line with our original guidance And at record setting pace.
Our guidance for CapEx will also remain at $250,000,000 We are excited about the strong performance our company has continued to see it, but even more so about the future growth opportunities that these recent results open for us. As always, I would like to thank our team, customers and suppliers for another external quarter. I would also like to thank you for your attention today. I will now turn the call back to Alejandro to open the webcast for Q and A.
Thank you, Pepe. At this time, we will now take your questions. To ask your question live, We ask that you raise your hand virtually through Zoom. We will call on participants in the order that hands are raised. Alternatively, You may also type your question through the Q and A function.
We will attempt to cover as many questions as time allows. Our first question comes from Nikolay Lippmann with Morgan Stanley. Nick, your audio has been enabled. Please unmute yourself and proceed with your question.
Thank you very much, Alex. Good morning, everyone. Thanks for the call and for taking my questions, And congratulations on the strong ones. I've got 3 quick questions. 1st, and I know you're not giving guidance for 2022, but On the polyester side, when you what I can you have pricing, cotton prices, higher freight.
Can you discuss perhaps the balance of risk? To what degree that you have balance of risk to the upside into 2022, specifically for polyester? So that's question number 1. Question number 2 Relates to Alpiq and how you express your targets there, which is 300,000 tons, which is a very concrete target for 2025, your brand owners, your clients expressed it as a percentage of recycled content, as a percentage of the total product. Can you am I overthink me this?
And I'd also like to just if you were to ask if you were able to buy Recyclicl, is that something that you would be interested in, in relationship to try to reach the Target that will potentially allow you to operate at a higher rate for in PTA and just use the Versailles transaction. Those are my questions. Thanks a lot. Congrats.
Thank you, Nick. Your first question, I mean, how do we see, let's say, margins for PET for 2022? Well, we at this moment, I have to say, we do see a potential upside, an important potential upside in margins for PET Based on many factors, actually, I over or I mentioned several times during My presentation, the issue of the ocean freight as a factor that has enabled Ours to increase our, let's say, sales into domestic market, particularly in North America, And it has certainly tightened the supply demand situation for PT. But there are other factors at play also. Again, the ocean freight is one issue.
But recently, as I I believe you must be aware there's been a significant increase in energy prices in Asia, Particularly natural gas, there has been also, in particular in China, some rationing of power supply. And this has already translated over the last few days into even higher margins Now we mentioned in our guidance, I mentioned that we were assuming $3.50 per ton Margins for Asia during the Q4. And honestly, Today's margins, I mean, if we specifically talk about today, the margin in China, not in Asia, is 3.60 So a very specific thing that I mentioned as our assumptions. So there is That's another factor that might be playing in terms of improving margins. And again, the reasons for local margins in Asia to improve what we do, I think, we believe a lot in terms of energy.
And so yes, we do release a significant upside for margins during the next year. At this point, we are starting negotiations with our main customers for prices for next year. So we will have a more definitive answer at the next meeting. But yes, the trend is positive for margin in our products, I would say, particularly
Can I ask you, Pablo?
How are you
No, it's just a follow-up. I use so aluminum is obviously made last year of electricity. But And are you seeing some substitution there that brand owners are maybe switching a little bit out of aluminum and also on the textile side? On the yarns, are you seeing maybe as cotton prices have been rising that there's more demand for PTA For from the textile industry or is it still too early?
Look, Nick, it's difficult to exactly answer your question. What we have seen In Feb, it's a much higher growth than we have forecasted. In 2020, If my memory is right, I think the consumption of pet in the U. S. Increased by almost 3.9%.
This year, we're estimating 3.2%, 3.3% And for next year, we are estimating over 2%. And this compares with the previous Your estimation that the growth of pet will be somewhere I'm talking virgin pet, that the growth of Consumption in PET would be somewhere between 0% and 1% per year. So we have already seen a significant increase in PET. Aluminum, at least until half middle of this year, has been in a way also limited by their capacity to produce. So I think they're also doing well in terms of volume.
And at least the visibility we have, They should be able to increase a little bit the capacity in the last or next month, But I could say that Pet has surprised us in terms of the volume. And I think, of course, has to do with higher growth in the market, developing a lot of new products, Developed in pen and again, we see this when we talk to customers, We see all of our customers asking for additional volumes into next year. So it looks like the demand will continue strong. I think a lot of the changes, we mentioned last year, you might recall, we were mentioning last year that one of the factors What we thought increased the demand for prepared was the increase in takeout. All of the on premise locations in many cases were closed and people were asking for takeout.
And in takeout, Sometimes, in the on premise, they have these repeatable machines. And in takeout, obviously, you have to use bottles. You cannot use those machines. So we see we continue to see a little bit of that trend. Takeout people are continuing to increase that.
And So again, we think the demand will continue to be very strong And regardless of aluminum prices, honestly.
And on the issue of ARPU
In terms of our RPT target, look, we are we committed, when We say this way to our customers, we have customer by customer sort of commitment for 2025. And the target that we set It's for us to meet that commitment. Having said that, I think you're right. All of our customers are now coming back to us And they're asking us to try to increase those volumes. And we are looking into those.
And of course, we are looking into all sort of opportunities, not only mechanical recycling, also chemical recycling. And for sure, your question of whether MEG, recycled MEG will be of interest to us, of course. All of our recyclable products are really important to us. We again, we set the target based on commitments we have, Well, we are open and willing to increase those even further. Now you have to keep in mind In one of our largest markets, particularly Mexico, There is a lot of other companies reside with PET.
Some of them, our customers themselves. So for that reason, they don't request, particularly in Mexico, they don't request as much recycled products Because they do have the capacity and there are other suppliers, important suppliers that are also In this business of Recycling P and T. So that's another explanation. We are not the only supplier to our customers. And I guess That in my opinion should answer your questions.
Thank you very much.
Thank you, Nick. Our next question comes from the line of Vanessa Quiroga with Credit Suisse. Vanessa, your line has been open. Please go ahead and ask your question.
Thank you. Thank you, Alejandro. Hi, Pepe. Hi, Jose Carlos. I hope you can hear me well.
I have a follow-up about the recycle PET question and this topic. So is it correct to estimate your expected capacity Of iPad as about 12% of your total pet capacity. And if we compare these to the targets that we are seeing for your own customers, Obviously, I mean, 12% is lower than these targets, which go anywhere from 25% to 30% and even higher. So given your previous answer, is it correct to assume that basically some market share You're going to lose some market share your fair market share of ARPED to your own Just to understand that very clearly. Thank you.
Again, I think what I'm trying to explain to Nick in the last part of the question, and let me go back to using Mexico as an example. Today, we don't produce ARPEX in Mexico, okay? And the reason why we don't produce ARPEX in Mexico It's because our largest customers are almost self sufficient in ARPES. So they are supplying their own ARPES For themselves, so again, that means that the 25 or whatever number they want to recycle 50, whatever, We are supplying a significant portion of it. And what they have requested from us
is equivalent or is it purely in this 300
And no, we have not lost market share. We are increasing our market share, But we don't have, let's say, our customers do not request from all the 25 or whatever percentage of the ARPUs because they do have other sources. But we are increasing the market our market share. They as I say, in some cases, they're not even asking for nothing today Because they have their own plans and their own needs to get the cycle.
Okay, Pepe. Thank you very much for that. And so my follow-up question would be about your growth plans. I would do you expect for now that your any inorganic growth, any acquisition that you make will be focused on your ESG or Evergreen related plan or do you expect to do Further in terms of vertical integration or any other product or strategy?
Thanks. Well, we don't have any specific M and A opportunity right now, but we're looking into a lot of New and different fields to comply with our ESG target. As I sort of mentioned, one of the key aspects To meet these reductions by 2,030 and eventually 2,050 carbon neutrality, Listen to me, renewable energy, and we are looking for ways in which we are going to source that. And in some cases, Vanessa, that might imply some acquisition or it might imply organic growth. If we don't find suppliers that can deliver that to us, we could build our own renewable facilities close to some of our sites.
So yes, it could Teik was there. And Yes. And so that's one example of a potential acquisition. We and let me continue first with the ESG ideas that we have. We're exploring new technologies, obviously.
We want, I mean, the first step and something has to be done before 2,030 is a significant change of We know the power supply from whatever source we have today to renewable. That's number 1. But now we are another source, important source of emission for us is our manufacturer of steam. And in that case, We are using also different ways to, in one case, reduce the steam in favor of power and then power will produce the renewables. That's one way we can improve or reduce our CO2 from steel.
And also, we're looking at possibilities Let me just give you an example. I mean, at this point, it sounds a little bit far fetched, but it's moving. Green hydrogen is another opportunity that we are looking at to also Replaced using fossil fuels in production of steam. And in fact, There are some new and interesting technologies in that field that combine the production of green hydrogen with renewable energy In same size, so we are looking at those type of projects on the ESG. And last but not least, We are also starting to look at carbon capture projects.
Particularly, we don't need those for 2,030, But we do need those for the 2,050 goal of neutrality, okay? So I mean, in terms of ESG, Those are all of the project opportunities that come. And also related to EAG, we do have Project to improve our usage, our consumption of energy in our plants, which those are very much related to Adapting new technologies and so that covers, I think, the ESG portion of your question. And on the growth side, other than ENG, well, I mean, as usual, we are also looking at opportunities To improve our portfolio to continue to grow. And we are, At this point, it's relatively healthy.
We have a very healthy balance sheet, and we have room We continue to grow not only with the Ogandi project, but also with some acquisitions.
Thank you very much, Pepe.
Thank you, Wane. Our next question comes from the line of Ricardo Resende with JPMorgan. Ricardo, please unmute yourself and ask your question. Ricardo?
Sorry, can you hear me? Yes, we got you, Ricardo. Okay, sorry. So good morning. Hope you guys are doing well.
Thanks for taking my question. The first one, it's on your capital allocation. When you look at leverage has been declining, you just raised your guidance, looks like 2022 will be A very good year as well. So how should we think about capital allocation and especially on the dividend side? The second question, And more about the working capital, we saw the large consumption during the quarter.
So how should we think about working capital going forward, especially on the Q4? And then just lastly, one very specific question. Pepe, you mentioned about the Chinese margins that you're seeing today. Just to confirm, is that $3.60 per ton, that is mentioned. Thank you.
In terms of capital allocation, Well, I mean, what I can say is that we, of course, are looking first at M and A opportunities. And but very much related to that, if we after taking a look at the many opportunities, We find that we still have a strong balance sheet. We would also, of course, We have to look at activities. We don't want to be on a permanent basis in an efficient capital structure No, we'll balance sheet. Having too much debt is not good.
Having too little debt is not good either. So I do believe that we will trust to balance that. And depending on the M and A opportunities that we can execute, And we will also determine the dividends. So that probably, I hope, responds to your question. In terms of working capital, working capital has increased a lot this year as a result of higher prices Of crude oil and raw materials in general, so has increased a lot.
I am Proud to say that in terms of investment in this money, in terms of U. S. Dollars in working capital, I have to say that we have been able to improve significantly our turnover of working capital. I mean, the days Our working capital have been reduced by 4 or 5 days probably compared to previous periods. So we have mitigated that Increase of investment in working capital by higher efficiency.
But also and again, I would say most of the increase in working capital, in my opinion, is behind us. We believe prices We'll start raw material will start to come down and then we'll free up Some investment in working capital in the next months. So that should be helpful for our balance sheet as well. And the question of Chinese margins, Well, what I can tell you, yes, the 360, actually, it was 370 today, not 360, 370. Yes.
That's correct. And yes, if you go back to the last to the spread between Asia and China Over the last months, 5, 6 months, yes, you would expect that the Asia prices will be approximately $90 higher, which will be before 450, 450 that you mentioned. However, we don't have information I mean, We have information from China on a daily basis. We don't have information from Asia on a daily basis. And actually, There's been sort of a holiday over there over the last days, and so we don't have recent information.
But yes, I would expect The margins will probably remain around the spread between Asia and China to remain in the $90 I suppose to be $45, $50 in the previous years. And how long does this last? I have to tell you, we put a lot of effort Into understanding this ocean freight dynamic and And depending who you ask, everybody gives you a different answer, but nobody really gives you a well documented So I don't know. At first, we told us it was going to improve significantly by the middle of 'twenty one. Now we start to hear that this is going to continue for some time and perhaps go for most of next year, Not necessarily at the same level, but we don't have really a good answer to your question.
Thank you, Ricardo. Our next question comes from Ben Isaacson with Scotiabank. Ben, please unmute yourself and ask your question.
Great. Thank you. Can you hear me okay?
Yes. We got you, Ben.
Great. So I have three questions. The first question is on your ESG GE targets to reduce your emissions by 27% by 2,030. Can you talk about How specifically that will be achieved? And the reason why I'm asking is I'm actually more interested in what your goalposts are for CapEx spending to achieve that because of course that will reduce free cash flow available to shareholders over the coming years.
Yes. Look, this I would say, there are some actions That we are taking that we actually do not require a lot of investment. And again, let me go back to Replacing fossil let me call it fossil power with renewable power, okay? That with today's technologies, I would say, the total unit required a lot of investment there. And not only do you not require investment, you will most likely do not incur an additional cost.
In fact, we do believe we might actually reduce costs. So those sort of actions Relatively no brainer. Let me do it that way. So and that is a significant part of the adoption. Most of our CO2 emissions are related to the energy that we consume, Both power and steam.
So on the power side, we have those very specific opportunities. Then in terms of replacing again, forcing power with renewables, Then we do have other projects where we do need more investment and where the idea would be To reduce the consumption of both power and steam To improve efficiency in our plants. These in some cases, these projects also Imply a certain increase in capacity, resulting in other costs. So we do have a group of other projects In that direction, and here we do need some investment. We do have a very preliminary idea today.
We might believe that from here to again to 2,030, we will be probably Investment in the range of $350,000,000 $250,000,000 but We would as a result of those investments, we would probably reduce or improve our EBITDA line by 9. So these projects come, I mean, with important investment, but they also have A reasonable payback. So that's another group of projects. And I would say those are For 2,030, those are the main ideas. Yes.
And then again, In the balance, you have also to consider, we might have some footprint optimization. We might consider debottlenecking some plants, and that would allow us to reduce some other plants that are not as efficient. But that's again part of the idea of the Poly350. And I would say that should take us to 2,030. And as I mentioned, beyond that, well, we have to continue to look for other opportunities.
I think particularly the next step would be Some additional power switch From cost to renewables, we do have some contracts which expire beyond 2,030, which we cannot cancel. And then, of course, as I mentioned, this team opportunity, right at that time, will be very critical. And as I said, again, the footprint we have some assumptions of Reducing both devices on our sites, but at the same time, we have some assumptions that we will have some growth. So we are including in our $27,500,000 potential new acquisitions.
Perfect. Thank you. My second question is on capital allocation. Just to follow-up on the dividend question. There's been a lot of talk about dividends and potential special dividends by Alpek.
And I just wanted to ask about share buybacks. Have you considered and what are your thoughts about repurchasing shares directly from Alpha? It sends a very good signal to the market that you see your Stock has been undervalued. You also don't destroy the 18% fleet float. And of course, it also sends money To Alta as well, which accomplishes the same thing with a special dividend.
Can you talk about whether or not you've evaluated that and what your thoughts are there?
We are looking at several alternatives This could potentially be one of them. What I can tell you is that's something that could be done. It depends a lot also on fiscal issues
that we have to consider.
Okay. Thank you. And my final question is just for an update on the timing, CapEx, decision making on Corpus Christi.
Well, As I mentioned before, the outlook of depressed demand Indochla Vega has improved significantly over
the last couple of years.
And yes, we are at the as we mentioned again before, we are at the latest stage of having the Investment estimate for Corpus, and I would say we expect to make a decision on whether to I mean, to restart, let's say, construction within the next 2 to 3 months.
And then just finally on that point, is there any possibility of Increasing or decreasing the ownership or is it set your partnership and there's not going to be any change? So all of the other partners feel the same Or is it possible that someone should exit and sell?
Well, I think it would be easier to sell than to buy. I think the partners are all Quite eager to go out to move ahead with the project. So it's my opinion that Seems to me everybody will be more in a buying mode than in a selling mode. So based on that, I assume we are all going to stay the same.
Great. Thank you very much. Appreciate
it. Thanks,
Ben. Our next question comes from Andres Cardona with Citi. Andres, Please unmute yourself and ask your question.
Thanks, Alejandro. Good morning, everyone. I have two questions. Let me try to put together some ideas about 2 previous questions from my colleagues. The first one is, you mentioned that you can invest On converting your facilities from BNG PET to recycled PET, I would like to understand how long does it take to complete that Investment process, right?
And the second one, if you are considering M and A in different geographies Then the Americas, so that will be the first one. And the second one is, if you have analyzed potential impacts from the potential amendment To the energy reform in Mexico.
Thanks.
Yes, good morning. What do you mean by conversion bridging PET to is what we call a single pellet solution. We do have one project to do that in one of our plants in the U. S, We should be approximately 33,000 tons, but that will still be a minor part of our We are most of the growth that we are expecting for recycle bin is going to be on purpose So, Jose, TEP. Again, this decision of switching virgin PET to recycled PET He is not as attractive as the outlook for pet demand is improving.
If we were to be in a situation in the future where you have excess bank capacity, That conversion will make more sense. But right now, with the outlook I was sharing with you, we're actually short of conversion That capacity for the next of this will next to the year until the purpose is established. So that's perhaps Something that we will address later when we are closer to the start of the focus. For the time being, Our most important projects have their own solid saving capacity together with the freight production. Okay.
Now, measurement in the energy reform in Mexico, well, as you say, it's Overall, our concern is it where if we propose a way to go exactly as it is, Well, I mean, I think it has a lot of problems, obviously. I mean, first of all, it's not sort of Let's just do it this way. The main issue, I think, for us will be potentially an increase in power cost, A significant increase in power cost versus the uncertainties that we have today. That, I think, will be the major Problems that we envision with this reform, particularly if it's supplied retroactively. If it is not, I mean, if it is applied like for new projects and existing projects, what do we allow to continue, Which is something that we will expect to happen, then the impact will not be as important for us.
And still overall, I think, the impact for the Mexican economy that depends on how to manufacturing It is an increase in power cost, which reduces the competitiveness of most of the manufacturing plants in Mexico. So that's the biggest concern that we would have with a decision like this. And again, let's hope that this is taking into consideration.
Thanks, Ben. I'm sorry, Andres. Thank you, Andres. Our next question comes from the line of Gustavo Cunha with UBS. Gustavo, please unmute yourself and ask your question.
Sorry, it's can you hear me? Can you
hear me? Yes, we can hear you. Go ahead. Okay.
It's Luis Carvalho here, sorry. Okay. Yes. Hi, Jose Carlos. Thanks for taking the questions.
I would like to come back on this Capitalization discussion, I think that we had a couple of questions before, but just trying to understand What would be the strategy looking forward? I think that you already mentioned that potentially we consider some, I don't know, some potential, I would say, Inorganic, I would say, rules for you mentioned something about dividends, but Just trying to understand what kind of returns you're looking and if you don't have the potential M and A On the pipeline, how would you see the dividends looking forward? The second question is mostly about some of the products That you produce, we and then prior to the pandemic, we saw lots of pressure from Some bodies in terms of reducing, for example, the use of single plastic single use plastics And after the pandemic, we saw kind of a rise in terms of the consumption for these goods. And now that the pandemic is, Let me say somehow easing in some parts of the world, how you're following the acidic consumption habits For these kind of products. Thank you.
In capital allocation, and again, I think the idea of the capital allocation, as I mentioned, I mean, we're going to continue to pay dividends as Alpek. There's no question about that. I think the question is the amount of dividends that you're going to pay going forward. And that depends, again, as it has been in the past, On the opportunities on the M and A side, but in all cases, We will try to keep our net I mean, we'll have that 28 in levels that are Similar to previous years, try to not to go over 2.5%, at least not On a permanent in a long period of time, so it might be a little bit more for a short period of time. But that in a way I think is what's going to decide on the dividends.
You do have to pay dividends to make sure Those could be higher or lower depending on the opportunities that we find for Ele. And in both cases, I mean, we try to be close to the leverages As we have mentioned, 2x, 2.5x EBITDA, net debt to EBITDA. That is the criteria that you can expect And you can see that, that will happen. Pressure of plastics, I mean, That continues to be a major issue for us. And I think it's very interesting because In terms of plastic, I think the biggest concern of the consumers or communities or the people has to do with the waste The way we manage the waste in plastics.
And in that sense, I think the best way to change that, As we explained before, is through secular economy to increase the cycle. That's why we are working so hard. And there's a lot of people working on that. And I think as we do improve the recyclability of particularly PET, We will mitigate the pressures from society on that side. On the other hand, and now that we are all so much I think we believe that over time, the key metric that everybody is going to be looking at It's going to be CO2 emissions.
And again, when you look at plastics In terms of CO2 emissions, then you will realize and hopefully we can convey this to people in general That from the perspective of CO2 emissions, that is the best option for the consumer. And I will tell you something else. Recycled bed is even better in terms of the emissions of CO2. So again, I think as people have become more familiar with all this, the perception about the plant, it should improve. So again, from a theoretical point of view, the plastic, we have an issue with waste, Which we are addressing, we have a great opportunity in terms of the advantage that plastic has And I think, again, right now, Mahesh is a big issue.
Hopefully, it will be resolved and mitigate the problem. But I want to think 2, 3, 4 years from now, most of the concern of the people is going to be in CO2 emissions. And on that front, I do believe that we have a big advantage, particularly if we make all the changes that we are Talking about, I mean, converting to renewable power and reducing clean source to close this team, Dave, I think our product is really very friendly in the environment.
Okay. Not very clear. Thank you very much.
Thank you, Luis. That was the last question we have time for today. Rest assured, we will follow-up via email if we were not able to get to your question on this call. As always, I'd like to remind you that you can Find both a video recording of today's webcast as well as a transcript on our website at alpek.com. Thank you all for participating today with us and have a great day.