Hello, this is Thor Giæver, Head of Investor Relations in Yara. This is our fourth quarter 2020 results conference call. We have our presenters from earlier today here. Our CEO, Svein Tore Holsether, our CFO, Lars Røsæg, and our EVP Farming Solutions, Terje Knutsen. We are ready to take questions now. Operator, if you want to kick off the Q&A. Thank you.
Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question today, please press star and one on your telephone keypad. If you wish to cancel your request, please press the hash key. Once again, please press star and one if you wish to ask a question. 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 some BPC from Belarus. Can you talk about that, first of all, if you could, if you continue to buy with the same amounts? 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 Southeast Asian prices are a lot lower than Brazilian markets. Of course, they're standard granular. Any comments you can offer there would be helpful. Thank you.
Yes. This is Svein Tore Holsether. I can take the first part of the question, and then I'll hand over to my colleague on the second part. When it comes to our sourcing from Belarus, there's nothing new to report there since our statements around this matter. We're continuing to work with Belaruskali, and they've also made commitments as to what they will do in order to ensure safe operations and that they are producing according to our code of conduct. They've also, last month, made a press release with regards to special initiatives that they are doing to fulfill that, and we stay in close dialogue with them. Nothing new from our side since these statements. With regards to the potash markets, Terje, perhaps you could share a few comments on that.
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. Secondly, and particularly 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 magnesium and phosphate. 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 a more direct application into Brazil. Yeah. I don't think maybe there is that much specific to say around the potash market as such.
Okay. My last question would be on the NPK premiums. You enjoyed very strong NPK premiums for a couple of years. We saw the premiums come down in the fourth quarter. Can you talk about what you're seeing into early 2021 here into early Q1, excuse me. Are you recovering some NPK premium back to what we've seen the last couple of years? 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 NPKs as a premium product. That means that you would typically see less volatility than you see in the commodities. 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. 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. This is exactly the phase we are in now. It's typical that when prices increase as fast as what has been the case, we might have a time lag.
We are carefully monitoring all the segments we are in and adjusting as we speak. The key here is that the fundamentals are good for the farmers. We think that, yes, there could be a time lag, but farm economy is generally good and supporting the prices.
Thank you very much.
Thank you. Your next question comes from the line of Thomas Wigglesworth from Citi. Please go ahead. Your line is open.
Thanks very much for the opportunity to ask questions live. Just to follow up on that, given you've spoken for many years about the supply-led market, can we now assume that this is a demand-led market? 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. My second question 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 give clean ammonia volumes going forwards? How should we think about the evolution of that division over the next 3-4 years? Thank you.
Yeah. Maybe I can take the first part, and then Svein Tore 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. There are many factors leading to this. We see obviously the quite significant increases in particularly extensive crop prices, such as wheat and corn, et cetera, 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 you have seen from the publications, and we do believe that that will offset the increase in energy cost.
I'll address the question on the new business area. I think there are incredibly exciting opportunities within this space to enable the hydrogen economy. There are huge investments ongoing and large projects to produce hydrogen across the world. It's also being talked about as the backbone of Europe's zero-emission energy transition. I think there's an important question that needs to be asked, and that is why do you produce hydrogen in the first place? Broadly speaking, the answer to that is that you have renewable energy at one place, and you need to utilize it somewhere else. We need to transport energy from one place to the other. Hydrogen has many positive properties, but also some disadvantages, especially by it being a very light molecule.
In fact, the lightest molecule, which makes it challenging to transport over a distance because of the lack of energy density. That's where ammonia comes in with a solution. When you turn hydrogen into ammonia, you change the properties. It becomes liquid at -33 degrees Celsius instead of -253 degrees Celsius. To transport energy over long distances, ammonia is the solution. That opens up the opportunities for Yara, because we already have an existing infrastructure by being the world's second-largest producer of ammonia. When we look at our global footprint, we have a leading global ammonia position, and we have an infrastructure in place with the production assets, tanks, and ships to enable this. Up until now, that's been used mainly to balance our own needs for ammonia.
It takes on a new role and a new opportunity to enable the hydrogen economy to grow. We see opportunities to build on top of this. Also internally, if you believe in the hydrogen economy and the expansions in hydrogen, you have to believe in ammonia as well. You can almost think about ammonia as the LNG of hydrogen, it enables transportation. That's where we will play a role. We're setting up a structure to manage this and to build our future position. We see that we have to do this in partnerships as well. We've already announced a smaller project in Australia, in Pilbara together with ENGIE. We've announced a project in the Netherlands, Sluiskil, together with OCI. We're also now working on the complete conversion of Porsgrunn in Norway to 100% electrification.
Also for that, we need to look for partners and for incentives to be able to get this done. By establishing this entity, we have the structure to lead the way and also to help to put structures in place to enable this.
Just, Svein Tore, on that, will those partnerships ensure that the return on invested capital is not diluted for the group?
We're approaching this a bit differently than we would if we were to construct a greenfield or brownfield fertilizer plant. The dynamics in the renewable sector would be quite different. I think you can look at what happened in the solar sector, the important role that Japan and Germany played in order to get scale in the industry, which in turn made it cost competitive with grid parity. When you look at the prospects from the hydrogen industry itself and the cost curves going forward, you can see a similar path. That requires scale, and Yara can, with our project, create scale. We could do that in an efficient way since we have some of the pieces already in place since we can repurpose parts of the ammonia plant.
That said, in everything we do, it is with a solid business case to begin with. It has to make sense financially as well, so that it provides the right capital return. We'll work creatively around that, how we financially put that together and how we structure partnerships. Indeed, we also need financial incentives as we will then be an enabler to create scale. The same rules for return apply also in this area as in every area in Yara.
Thank you very much. Very clear.
Thank you. Your next question comes from the line of Lisa De Neve from Morgan Stanley. Please go ahead.
Hi. Good morning, and thank you for taking our questions today. I had another question on the clean ammonia unit. First and foremost, how do you see ammonia prices evolving as the end market opportunities are clearly growing in this area? On that note, my understanding is that you have about 8.5 million tons of gross ammonia. In terms of net ammonia, I believe you have about 2 million tons of annual capacity. How do you see this net ammonia footprint evolving for yourself over time given the opportunity you see in this market? How big in terms of ammonia volumes is this opportunity for you without expanding your ammonia footprint? Would you consider expanding your ammonia footprint?
That inventory will just happen. We believe that you have to make volumes available and in parallel develop the markets. I don't think it's possible to first develop the markets and then start to construct. There are opportunities in many areas. One that is clear and with huge potential would be for shipping fuel. When you look at the projections and the emission levels communicated by IMO, there has to be zero emission ships in the future. What will they be fueled by? Ammonia has a clear advantage in that, and that could represent a huge part of future ammonia off-take. Also as just a general energy carrier, as I mentioned initially, to move the renewable energy from one part of the world to another where it's needed. It's a reversible process from ammonia back to hydrogen if needed.
Also there are engines built that can use ammonia as feedstock as well, and then obviously within fertilizer as well. The markets need to be developed, and it's important to look at the totality, including the emissions of producing and that's transparent and traced through the whole value chain, and through that create opportunities for these products. We've already seen major announcements from some of the biggest food producers in the world when it comes to reduction of emissions. That also includes what happens at the farm field, and it will only happen if the farmers are also incentivized to farm in that way, and through that, they will be able to pay for zero emission fertilizer as well. The market opportunities are definitely there. I think it's important to see full value chain. Let me make one example of this.
If you look through the whole value chain, if a conversion of the plant in Porsgrunn to green fertilizer, what would that mean to the carbon footprint of bread, for instance? Well, that alone could reduce by 30%, and the extra cost for the consumer in the supermarket would be EUR 0.01. It's not structured to allow that now, but I think it's important to illustrate what will it take, and there's no doubt about where the world is going in terms of emissions. We're going to support that. It creates business opportunities, and then we'll continue to expand with the market as it develops. This is our start to look into the possibility of making significant volumes available.
Okay, thank you. Just to clarify, can you just tell me how big your net ammonia position is? If you produce 8.5 million tons of gross ammonia per year, how much are you net selling in the market? Is that 2 million tons? Two, you mentioned something very interesting on the Porsgrunn facility, that if you are able to convert it into green ammonia, that the extra cost towards the customer would only be EUR 0.01. Did I hear this correctly?
Yeah. 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, because today there is still too much silo thinking, too much cost plus mentality. With that, it would be much higher in the supermarket. There's a lot of work happening now in the food systems to create greater transparency and link from the consumer all the way back to the farmer and the input. Through this product, we are helping to visualize this and to help the consumer also to make the right choices when it comes to climate impact.
Hi, Lisa, this is Thor. Just on the net position, it of course varies a bit with production levels, but directionally about between half a million and 1 million tons long is where we are today.
Okay, thanks very much for that.
Thank you. Your next question comes from the line of Andrew Stott from UBS. Please go ahead. Your line is open.
Good afternoon, everybody, and thank you for your time today. I have a few questions, actually. The first set was in the same theme, which is this issue that came from an earlier question from Thomas, which is around return on capital visibility. Can I check a few things? Firstly, the 1.2 billion 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 Porsgrunn 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, or are you really relying upon carbon credits, government funding, et cetera? Thirdly, 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-mover advantage? If you could capture the high ground on volumes through having this supply, but at the same price, would you do that? I know, Svein Tore, you just said that you're going to be disciplined, but for a period of time, would you be happy to accept a bit of return on capital dilution for the longer game? That's that set 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 going to spin that Clean Ammonia division midterm in order to make it easier to attract funding, in order to maybe monetize the green credentials?
Is it purely just a case of separating it out within Yara and keeping control?
Thanks a lot for your questions. This is Lars here first. Our commitment to a maximum annual CapEx of NOK 1.2 billion, that includes what we're doing in clean ammonia. It's not coming on top of the NOK 1.2 billion. We've said that we are looking at, as Svein Tore said earlier, establishing the right partnerships and the right structures around those projects. I think I'll hand over to you, Svein Tore, on a couple of the others.
Yeah.
I think when it comes to the ability to get a premium for green fertilizer, that's a market that needs to be developed. We can't put that burden straight onto the farmers, as is today. The farmers have an important role to play, but they don't have the sort of profitability where they can easily absorb that increase in cost. That's 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 total, and then what happens at farm level becomes very important. Then we need to have incentives in place for the farmers, which partly could be paid from consumers and increased awareness around the carbon footprint, but also from regulators and from governments.
We do keep in mind that the planet is already paying a higher cost for food than what we pay at the cash register. I encourage all of you to read the Food and Land Use Coalition report, which shows the total value creation in the food system on an annual basis, which is $10 trillion. The hidden cost of the food system is $12 trillion. That's related to health, but also emissions and environmental impact. 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 planet. We need to approach this holistically. Yara is taking a key role also in this too, to help to develop these markets. I'm quite encouraged by everything that is happening now in the space.
Also looking at the farmers as part of the solution, not only when it comes to using green fertilizers, but also through carbon farming, using the farm field to sequester carbon and also to farm productivity, where more food can be produced on less land and freeing up land and turning it back into nature with the corresponding carbon sequestration from that. A lot of exciting opportunities. Again, we need to have a product in place in order to drive this. Then back to the question, are we willing to take a lower return? If you look in other industries, including now we see offshore 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 that always with a financial return in mind.
Indeed, we will also see the totality and the value of the first-mover position and so on. It would still have to make sense on the longer term, even if it didn't have the straight short-term returns. I hope that answers the question as well.
Yeah. On the last point, what we're doing here today is we're establishing a unit that we think entails some very exciting business opportunities. It's a $1 billion revenue and $120 million EBITDA business. That's really our focus now on establishing that in the best possible way and certainly drive the value creation potential of that unit as good as we can going forward.
To come back on that, apologies for my bluntness, but you didn't really answer the question. Is it a division you want to keep control of, or would you look at part spinning it?
We want to keep control of this unit. It plays an important role also in our existing structure and will, so going forward as well. We are open to, and we will be open for partnerships to drive this. 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 logic. That's our approach to this as well.
Perfect. Thank you very much.
Thank you. Your next question comes from the line of Jaideep Pandya from On Field Research. Please go ahead, your line is open.
Thank you. First question really is, could you give us some idea of what is your net carbon exposure that you will have to purchase, assuming there's no change in the regulation from 2021 onwards? Subsequent to that, what do you expect in terms of the next phase for 2020 onwards, in terms of reduction of allowances. Do you think the 20% headline number for nitric acid and ammonia applies, or do you think that this is going to be a case by case? A related question really is just all three parts of one question. Please, obviously a lot of your competitors in Asia are coal-based. Do you expect that you will 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 this. 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, 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 can start on the EU ETS side of things here. Maybe the India, I will ask for help. We now understand the ammonia benchmark, for 2021 in the EU ETS is 1.57 tons of CO2 per ton ammonia. With that reference point, we actually expect to be covered or even have a small surplus of allowances in 2021. Then the second question, as you probably know, these benchmarks do get adjusted from year to year, and it's a bit more technical than just arriving on one benchmark. A number of adjustments can be made, and it's not necessarily linear, for any given company every year. You're of course, right. It's prudent to assume that the trend over time is that these allowances get tightened.
That's an important dynamic that we plan for, as part of our broader strategy really, which is aimed at providing sustainable food solutions. As part of that, we are constantly working and we've 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 field. The final, on this topic, you asked about border tax, and I think, yes, there is. This is still under, should we say, construction and review in the EU.
Yes, there is a carbon border tax under design, aimed at dealing with examples that you mentioned, that if you have set limits for CO2 emissions within the EU on fertilizer production, then the intent of that regulation will be to then adjust for if you have imports from elsewhere that have potentially a lower price or lower cost as such, but a higher carbon footprint. These regulations are still at the drafting stage, so we don't know exactly how that will play out.
Yeah. On India, this is Freidrik Knutsen. I don't think we will enter into expectation whether the dynamics of the tenders will change as a consequence of what is going on. What we can say is that we work relentlessly every day on the ground in India to improve profitability for the farmers. We are successfully working with our concepts and now also very much integrating digital solutions into our total offering. By that creating real, you could say, solutions, to again contribute to the target 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?
Yeah. 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 capital process.
Yeah. It's absolutely fair to say that we have not disclosed 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 Chetan Udeshi from J.P. Morgan. Please go ahead, your line is open.
Yeah, hi. Thank you. I just had three questions. First one was, there is a mention of some $100 million of fixed cost increase in 2021, and it says it's going to be a temporary increase. Can you maybe give us some more color on what you're spending on, and why is this actually temporary? Again, I think the broader context here is, at what point do these temporary cost increases every couple of years become not temporary? Just on a broader strategic point, that'd be useful. The second question was, your deliveries in Q4 were very strong. Have you sold much of your product forward for Q1 season or Q1 demand already in Q4 based on what you know at the moment?
In other words, should we expect any lag in terms of when you see the full benefit of the price increases that we've seen so far in Q1? The last question would be, on freight costs, do you have any sense of the impact we could see on Yara's freight costs and total cost on shipments, given the increase we've seen in general in the freight markets? Thank you.
Yeah, thanks a lot. Let me start with Slusher. On the fixed cost, you are indeed right. That's a temporary increase, and it's linked to the new initiatives we're taking, announcing today and what we also launched at the ESG Investor Seminar. It has something to do also with classification between CapEx and OpEx. If you look at what we said in Q3, we said that we would have a total CapEx spend of $2.2 billion for the combination of 2020 and 2021. What we actually said today is that is estimated $100 million lower at $2.1 billion in CapEx, then we have the $100 million in fixed cost. That means that we are stable on commitments for 2020 and 2021 compared to what we said at $2.2 billion, there is then an allocation between OpEx and CapEx.
In June 2019, we launched our target of having a nominally flat fixed cost base until 2023. We've kept that very stable and flat and even a bit ahead. We are very strong in our commitment to that target and being back on that target in 2022. In the light of what I just discussed on sort of the application between CapEx and OpEx. On the total commitment side, as I also said earlier, we have a maximum total CapEx of NOK 1.2 billion a year from 2022 onwards, and that also includes what we now are doing in clean ammonia. On the second question, maybe I hand it over to you, Terje.
I think I can start, then maybe Thor will have some additions. We have had a strong quarter. I think that has been primarily due to good support from, again, as we have said, crop prices and the general conditions for farmers. No particular sales forward into that. 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 as a time lag. Yeah. I guess that's what we can say.
Yeah. Just to build on that, it's not forward selling. We wouldn't define it as forward selling, but it's just that from the normal time from we take an order and fix the price until we deliver the product, which is what our P&L is based on, is, as Terje says, a month to a month and a half.
Thanks. On freight costs?
Sorry. Yes. There was one more. Would you mind repeating the question? Because I don't think I got it completely.
I just wanted to get a color whether you think the freight cost that you have in general, which is I think NOK 1 billion per year, should we expect any material increase in that number this year given the shipping rates today in most routes seem to be much higher than they have been in the last 3, 4 months? Just thinking whether is that something we should be taking into consideration in our numbers for 2021?
Yeah. We don't have any guidance on shipping costs. As you know, we have operations globally, some of which are exposed to freight costs. Others that are, for example, in Europe, where we are located inland and competing against imports, you can also get the positive effect from increased freight rates because the competitive benchmark import increases in cost. I think you will often see that there are pluses and minuses in our operation here, but we don't have any guidance as such.
Understood. Thank you.
Thank you. 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. 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? The third question on the dividend, the payout ratio is higher this year than the 50% guidance that you've given through cycle. Does this reflect a bit more of an emphasis on dividends over buybacks at the moment? Any color you can give on that would be helpful. Thank you.
It's something I could start on the question related to interest around this. I think 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 markets in general. There's a huge amount of interest and also a lot of discussions with relation to what this could lead to. I mean, both with regards to green fertilizer production, but also important is marine fuel with zero emissions. You asked about green versus blue. I think it's going to have to be a combination. It depends a bit on where in the world and what the application is.
So far, most of the discussions I've had within the food system, there seems to be a greater interest for green ammonia, while if you discuss on energy sourcing at country level, then there's probably more blue. Our infrastructure will facilitate both, and that's why we're also calling it Yara Clean Ammonia, because it could be both blue and green.
If I answer on the dividend side. As you would know, we introduced a new capital allocation policy in 2019 where we lifted the floor from 40%- 50% of net income, where we also said that we wanted to have a net debt to EBITDA range of 1.5- 2. What that means is that improving return on cash flow may lead to increased payout capacity in line with that policy. On that basis of that policy, the board now proposes NOK 20 to the AGM. In addition to that, what we've said is that cash dividends is our primary lever, with buybacks as a supplementary lever, as was also been the case in 2020.
Thank you.
Thank you. Your next question comes from the line of Morten Normann 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 NOK 1.2 billion going forward. How does that relate to potential retrofitting your ammonia production? 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 hydrogen. What price do you pay? Is that blue, green, or gas-based hydrogen?
I think it's too early to start to create a rule of thumb cost projection for green ammonia. It's about time and scale as well for the whole hydrogen industry to ramp up and through that, become more cost competitive for CapEx. 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 a fossil approach to it. Our approach is that we need to have incentives in place that bridge that gap. We have some clear advantages with the opportunity to retrofit, and that can be done in several different ways. Part of it can be done through incremental increases by producing hydrogen electrolyzers next to an existing conventional Haber-Bosch ammonia plant, and where you can feed in hydrogen straight into that with minor modifications.
It depends a bit on the design of the plant, ranging from some plants you can feed in up to 10%, some you can go all the way up to 50%. The reason for the differences would be the design and the need to have the energy balance right in the ammonia plant. Then, if you go for a full conversion, we just take out the front end of the ammonia plant and we use the back end. Then what you need is reuse the whole Haber-Bosch synthesis. You need an air separator and then an electrolyzer. I think that would be the investment cost to get that going. We will come with numbers on this as we have matured it a bit further. As Lars indicated, we're approaching this with the mindset that we should do this within our existing CapEx guidance.
As I indicated earlier, that means that we need to think partnerships. It means that we need to think also incentives and also a different way of financial structures around it to help finance this. Similarly, you can view that similar as what is happening on various wind power projects and similar today.
Okay, Freeport?
Freeport is set up so that we don't have the front end of the ammonia plant because we're sourcing hydrogen straight into the plant. That is based on by-products from, and it is part of a huge chemical complex, where hydrogen would be one of the by-products. We're utilizing that, and the payment structure of that is linked to natural gas prices. You pay for the hydrogen, but you get it without the carbon.
Okay. 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, ammonia only contains 18% hydrogen, and you have illustration in the presentation showing that the energy content in ammonia is twice as high as in hydrogen. Still, don't you need to transport two to three times more ammonia, to get the same energy content compared to hydrogen?
I think you have to look at it in terms of the properties of the product and how much you can. When we're saying energy density, it's based on the volume of the ammonia versus the volume of pure hydrogen. By adding that nitrogen molecule, you're changing the characteristics so that it becomes liquid at - 33° C. You could say, put it simply, the nitrogen molecule looks after the hydrogen molecules and keep them in order so that you can transport more of them in less space.
Okay, thanks.
Thank you. Your next question comes from the line of Rikin Patel from Exane. Please go ahead, your line is open.
Yes. Hi, everyone. Good afternoon, and thanks for taking my questions. Firstly, again, on green ammonia. If you take a scenario where you upgrade a facility like Porsgrunn to 100% green ammonia, 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? Secondly, on the new EBITDA initiatives you announced late last year, is there any update on the trajectory for earnings there in initiatives like the carbon marketplace, for example? Thanks.
When it comes to the capacity, it's a full conversion of Porsgrunn, 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. I think you should see that as the project that we have in Norway. Once that reaches full utilization, we'll also look into other opportunities for further investments in green ammonia. You could add like a module approach to several of our plants, to make it available elsewhere in the world as well.
I'm not sure I catch exactly 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 shaping a market for carbon credits. Basically working with climate-smart farming at farm level and developing that as a potential both income for the farmer, incentivizing 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. There is, of course, no change to the financial ambitions and potentials that we announced at the Investor Seminar.
Great. Thanks.
Thank you. Your next question comes from the line of Thomas Fastjord, 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 Porsgrunn plant? I'm thinking more about the timeline for FID, and also with the interest from potential partners. Question number 2 could be on the Action Africa initiative. What potentials do you see on this in Africa after going forward?
Yes. When it comes to the electrification of Porsgrunn, launched back in December, obviously we're done quite a bit ahead of that, but that should also be seen as our invitation to bring in partners and to continue and further involve the dialogue with the government in order to create incentives to get this done. We're still working on that, and we'll give updates on how that progresses. Obviously, we're looking for partners that can add both industrial and operational and financial knowhow into the product. More to come on that one. With regards to Action Africa, it's been a very rewarding project for our whole organization to take place in. It also demonstrates the power of cooperation as we've gone together with the World Food Programme and the government.
By allocating 40,000 tons of fertilizer, combining that with agronomic knowledge, that produces enough food to two million people for a whole year. That's something about the power of our products combined with our solutions. We added additional component to that, and where we can also give agronomic advice. We reached, I believe now more than two million farmers, and obviously that creates a database and a platform to further do work on this in Africa and elsewhere. We're also talking about partners where we can add additional support through this network. I think it's a very clear illustration of what we're able to do when we cooperate between private sector organizations and governments.
Thank you. You could say that is there a strong interest from industrial partners to the Porsgrunn plant project?
Yes.
Okay. Thank you very much.
Thank you. We have one further question in the line. The question comes from Jaideep Pandya 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. One of your key competitors has flagged their nitrogen and NPK business as non-core. How do you see the competitive landscape in Europe? Do you think you have room for inorganic growth in ammonia, nitrogen, and NPKs? Do you think that this is not an area of focus for you and therefore we shouldn't expect any large M&A from you in Europe?
Yeah. On a general note, 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 set out. Yeah.
Okay. Thank you.
Thank you. There are no further questions at this time. I will hand the call back to you, Sir.
I think all that remains to be said is thank you very much for joining us in this long and comprehensive Q&A. We're really interested, and we'll 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.