So hello. This is, Thoud Yaver, Head of Investor Relations in Yara. So this is our, fourth quarter twenty twenty results conference call. We are we have our presenters from earlier today here. So our CEO, Svein Tohodehund Septrid our CFO, Lars Rostek and our EVP, Farming Solutions, Tadier Knudsen.
So we are ready to take questions now. So operator, if you want to kick off the Q and A. Thank you.
Thank you. If you wish to ask a question. And your first question today comes from the line of Joel Jackson from BMO. Please go ahead. Your line is open.
Hi. Good afternoon, everybody. A couple questions. There's been a lot of media press, Yara, and what you might do for some buying potash from from BPC from Belarus. Can you talk about that, first of all, if you could if you could continue to buy about the same amount?
And also your comments on the potash markets. You're a big buyer in Brazil. Obviously, we're seeing a bifurcation of potash markets, where Asian and Southeastern prices are a lot lower than Brazilian markets. Of course, they're standard granular, but any comments you can offer there would be helpful. Thank you.
Yes. So, this is Francois. I can take the first part of the question, and then I'll hand over to my colleague from the on on the second part. When it comes to to to our sourcing from Belarus, there's nothing new to report there since our statements, this, matter. We're continuing to to work with, Belarus College, and, they've also made, commitments, as to what they will do in in order to ensure safe operations and that they are producing according to our code of conduct.
And they've also, last month, made a press release with regards to special initiatives that they are doing to fulfill that, and then we we stay in close dialogue with them, but nothing new from our side since these statements. Then with regards to the potash markets, tariff, perhaps we could share a few comments on that.
Yeah. Yeah. First of all, you could say that Yara has two main use of potash. We use it, obviously, as a key raw material for our premium NPKs. And secondly, we and particularly in in Brazil, we are a big buyer of potash, which then is used either as direct application or as raw material to our blend business in Brazil.
As I'm sure you are aware, the potash market has been relatively more stable than, the price increases that we have seen in other commodities like nitrogen and and, phosphate. And being a significant buyer, we obviously make sure that we follow the cost curve and take care of our margin both when it comes to the use as raw material as well as in in a more direct application into into Brazil. Yeah. So I I don't think maybe there is that much specific to say around the potash market as such.
Okay. And my last question
would be on the NPK premiums. You you enjoyed very strong NPK premiums for a couple of years. You saw the premiums come down in the fourth quarter. You talk about what you're seeing into early twenty twenty one or into early Q1, excuse me? Are you recovering some NPK premium back to what we've seen in last couple of years?
Or are you kind of holding similar conditions as we saw in the fourth quarter?
I think the advantage of Yara or what we really work hard to achieve is to position our MPKs as a premium product. And that means that you would typically see less volatility than you see in the commodities. And that means that when we have times of sharp increases like we have seen over the last few weeks, we obviously correct our pricing. We look very much at, let's say, the economy for the farmer depending on which crop is being produced, and then we correct our pricing to make sure that we stay in those segments that we consider long term being strong segments for us to hold. And this is exactly the phase we are now.
It's typical that when prices increase as fast as what has been the case, we might have a time lag, but we are carefully monitoring all the segments we are in and adjusting as we speak. So the key here is that the fundamentals, are good for the farmers. So we think that, yes, there could be a timeline, but, farm economy is generally good and, supporting the prices.
Thank you very much.
Thank you. And your next question comes from the line of Thomas Wrigglesworth from Citi. Please go ahead. Your line is open.
Thanks very much for the opportunity to ask questions live. Yes. So just a follow-up on that. You know, given you've spoken for many years about the supply led market, can we now assume that this is a demand led market? And in light of that, have the price increases that you've already announced into the market for the first half more than offset the higher gas price outlook you provided with the results today?
That's my first question. And my second question is focuses on the new division that you're carving out, the clean ammonia. How should we think about that division going forwards? Will you allocate CapEx specifically to that division? Will you make a kind of give volumes as to clean ammonia volumes going forward?
How should we think about the evolution of that division over the next three to four years? Thank you.
Yes. So maybe I can take the first part and then Svein Kurde can answer the second part. Yes, I think we are moving from a supply driven market that we have seen the last years to a demand driven market, which obviously is very positive. We see particularly the demand increase outside of China, which then is attracting also the Chinese product, which again we consider a positive. And this is many factors leading to this, but we see obviously the quite significant increases in particularly extensive crop prices, such as wheat and corn, etcetera, contributes to such a demand driven market.
When it comes to Europe, you are correct. We are adjusting price sort of continuously the last weeks as we have seen from the publications. And we do believe that that will offset the increase in energy costs.
So and I'll address the the question on on the new business area. And I and I I think, you know, there are incredibly exciting opportunities within this space to to enable the hydrogen economy. And there are huge investments, ongoing and large projects, to produce hydrogen across the world, and, it's also being talked about as the backbone of Europe's zero emission energy transition. But I think it's there's an important question that needs to be asked, and and that is why do you produce hydrogen in the first place? And, broadly speaking, the answer to that is that you have renewable energy at one place, and you need to utilize it somewhere else.
So, we need to transport energy from one place, to the other. And hydrogen has many positive properties, but also some disadvantages, especially by being very a very light molecule. In fact, the lightest molecule, which makes it challenging to transport over distance because of the lack of energy density. And that's where ammonia comes in with solution. So when you turn hydrogen into ammonia, you change the properties.
It becomes liquid at minus 33 degrees Celsius instead of minus 253 degrees Celsius. So to to transport energy over long distances, ammonia is the solution. And that opens up the opportunities for for Yara because we already have an existing infrastructure by being the world's second largest producer of ammonia. But when we look at our global footprint, we have a a leading global ammonia position. And we have an infrastructure in place with the production assets, tanks, and and and ships to enable this.
And up until now, that's been used mainly to to balance our own needs for ammonia, but it takes on a new role and a new opportunity to enable the hydrogen economy to to to grow. And, we see, opportunities to to build on top of this and, don't know, so so also in terms of this, if you believe in the hydrogen economy and the and and the expansions in hydrogen, you have to believe in ammonia as well. And you can almost think about ammonia as the LNG of hydrogen. It enables transportation, and that's where we will play a role. And we're setting up a structure to to to manage this and to build our our future position, but we see that we have to do this in in partnerships as as well.
And we've already announced a smaller project in Australia in in Turbar together with Engie. We have announced a project in in The Netherlands, Sliceville together with Erstad. And we're also now working on the complete conversion of Poxetine in order to a 100% electrification. And also for that, we need to to to look for partners and for for incentives to be able to to get this done. So so by establishing this entity, we have the structure to to to lead the way and also to to to help to to put structures in place to to enable this.
And just to and just Swainteura on that, will those partnerships, you know, ensure that the return on capital is not return on invested capital is not dilutive for the group?
Yes. So so we're approaching this differently than we would if we were to construct greenfield or brownfield fertilizer plant. The dynamics in the renewable sector would be quite different. And and I think you I mean, you can look at what happened in the solar sector, the the important role that Japan and and Germany played in order to, to get scale in the industry, which in turn made it cost competitive with grid parity. And when you look at the the prospects from the hydrogen industry itself and the cost curves going forward, there, you could see a similar task.
But that requires scale, and Yara can, with our with our project, scale, and and we could do that in an efficient way since we have some of the pieces already in place as we can repurpose parts of the ammonia plot. That said, it's in everything we do, it is with a solid business case to begin with. So it has to make sense financially as as well so that it provides the right capital return. We'll work creatively around that, probably financially put that together and have a structured partner partnerships. But, indeed, we also need financial incentives as we will then be an enabler to create the scale.
So the same rules for return apply also in in this area, as in every area in Europe.
Thank you very much. Very clear.
Thank you. And your next question comes from the line of Lisa Diane from Morgan Stanley. Please go ahead. Your line is open.
Hi. Good morning, and thank you for for taking our questions today. So I have another question on the clean ammonia unit. So so first and foremost, I mean, how do you see ammonia prices evolving as the end market opportunities are clearly growing in this area? And and on that note, I mean, my understanding is that you have about 8,500,000 tons of gross ammonia.
But in terms of net ammonia, I believe you have about 2,000,000 tons of annual capacity. So how do you see this net ammonia footprint evolving for yourself over time given the opportunity you see in this market? And and how big in terms of ammonia volumes is this opportunity for you without expanding your ammonia footprint, or would you consider expanding your ammonia footprint?
I think inventory will just happen, and we believe that, you know, you have to you have to make volumes, available and in parallel develop the the market. But but but I don't think it's possible to to to first develop the the the markets and then start to construct. But there are opportunities in many areas. One that is clear and we have this huge potential would be for shipping fuel. And when you look at the projections and the and and the interest levels communicated by IMO, there there there has to be zero emission ships in in in the future.
And then what will they be fueled by? Well, then ammonia has a clear advantage in in that, and that will a huge part of future ammonia, offtake. Also, as a just a general energy carrier, as I mentioned initially, to to move the renewable energy from one part of the road to another road if needed. So you just it's a reversible process from the moment back to to hydrogen if needed. And also there are there are engines built that can use ammonia as as feedstock as well and then obviously within fertilizer as as well.
But the the markets need to be developed and it's important to look at the totality including the emissions of producing and that that's transparent and trace to the whole value chain and through that create opportunities for these products. And we already seen major announcements from some of the biggest food producers in the in the world when it comes to reduction of emissions. And that also includes, what happens at the at the farm field, and and it will only happen if if the the farmers are also incentivized to to to to to farm in that way. And through that, they will be able to pay for zero emission fertilizer as well. So so so the market opportunities are definitely there.
I think it's important to see full value chain, and and let me make one example of this. If you look through the whole value chain, it's a conversion of of the plant in Poshkren to green fertilizer. What would that mean to the carbon footprint of a a bread, for instance? Well, that alone could get reduced by 30%, and the extra cost for the consumer in the supermarket would be €1 cent. It's not structured to to to allow that now, but I think it's important to illustrate what will it take and and and there's no doubt about where the world is going in terms of emissions.
And and and we're willing to support that. It creates business opportunities, and then we'll continue to expand with the market as it develops. But this is our start to look into the possibility of making significant volumes available.
Okay. Thank you. And just to clarify, can you just tell me how big your net ammonia position is? So if you produce 8,500,000 tons of gross ammonia per year, how much are you net selling in the market? Is that 2,000,000 tonnes?
And two, you mentioned something very interesting, the Forsyth Queen facility, that if you are able to convert it into green ammonia, that the extra cost towards the customer would only be €1 cent. Did I hear this correctly?
Yeah. If if you convert that to the cost of a bread in a supermarket, if the world was ideal and our cost increase, to do this just went straight to the consumer, it's not structured like that today be because today, there's still too much, silo thinking, too much cost plus mentality. So so with that, it would be much higher in the in the supermarket, but there's a lot of work happening now in the food systems to to to create greater transparency and link from the consumer all the way back to the farmer and the input. And through this product, we're helping to visualize this and and to to help the consumer also to to make the the the right choices when it comes to to find impact.
And, hi, Lisa. This is Thor. Just on the net position, it's, of course, varies a bit with with production levels, but directionally about between 5,000,001 tonnes long is where we are today.
Okay. Thanks very much for that.
Thank you. Your next question comes from the line of Andrew Stark from UBS. Please go ahead. Your line is open.
Yeah. Good afternoon, everybody, and thank you for your time today. I have a few questions, actually. The first sort of set was in the same theme, is this issue that came from an earlier question for Thomas, which is around return on capital visibility. So can I check a few things?
Firstly, the 1,200,000,000 midterm guidance, am I right in believing that doesn't include any of the potential plans on green ammonia? That's the first question. When you think about porsgrim as an example, how do you get paid for that carbon free product? Do you think it's possible to get a premium from your direct customers? Are you really relying upon carbon credits, government funding, etcetera?
Thirdly, and sorry, it's all linked to the same question, would you suffer or would you take on a bit of return on capital dilution from those type of green projects if you felt you
could
have first move advantage? So if you could capture the high ground on volumes through having this supply but at the same price, would you do that? I know, Santoy, you just said that you're gonna be disciplined. But for a period of time, would you be happy to accept a bit of return on capital dilution for a longer gain? That's that sort of questions.
I've got one more question which is much more straightforward, which is clean ammonia division. Is there a chance here that you're gonna spin that clean ammonia division midterm, in order to make it easier to attract funding, in order to maybe monetize the green credentials? Or is it purely just a case of separating it out within your own keeping keeping control?
Yes. Thanks a lot for your questions. So this is Marc here first. So our commitment to a maximum annual CapEx of €1,200,000,000 that includes what we're doing in clean ammonia. So it's not coming on top of the €1,200,000,000 And then we've said that we are looking at, as Santorio said, they are now establishing the right partnerships and the right structures, around those, around those projects.
And then I think I'll hand over to you, Santurio, and a couple of the others.
Yes. I think when it comes to the ability to, to get a premium for, for green fertilizer, that's a market that needs to be, developed. We can't put that burden straight onto the to the farmers as it is today, the farmers have an important role to to play, but they don't have the the the sort of profitability where they can easily absorb that increase in in cost. And and and that's the the reason for all the work that is now ongoing in the food systems to create that supply chain view of it. What will it take to decarbonize food in in total, and then what happens at farm level becomes very important.
But then we need to have incentives in place for the for the farmers, which partly could be paid from consumers and increased awareness around the the carbon footprint, but also from, from regulators and and from governments. Because we do keep in mind that the planet is already paying a higher cost for food than what we pay at the cash register. And I encourage all of you to to read the food and land use question report, which shows the the total value creation in the food system on an annual basis, which is, $10,000,000,000,000. But the hidden cost of the food system is $12,000,000,000,000, and that's related to health, but also, emissions and environmental impact. So by redirecting some of that, it's possible to create incentives for farmers to enable them to farm differently and more sustainable, without it necessarily meaning more, expensive food for the for the plant.
So we we need to approach this holistically, and and and the Yara is taking a key role also in in in this to to help to develop these markets. And and I'm quite encouraged by everything that is happening now in the in the space and also looking at farmers as part of the solution, not only when it comes to to using green fertilizers, but but also through carbon farming using the farm field to suppress the carbon and also to farm productivity where more food can be produced on less land and and freeing up land and turning it back into nature with the corresponding carbon sequestration from from that. So a lot of exciting opportunities. And and but, again, we we need to have a product in place in order to to drive this. And then back to your question, are we willing to take lower return?
If if if you look at other industries, including, now we see our offshore wind wind projects and so on, Some of the early movers actually had higher returns because they moved early. We will evaluate everything that we see and we did always with with the with the financial return in in in mind. But, indeed, we will also see the totality of the value of the first mover position and so on. So the the the value would it would still have to make sense on the on the longer term even if it didn't have the straight, short term, return sort of so I hope that answers the question.
Yeah. And on on the on the last point, I mean, what what we're doing here today is we're establishing a a unit that we think entails some very exciting business opportunities. It's a $1,000,000,000 revenue and $120,000,000 EBITDA business, and and that's really our focus now on establishing that in the in the best possible way and and certainly drive the value creation potential of that unit, as good as we can going forward.
So to come back on that, apologies. My blood must be you didn't really answer the question. Is it is it is it a division you wanna keep control of, or would you look at parts bringing it?
We want to keep, control of this, unit. It it plays an important role, also in our in our, existing structure and will. So going forward as well, but we we we are open to and we will be open for for partnerships to to to drive this. And and I think that's what we see across all areas when it comes to renewables that this is best done in partnerships, whether that's based on industrial or financial projects. So that's our approach to this as well.
Perfect. Thank you very much.
Thank you. And your next question comes from the line of J. D. Pangaea from On Field Research. Please go ahead.
Your line is open.
Thank you. First question really is, could you give us some idea what is your net carbon exposure that you will have to purchase assuming there's no change in the regulation from 2021 onwards? And then subsequent to that, what do you expect? So what are you budgeting sort of in terms of the next phase for 2020 onwards in terms of reduction of allowances? So do you think the 20% sort of headline number for nitric acid and ammonia applies, or do you think that this is gonna be sort of a case by case?
I'm sorry. But a related question, really, it's just all three parts of one question, please. Obviously, a lot of your competitors in Asia are coal based. So do you expect that you will sort of see a carbon border adjustment that is being discussed in other industries to protect companies like yourselves against the carbon leakage disadvantage. Thanks a lot for for this.
And just one final follow-up is considering what is happening in India with farm laws, do you think if the laws do go in place, if will that make any difference to the way tenders are placed, and the Indian demand? Thank you so much.
Okay. Hi. This is Thor. I I can start on the on the EU ETS side of things here. Maybe the India, we we I will I will ask for help.
But so we we have we have now we now understand the ammonia benchmark, for the for 2021 in the EU ETS is 1.57 tons of CO2 per ton ammonia. That is with with that reference point, we actually expect to to be covered or even have a small surplus of allowances in 2021. And then the second question, I mean, we as you probably know, these benchmarks do get adjusted from year to year, and it is it is a bit bit it's a bit more technical than just kind of arriving on one benchmark. And there, you know, a number of adjustments can be made, and it's not necessarily linear, for any given company every year. But you're you're, of course, right.
It's prudent to assume that the trend over time is that these lines would get tightened, and that's, you know, an important, dynamic that we plan for, as part of our broader, strategy, really, which is, which is aimed at providing sustainable, food solutions. So so, you know, as part of that, we are constantly working and we set ambitious targets to reduce our carbon footprint over time, both in terms of the, production side of things, and as we've touched on earlier, including green ammonia, and also in the market and on the field. And then the final on this topic, you are you asked about border tax, and I I think, yes, there is. This is still under, shall we say, construction and review in the EU, but, yes, there is a carbon board attacks under under design aimed at dealing with examples that you mentioned that if you you you you have set limits for for CO two emissions within the EU on on fertilizer production, then, the intent of that regulation will be to then adjust for if you have imports, from elsewhere that have that have a potentially a lower price or lower cost as such with a higher carbon footprint.
But these, these regulations are are are still at the drafting stage, so so we don't know, exactly how that will will will play out.
Yeah. On India, this is Fredrik Knudsen. I I don't think we will enter into a such a speculation whether the dynamics of the tenders will change as a consequence of what is going on. What we can say is that we work with them literally every day on the ground in India to to improve profitability of the farmers. We are successfully working with our concepts and now also, very much integrating digital solutions into our tofu offering and by that creating real, you could say, solutions to again contribute to the targets of the prime minister to double the income of Indian farmers.
That work will continue. We are successfully growing our position and continue to focus on the farmer in a very farmer centric strategy that we run-in India.
Just one follow-up on the carbon topic. Would you be able to share what is your, carbon price assumption, for the longer term, especially linked to the green ammonia type projects?
Oh, yeah. We do not, we do not, as of today, have, an internal carbon price in Yara. Having said that, though, for all our projects, and including the green ammonia ones, we do have a specific carbon, evaluation as part of the, as part of
the capital process. Yeah. So so it's absolutely to have said that we we we we have not disclosed our our carbon assumptions externally, but, of course, an active part of our evaluations.
Thank you so much.
Thank you. Your next question comes from the line of Suthan Udeshi from JPMorgan. Please go ahead. Your line is open.
Yeah. Hi. Thank you. I just had three questions. First one was, you know, there is a mention of some $100,000,000 of fixed cost increase in 2021, and it says it's gonna be a temporary increase.
So can you maybe give us some more color on on what you are spending on and why is this actually temporary? And, again, I think the the the broader context here is, you know, at what point do these temporary cost increase every couple of years become not temporary? I mean, just on a broader strategic point, that'd be useful. And the second question was your deliveries in q four was very strong. Have you sold much of your product forward for q one season or Q1 demand already in Q4 based on what you know at the moment?
Or in other words, do we expect or should we expect rather any lag in terms of when you need a full benefit of the price increases that we've seen so far in Q1? The last question would be on freight costs. Do you do you have any sense of of the impact we could see on on Yara's freight cost, total cost on shipments given the increase you've seen in general, in the freight markets? Thank you.
Yes. Thanks a lot. And, let me start with Lars here. So on the fixed cost, you are indeed right about the temporary increase, and it's linked to the new initiatives we're taking, announcing today and what we also launched at the investor seminar. And it has something to do also with classification between CapEx and OpEx.
So if you look at what we said in Q3, we said that we will have a total CapEx spend of $2,200,000,000 for the combination of 2020 and 2021. What we actually said today is that, that is estimated €100,000,000 lower at 3,100,000.0 in CapEx, and then we have 100,000,000 in fixed costs. So that means that we are stable on commitments for 2020 and 2021 compared to what we said at 3,200,000,000.0 but there is then an allocation between OpEx and CapEx. And then in June 2019, we launched our target of having a normally flat fixed cost base until 2023, and we've kept up very stable and flat and even a bit ahead. And we are very strong in our commitment to that target and being back on that target in 2022, also then in the light of what I just discussed, sort of the application between CapEx and OpEx.
And also on the total commitment side, as I also said earlier, we have a maximum total CapEx of €1,200,000,000 from 2022 onwards, and that also includes what we now are doing in clean ammonia. And then on the second question, maybe I hand it over to you, Thade.
Yes. I think I can start and then maybe Tore has some additions. But we have had a strong quarter. I think that has been primarily due to good support from, again, as we have said, the crop prices and the general conditions for farmers. No particular sales forward into that.
So I would say that we have quite normal time lag on the prices, which would typically be in Europe a month, a month and a half asset timeline. Yeah. So I guess that's what we can say.
Yeah. And just, just to to build on that. I mean, it's so it's not I guess it's it's not forward selling. We wouldn't define it as forward selling, but it's just that when we from the the normal time from we take an order, you know, and fix the price until we deliver the product, which is what our p and l is based on is, as as Teddy says, a month to a month and a half.
And so and on freight costs?
Sorry. Could Yes. There was one more. Would you mind repeating the question? Because I I don't think I looked it completely.
Yeah. I just wanted to get a color whether you think the freight cost that you have in general, which is, I think, a billion dollars per year, should we expect any material increase in that number this year just given the shipping rates today in most routes seem to be much higher than they have been in the last three, four months? So just thinking whether it's is that something we should be taking into consideration in our numbers for 2021?
Yeah. We we don't have any guidance on on shipping costs. I mean, as as you know, we we have operations globally, some of which are some of which are exposed to freight costs, but others that are, for example, in Europe, where, you know, we are located inland and competing against imports, then you you can also get the positive effect from increased freight rates because, you know, the the the comp competitive benchmark imports, increases in costs. So I I think you will often see that there are pluses and minuses in our operation here that we don't have any guidance as such.
Understood. Thank you.
Thank you. And your next question comes from the line of Alexander Jones, Bank of America. Please go ahead. Your line is open.
Thank you. Good afternoon. Thanks for taking my questions. Two on green ammonia and then one on the dividend, if I may. On the green ammonia side, could you outline a bit about the customer reaction you've had since your announcement in December?
Have you had incoming interest from potentially industrial customers or power customers, that would be helpful. And the second question on that would be, could you talk a little bit about blue ammonia and how you perceive the relative advantages blue versus green and where you want to place your focus? And then the third question on the dividend, the payout ratio is higher this year than the sort of 50% guidance that you've given through cycle. Does this reflect a bit more of an emphasis on dividends over buybacks at the moment? Or any color you can give on that would be helpful.
Thank you.
So it's so I think I I could start on the the question related to interest or others. And and I think the the incoming requests and discussions we've had since we made our bigger ambitions in this area public in December have reflected what we're seeing in the hydrogen market in general. So there's a huge amount of interest and also a lot of discussions with relation to you know, what this could lead to. And then I'm so in both with regards to green fertilizer production, but but also important is marine fuel with zero emissions. And then you asked about green versus blue.
I I think it's gonna have to be a combination. It depends a bit on where in the world and and what the application is. So far, most of the discussions I've had within the the food system, there there seems to be a greater interest for green, ammonia, while, that's if you discuss on energy, sourcing at country level, then, there's probably more, glue. So so our infrastructure will facilitate, both, and, that's why we're also call calling it out a clean, among them because it could be both Glee and, Glee.
Yeah. So if I, answer on the, on the dividend side. So, as you would know, we introduced a new capital allocation policy in 2019 where we lifted the floor from 40% to 60% of net income, but where we also said that we wanted to have a net EBITDA to net debt to EBITDA range, I'm sorry, of 1.5% to 2%. And what that means is that improving research and cash flow may lead to increased payout capacity in line with that policy. And on that basis of that policy, we the Board now proposes NOK 20,000,000 to the AGM.
And then in addition to that, what we said is that dividend cash dividend is our primary lever with buybacks as a supplementary lever as it's also been the case in 2020.
Thank you.
Thank you. And your next question comes from the line of Malton Norman from Carnegie. Please go ahead. Your line is open.
Thank you. A couple of questions regarding green ammonia. You also mentioned your CapEx guiding of a maximum $1,200,000,000 going forward. How does that relate to potential retrofitting your ammonia production? Or do you have any sort of a rule of thumb CapEx per ton per ammonia capacity?
The second question is regarding Freeport. You're importing hydro. What price do you pay? And is that blue green or or gas, based, hydrogen?
I I think it's too early to start to create a rule of fund cost reduction for for green ammonia. And it's about time and scale as well for the whole hydrogen industry to to to ramp up and through that become more cost competitive for CapEx. But indeed, if you look at the established projections from the industry, it will come down to levels where it becomes very interesting in comparison with fossil approach to it. So our approach is that we need to have incentives in place that bridge that gap. Then we have some clear advantages with the opportunity to to retrofit, and and that can be done in in several different ways.
Part of it can be done through incremental increases by producing hydrogen electrolyzers next to an existing conventional hot water ammonia plant and where you can feed in hydrogen straight into that with minor modifications. And it depends a bit on the the sign of the of the plant ranging from some plants you can feed in up to 10%, some you can go all the way up to to 50%. But it's the the reason for for differences would be the design and the need to to to have the the energy balance right in the in the ammonia plant. And then if you go for full conversion, you just take out the front end of the ammonia plant and you use the the the back end. So so then what you need is we use the whole hover brush synthesis.
You need an air separator and then and a electrolyzer. So that would be the investment cost to to to get that that going. And and we will come with the with numbers on this as we have matured a bit further. As Lars indicated, we're we're approaching this with the mindset that we should do this within our existing CapEx guidance. And as I indicated earlier, then that means that we need to think partnerships.
It means that we need to think also in some groups and also a different way of financial structures around it to help finance this. And sim similarly, you can view that similar as what is happening on on on various wind power projects and and similar to today.
Okay. And Freeport?
Yeah. So so the Freeport is set up so that they got they would we don't have the front end of the ammonia plant because we're sourcing sourcing hydrogen straight into the into the plant, and that is based on byproducts from and it is part of a huge chemical complex where hydrogen would be one of the the byproducts that we're utilizing then, and and the the payment structure of that is is linked to to natural gas prices. So so so the you you pay for the you you pay for the hydrogen, but you get it without the carbon.
Okay. And finally, I forgot one thing. Could you please enlighten me a little bit on the you're saying that ammonia is the best suited long distance hydrogen carrier, but ammonia only contains 18% hydrogen. And you have illustration in the presentation showing that the energy content in ammonia is priced as high as in hydrogen. But still, don't you need to transport two to three times more ammonia to get the same energy content compared to to hydrogen?
Well, I I think you have to look at it in terms of, you know, the the properties of the of the product and and how much you can so so when we're we're saying energy density is based on the volume of the of the ammonia versus the volume of pure hydrogen. And by adding that nitrogen molecule, you you change in the characteristics so that it has becomes lifted at minus 33 degrees Celsius. And and it it you could see put it simply, the nitro nitrogen molecules looks after the hydrogen molecules and keep keep them in order so that you can transport more of them on in in that space.
Okay. Thanks.
Thank you. And your next question comes from the line of Rakim Patel from Exane. Please go ahead. Your line is open.
Yes. Hi, everyone. Good afternoon, and thanks for taking my questions. Just firstly, again, on green ammonia. If you take a scenario where, you upgrade a facility like Prostrom, to 100% green ammonia, and then assuming the market is there, if you wanted to add on incremental, additional capacity, what would be the sort of theoretical maximum capacity that you could add based on the existing infrastructure?
And then secondly, just on the new EBITDA initiatives you announced late last year, Is there any updates on the trajectory for earnings there in initiatives like the carbon marketplace, for example? Thanks.
Well, when it comes to the full conversion and of and that would quite likely utilize the production capacity of the ammonia plant. That said, we have seen and we're seeing in Freeport as an example that when you feed pure hydrogen into the ammonia plant that you're able to produce somewhat more than nameplate capacity as well. But I think we should see that as the project that we have in Norway. Then once that reaches full utilization, we'll also look into other opportunities, for further, investments in in in green, ammonia. You could add, like like a module approach to to several of our plants, to make it available elsewhere in the world, as well.
I'm not sure I catch exactly the the second part of the question. But, if it was related to what activities we do, we are, as we also talked about at the ESG seminar, working now very much towards creating and and shaping a market for carbon credits. So basically working with climate smart farming at farm level and developing that as a potential both income for the farmer in simplifying those farmers that farm in a more responsible way from a sustainability point of view, but also that we then participate as and create a marketplace for carbon credits.
Yeah. And there there is, of course, no change to the financial ambitions and potentials that we see as announced at the Investor Center.
Great. Thanks.
Thank you. And your next question comes from the line of Thomas Frafjord, a private investor. Please go ahead. Your line is open.
Yes. Hello. Thank you very much. Can you say something about the electrification of the post plant? I'm thinking about the more about the time line for FID.
And also with the interest from from from potential partners. And then question number two could be on the Action Africa initiative. What what potentials do you see on this in Africa after going forward?
Yes. So so when it comes to the electrification of Pozkin, the the launch back in December, obviously, we've done quite a bit ahead of that, but that was should also be seen as our invitation to bring in partners and to to continue and further enroll the the dialogue with the with the government in order to to create incentives to get this done. We're we're still working on on that, and we'll give you updates on on the how that progresses. But but, obviously, we're we're looking for partners that can add both industrial and operational and financial know how into the into the project. So so more to comment on that that one.
And with regards to Action Africa, it's it's been a very rewarding project for a whole organization to take place in. It's also demonstrates the the power of cooperation. This was done together with the World Food Program and and the government and by allocating 40,000 tons of fertilizer combining that with agronomic knowledge that produces enough food to to million people for a whole year. So that's that's something about the the power of our products combined with our solutions. We added additional component to that, and where where we can also give agronomic advice.
We reached, do know, more than 2,000,000 farmers. And, obviously, that creates a a database and a platform to to further do work on this in in Africa and, and elsewhere. And we're we're we're also talking about partners where we can add additional support, through this, network. But I but I think it's a very clear illustration of what we're able to to do when we cooperate between, private sector, organizations and, and governments.
Thank you. But but you could say that is there, like, a strong interest from from Industrial Partners to the to the post plan project?
Yes.
Okay. Thank you very much.
Thank you. And we have one further question in the line, and the question comes from Jadi Panga from On Field Research. Please go ahead. Your line is open.
Thanks for taking the follow-up. I appreciate you won't be able to say much, but one of your key competitors has flagged their nitrogen and NPK business as a noncore. So how do you see the competitive landscape in Europe? Do you think you have room for inorganic growth in ammonia, nitrogen, and NPKs,
or do you do you
think that this is not an area of focus for you and, therefore, we shouldn't expect any large m and a from you in Europe?
Yes. So on a general note, I I think what we can say is that, we are very much focused now on delivering on the strategic initiatives we have and on the agenda, we have and on the targets that we have that we have set out.
Thank you.
Thank you. There are no further questions at this time. I will hand the call back to you, sir.
Okay. Then I think to
all that remains be said is thank you
very much for joining us in this long and comprehensive Q and A. So really appreciate, and we look forward to keeping you posted. Thanks very much.
Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.