Hello, welcome everyone to this conference call about the announcement Yara made today of our acquisition of the Gulf Coast Ammonia plant. I am Maria Gabrielsen, Head of Investor Relations, and I am joined by our CEO, Svein Tore Holsether, and our CFO, Magnus Krogh Ankarstrand. I just want to start by saying that we will only address questions today about the announcements we've made this week. We will not answer any questions related to quarterly financials or current market dynamics. We will start with some opening remarks. Then open up for Q&A. Please raise your hand if you wish to ask a question. If you're joining by phone and wish to ask a question, you need to press star followed by five to raise your hand.
With that, I'll give the word to Svein Tore Holsether.
Well, thank you so much, Maria. Hello, good afternoon to everyone, and thank you for joining this call. I'm really happy to share that Yara today has announced that we're acquiring the Gulf Coast Ammonia Production Facility located in Texas City for a consideration of $1.3 billion. This is a plant with an expected nameplate capacity of 1.3 million tons a year. This acquisition demonstrates Yara's execution of our strategy to diversify our energy exposure and enhance the competitiveness of our global ammonia production footprint through accessing low-cost gas and also economies of scale, and through that, lowering both our fixed costs and our capital per ton. This acquisition is a very attractive entry to low gas cost production in the U.S. We will use our experience to contribute to improving plant reliability and performance, targeting production to or beyond the nameplate capacity.
It also demonstrates our return-focused capital allocation policy by executing on investments with strong and robust returns, which increase our long-term competitiveness. Following completion of the acquisition, our immediate priority will be commissioning the Gulf Coast Ammonia plant while delivering on our previously announced EBITDA improvement targets from the Capital Markets Day. With our resilient and future-ready business model, Yara is well positioned to deliver strong shareholder value returns today and in the future.
With that, I'll now hand over to Magnus Krogh Ankarstrand, our CFO, to elaborate on the financials. With that, over to you, Magnus.
Thank you, Svein Tore. Reiterating Svein Tore's comments, this plant has the potential to become one of the most profitable plants in our portfolio. The consideration of $1.3 billion is a very attractive entry ticket to ammonia production in the U.S. at a very attractive cost. It clearly demonstrates our ability to execute on our ammonia strategy combined with the agreement we also are finalizing with Air Products on green ammonia out of Saudi Arabia. The combination of these two fulfills the main objectives with our ammonia strategy that we worked on for several years. We expect that the plant will generate strong and robust returns, the key variable components being natural gas linked to Henry Hub and global ammonia prices, and that's perfectly aligned with Yara's wanted exposure as integrated nitrogen producer.
The hydrogen and the nitrogen will be sourced from Air Products, a very similar setup as we have in our Freeport plant. The plant is currently completing outstanding work to gradually ramp up to nameplate capacity and stable operations. Yara has done a very extensive technical due diligence as part of the process and concluded that the plant's potential is significant and that this will become a key strategic asset in our global portfolio. The acquisition in itself leads to a CapEx for 2026, provided that we close within the end of the year, of $2.5 billion. While this front loads anticipated growth CapEx, it is still within the CapEx framework and the CapEx expectation that we had for the period up to 2030 announced at our Capital Markets Day.
Also, of course, this asset has a much faster cash flow than a building project, as an example. Yara remains committed to our capital allocation framework and also our guided CapEx of around $ 1.2 billion in real terms on average for the next few years, meaning that we also will maintain strong capital discipline even with this acquisition, and also prioritize growth investment accordingly, limited and focused on selective high return opportunities only. As of first quarter, Yara reported a Net Debt/EBITDA of around 1x. A pro forma Net Debt/EBITDA after this acquisition and dividend payments brings us roughly to 1.7x within the range of our capital allocation policy. Just to reiterate, Yara remains committed to our capital allocation policy, with an overall objective of maximizing value creation for shareholders and maintaining our BBB credit rating.
With that, I think we'll open up for questions.
Yes. We will now open up for Q&A. When it's your turn, I will state your name or the last figures of your phone number, if that's the only thing that appears on my side. I will then ask you to state your name and which company you represent. The first question is now from Elliott. Please go ahead, Elliott.
Hey, guys. Yeah, thanks. Elliott Jones from Danske Bank here. Couple of quick ones. Firstly on the kind of CapEx of the project, just confirmation that the $1.3 billion is the final ticket here, and maybe how that's going to be split between the quarters, and also if you expect it to be kind of 100% equity or equity and debt. Actually I'll let you answer that, and then I've got two more questions after that.
Can you repeat the last sentence there, Elliott ?
Sorry. Yeah, I just said that maybe you guys can answer that first, I've got two more questions after that.
Oh, yeah. Okay.
Yeah. No, sure. It is a normal acquisition of an existing asset. The purchase price is the $1.3 billion, that will be payable upon closing. I think that's the amount of details that we give on that. Again, with our balance sheet, it doesn't really matter so much exactly when that kind of falls. I think from a capital allocation policy and if you're thinking dividends, et cetera, we will stay very committed to our existing policy. Yeah, we'll fund the acquisition in itself as a combination of cash and corporate debt.
Got it.
Yeah.
Got it. In terms of the economics of the project, just any more color would be super helpful. Obviously we can work out the cash cost using maybe Henry Hub prices, but obviously there's a potential cost for the hydrogen and nitrogen. Is there any way you can kind of let us understand how things are structured then? If it's maybe on top of the Henry Hub, and if so, what type of range that could be? That'd be really helpful.
Yeah, no. I think what we can say around that is that like Freeport, this is half an ammonia plant in a sense, right? Where the other half is the hydrogen and nitrogen production part, which is not a part of the acquisition. That's supplied by Air Products, kind of similar as was intended in the Darrow project as well. We buy that over the fence. Of course, it's also you take fixed cost, maintenance, CapEx, et cetera. I know it's a bit different than an ammonia plant where you have both the front end and the back end. Part of that is also baked into obviously what we pay for hydrogen and nitrogen and other utilities and so on.
I think, we can sort of in roughly in the current market environment, say that it's south of around $250/ ton cash cost.
Got it. Thank you. Just maybe one last one going forward. This is 1.3 million tons. I suppose the first question is should we see this as kind of in the future replacing other parts of your existing portfolio, or is it kind of on top? The second question is, do you envisage potentially more U.S. acquisitions of a similar size going forward, or are you happy with whether your future system cash cost will be after this acquisition?
This is Svein Tore. As you saw earlier this week, we discontinued the project that we had ongoing with Air Products in Darrow. This is the project that we're doing. How we should think about it is that we're now getting 1.3 million tons more into our total ammonia system, which is a robust and global system that is set up to serve both ourselves, but also to other players in the market. It adds to our flexibility. First and foremost, it gives us access to low-cost gas and low-cost ammonia. This is the project that we're doing. You should not expect that there will be other large scale ammonia investments at this stage.
Great stuff. Thanks a lot, guys.
Thank you. Next one to ask questions is the phone number that ends with 5222. Please introduce yourself and ask your question. Unmute yourself first probably. Okay. Phone number ending with 5222. If you unmute yourself, you're able to speak. If not, I will move to the next person on the list. Thales Schmidt, please ask your question.
Hello, everyone. I'm Taj Schmidt. I'm with S&P Global Energy. I'm a market reporter for ammonia. My question is regarding GCA. It has an offtake contract with OCP. I wonder now with that Yara bought the plant, where does this contract with OCP stand?
Yeah. As mentioned in the press release as well, the plant or the target was sold through an auction process. The asset was offered without any offtake contracts.
Okay. The asset was offered without any offtake specifically linked to OCP or any other organization linked to it, right?
Yeah. It was offered without offtake contracts, then of course, as of now and until closing, of course, Yara will have no interaction as such with the plant. We don't own it before we close, obviously, when we do, this becomes a part of our system that has a wide range of commercial arrangements and agreements. Until we've closed, we're not at liberty to say anything more about any sort of commercial plans or either existing or future. As mentioned, the plant was offered for sale without any offtake contracts in place.
Okay. Thank you very much.
Thank you. Next question is from Lizzy Lancaster . Please ask your question.
Thank you. I've got two if that's okay. Firstly, I just wonder if this kind of reflects a move away from an investment in blue ammonia or low carbon projects, considering obviously some of the other projects that you're pursuing were CCS related. If this also means that you're not considering investing in Project Yara, and that you were exploring previously as well. The second question was just kind of surrounding CBAM and the U.S. country default value. There was some ambiguity around whether GCA was going to be able to get verified early in 2027 or not, and do you have any concerns around that, or are you expecting that the plant will be able to get a verified CI score in order to ship those volumes back to your own system in Europe without a high penalty?
Thanks for the questions now. This is Svein Tore. I'll start on the carbon question. I think you need to see this in the context of what we've done at Yara over the last decades in terms of reducing our carbon footprint, where we've reduced by close to 50% already. We set a carbon intensity target in 2019 as well that we were very proud to deliver on in 2025. On top of that, we're now in the final stages of our decarbonization project in our plant in Sluiskil in the Netherlands as well, 800,000 tons of CCS, largest industrial decarbonization project with CCS in Europe.
With what we've done with our pilot plant on the green hydrogen in our plant in Porsgrunn in Norway, and as communicated earlier this week, that we're continuing the contract discussions with Air Products on the NEOM project with the green ammonia as well. When it comes to our decarbonization journey, we're committed to that, but we look at the totality of this also considering that decarbonization also has to be profitable. As I said in the past, no green transition with red numbers. It's about capital allocation, capital discipline, and net present value as well.
For us, it's about looking at the totality of this. Now, this plant is an SMR plant. It is not at the moment blue nor green ammonia for that sake, but there are future opportunities for that either through pipeline or in the SMR itself to do carbon reduction, just like we're doing in Sluiskil. We can do that if it's profitable and fits into the totality of the needs that we have as a company. Think about this in a portfolio where we need both access to low carbon and low cost ammonia, and when we now look at the totality, this fits in very well.
I'll hand over to Magnus for the other questions.
Yeah. I think also when it comes to other projects, as Svein Tore mentioned, we don't have any other large scale projects in our CapEx plans in the coming years. When it comes to CBAM and certification, That's certainly something that we're watching very closely. Obviously, we've done our due diligence on this specific facility as well in terms of what that would look like once verified. I think what's important to keep in mind on that one is that we have a very flexible system in Yara. We also have a significant portion of what we call Inward Processing in Europe, which means that we are exempt from CBAM on ammonia we import to produce finished fertilizer, which is re-exported. Then, of course, we have our different sources.
Importantly, also, even though that's later in 2027, we have our important agreement with Air Products out of NEOM in Saudi Arabia as well, which is renewable ammonia and zero carbon footprint. Looking at that, including our CCS project in Sluiskil and other opportunities that we already have, we are quite well covered for our, say, call it CBAM exposure for 2027. Also, of course, we're not entirely sure when closing will occur, but of course, that's also later this year. I think it's difficult speculating how much time it takes to get certification. We're not particularly concerned about that.
Thank you.
Thank you. Then we will try again with Joel Jackson. Press star and six to unmute your microphone, then we try again and hope it works now. That did not work, unfortunately. Some issues with questions when joining by phone.
Hi, this is Joel. Can you hear me?
Oh, yes. Now we can hear you, Joel.
It kept saying I was not allowed to unmute, but now I am, so thank you very much.
Oh, okay, good.
All right. Thank you. Okay. Sorry for the humor there. I just wanted to ask a question about blue premiums. In some of the initial cargoes coming out of this plant, are you getting blue premiums from this plant? Maybe general commentary, are you seeing blue premiums for low-carbon ammonia globally now?
Yeah. No, I think currently, there's no carbon capture on this particular plant. The answer to that question is no. As Svein Tore mentioned, there could be possibilities in the future to do it stepwise. As a general comment when it comes to the way we think about this when it comes to projects and investments for decarbonization, the margin is really the ETS or CBAM number. That's currently what we see as a margin for decarbonization.
Yeah. I think on this one, it's fair to refer back to our Capital Markets Day presentation as well, where we're describing the way forward when it comes to Yara Climate Choice Fertilizers. Again, here, I encourage to look at the totality of our portfolio, and that's really core to the strength of Yara. It's the resilience in our production portfolio, where we're producing, how we're producing, and how we can move products around. Also going from the production stage, but all the way into the field of the farmers. We're working through the whole value chain also to support the decarbonization. As Magnus said, not to comment on the specific situation as of today, but more the long-term evolution of this. I think the best answer to that is really in our Capital Markets Day presentation from back in January.
Okay, earlier you talked about this is going to be your most profitable plant. Now, obviously, your costs are higher because it's not like a traditional integrated ammonia plant. When you talk about being the most profitable plant, are you talking about a percentage basis? Can you talk about how you quantify that?
It's the full cash flow profile of the asset. Obviously cash flow from operations and cash flow from investments. I think also, cash flow from operations in isolation, it will fit very well or be placed very well on the cost curve internally in Yara and certainly globally. This is even on a sort of operating cost basis, improving our cost position on production. Then similar as Freeport is as well, I think this is another big investment into the United States by Yara, which is a very important market for us. Also because energy cost in the United States is very attractive, which puts this in a good position for us in our portfolio.
You may have answered earlier, are there ways you could talk about as time goes on with your offtake contracts for feedstocks here, what's your sensitivity to different cost inflation in the feedstocks? Is it one to one with natural gas prices? Are there different pass-through mechanisms, other inflators? Can you give an idea of what it looks like?
We will update our sensitivities once we have closed this acquisition. Then the key variable there is obviously gas cost and ammonia prices. Those will be changing with this nameplate capacity and also reflecting that we expect this plant to be quite energy effective. In terms of that's one of the most important parts for the gas sensitivity, that will be updated once we are approaching closing.
Thank you very much.
Okay. I will give the word to David Symonds . Just give us two seconds to allow your microphone, and you can unmute and ask your question.
Great. Can you hear me?
Yes.
Brilliant. Three questions from me, please. Firstly, there were repeated delays to the start-up of this project. Is there anything you can say on the due diligence process that you undertook and what the issues were previously, and how you think you can fix them going forward? As much as you can comment on that. Secondly, can you give the build cost for the portion of the project that you are buying? I think it was originally scoped at $600 million, I imagine it's run over from that.
Also maybe how much would it cost to build today? Thirdly, stepping back a little bit, is a signal here that the risk of Europe being pushed off the top of the cost curve is bigger than the opportunity of earning a blue premium under CBAM, in your minds, given that you are devoting capital to pivoting away from Europe more so than pivoting away from carbon intensity? Thank you.
Yeah. I think when it comes to the technical status of the facility, obviously when we acquire something, we do a very thorough due diligence. I believe when it comes to operating ammonia plants, we have the best people in the world on that. We know exactly what we're buying, so to say. I think beyond that, it's not appropriate for us now pre-closing to comment any more on that, and that goes for building costs as well. That is not appropriate for us to comment on that at this point. I think when it comes to your question about Europe, and this one versus blue premiums, et cetera, I think we've been very clear in our strategy that there are three important components when we look at the ammonia part of our strategy. That's number one, to improve our energy cost.
Number two, to improve scale and in production, and that way lower fixed cost and CapEx per ton. Number three is to position us well towards carbon cost in Europe. Also of course, our greenhouse gas targets as well. I think obviously, this acquisition in itself is a major step forward on one and two. Of course, given that there's no carbon capture here, it doesn't do much for number three, at least not yet. I think, again, it's very important to think about, or we think about this as our portfolio. Again, here is why our collaboration with Air Products on NEOM becomes very important as well. Both fills a need that Yara has in its system.
Also with the ammonia infrastructure that we have in Europe, important gateway to obviously the largest market with blue premiums, but also I would say almost the only market with green premiums, which is an important element as well. We shouldn't forget that. I think the combination of that facility and our import capacity in Europe is also very attractive for both parties, both Air Products and Yara. Even as you allude to that, the appetite for renewable ammonia is perhaps less than what it was a couple of years ago in the market. It's also important to remember that the combination of Air Products and Yara present to the remaining demand there is the only combination that has a real producing plant and a real import infrastructure.
The rest is basically, or mostly, MOUs and plans. For the interest there is, there is RFNBO legislation in Germany as an example, in other countries in the E.U. as well. There are opportunities there. Yeah, that's definitely not off the table or unimportant, I think the combination that we here have with this facility, this acquisition here, and our collaboration with Air Products in Saudi Arabia, as well as some other opportunities that we have announced previously as well, smaller, it positions us very well.
Yeah. Just to add, we're very much committed to our European operations, to the European market. We have through several years now, worked in a rather volatile environment, and we've built in a lot of flexibility and resilience into our European plants as well for finished goods production. We also need a portfolio in totality that makes sense here as well. Don't think about this as individual assets, but rather do we put together the right portfolio of products that can support it? This is one important component that really helps to strengthen the totality of our ammonia position.
Thanks very much.
Okay, we move to Angelina. Just give us two seconds to unmute your microphone, and please ask your question.
Hello. Thank you very much for taking my questions. I hope you can hear me.
Yes.
I just have a follow-up on what you have said earlier, that there is a possibility technically to retrofit this newly acquired plant and, for example, make it a blue ammonia plant. I just wanted to ask from a strategic standpoint, or maybe from the external environment standpoint, what will be the catalyst for Yara to take such a decision going forward? Is there something that needs to change from the regulatory perspective? Is it that you need more certainty, or how would you think about it going forward overall?
Well, the key catalyst is net present value. It needs to make sense, so back to no green transition with red numbers. They need to also show up in cash flow. Then for us, it's about looking at the totality of our portfolio. We've done, as I mentioned earlier, significant decarbonization in our current structure. We are doing similar products to what would be needed to be done here in order to decarbonize. The product in Sluiskil in the Netherlands would be very similar to what you could do in a location like this in order to do further decarbonization. There needs to be an income side to that as well.
When we look at the totality of what we have now, whether that is our own blue ammonia production that is coming online, the agreement that we're working on with Air Products on green ammonia from the NEOM project, our own green hydrogen production, it's about having available tons that you then have a scale and market for as well. Currently, that is not needed. Should it be, well, then we can go ahead and do investments similar to what we're doing in Sluiskil if it makes economic sense. Currently, that is not needed.
Understood. Thank you very much. Just another very quick follow-up. You have commented earlier that you're not considering any other large-scale projects at the moment, but when it comes to offtake agreements for clean ammonia, for example, what you have for the NEOM project, would you still be considering such agreements if they were available in the near term or maybe a few years out?
I think that depends a bit on what type of ammonia and what type of agreement. I think right now, as I talked about earlier, of course, our focus is to commercialize that project, NEOM, from an offtake perspective, in addition to, of course, the GCA facility once we close. In general, our ammonia portfolio, what we buy and sell ammonia goes far beyond what we produce and consume ourselves as well. We already have a large portfolio of varying types of contracts, some shorter, some longer. I think that's something that we can continuously add and subtract to that portfolio.
Yeah. As Magnus is saying, we have a very interesting and strong midstream position here. As other industries move to decarbonize as well, keep in mind that ammonia is a very suitable carrier of hydrogen. As that is needed for other industrial processes, and you need to carry hydrogen over long distances, well, we could utilize our network. Here, this investment doesn't change anything to that. If anything, it strengthens our midstream position. It depends on both profitable offtake agreements but also demand for low carbon ammonia/low carbon hydrogen.
Great. Thank you very much.
Thank you. We'll now give the word to Magnus Rasmussen. You can unmute yourself and ask your question.
Thank you for taking the questions. If you were to add CCS at a later stage, is it a correct understanding that such project CapEx would be CapEx for Air Products and then matched by higher OpEx for Yara? If so, how much higher OpEx would we roughly then be talking about to defend Air Products' investments?
No, I think the specifics of exactly how that would happen, I think it's a bit premature to talk about that. Also keeping in mind that we are pre-closing still on this acquisition. I think in general, today this is an ammonia plant that receives part of the hydrogen from a nearby SMR, part of the hydrogen from a pipeline. Air Products in their system have a lot of flexibility, which then of course also means that in terms of whatever changes that you could do to that hydrogen supply in the future, it comes with a lot of flexibility. It's even too early to speculate on exactly what opportunity you would do, but it certainly does offer the opportunity, at least, for a more stepwise approach and also, as Svein Tore would have pointed out, if it's profitable.
Obviously, doing capture of existing CO2 streams out of any ammonia plant, including this and also like we are doing with our Sluiskil project, comes at a much lower CapEx. Significantly lower CapEx than what you're talking about in terms of new build, right? That's a totally different picture. Yeah.
Yeah. Understandable.
Again, maybe to be more precise on your question, I think whether the CapEx comes here and the OpEx comes there, from an NPV perspective, it doesn't really matter so much, right? Sort of to calculate the value creation for such an investment, you need to look at what would the CapEx and OpEx be and what kind of margin would you get from a CBAM 45Q, obviously, and so on.
Yeah. Just wanted to also sort of confirm, you said roughly $ 250 cash costs now given current gas prices, and that's on the EBITDA level, right?
Yeah.
Finally, it was asked earlier, the question, I don't think you answered it, maybe it just skipped you. What would it have cost to build such a project now? Do you have a rough idea of that?
I think in terms of replacement cost for an ammonia plant, then, of course, it differs a little bit. Obviously, which scale and size you build and so on. I would guide towards the publications, but also our Capital Markets Day presentation where we have some numbers from trying to average out a bit the projects that have been announced recently. What that means in terms of CapEx per ton. I think that's quite applicable for a project like this as well. I think that's probably best. I don't have those numbers off the top of my head, but they're in our Capital Markets Day presentations.
Thank you.
Thank you. It seems we have a question from David Symonds. Please unmute and ask your question.
Thanks. Yeah, just a quick follow-up. Obviously part of the CBAM premium that's available to earn comes from efficiency, from being more efficient than competitors, basically. I would assume that this is bottom quartile for efficiency, around the 30-32 mark for gas per ton of ammonia. Is that a reasonable assumption?
Yes.
Okay. Thank you.
It seems like that was all the questions for today. Just a big thank you for everyone for joining the conference call, and should we have more questions, IR is always available for that. Thank you and goodbye.