Please be advised that today's conference is being recorded. At this time, I would like to refer you to the disclaimer, which includes our position on forward-looking statements. These forward-looking statements are based on beliefs, estimates, and assumptions currently held by, and information currently available to OMV. By their nature, forward-looking statements are subject to risks and uncertainties that will or may occur in the future and are outside the control of OMV. Therefore, recipients are cautioned not to place undue reliance on these forward-looking statements. OMV disclaims any obligation and does not intend to update these forward-looking statements to reflect actual results, revised assumptions, and expectations, and future developments and events. This presentation does not contain any recommendation or invitation to buy or sell securities in OMV. I'd now like to hand the conference over to Mr. Florian Greger, Head of Investor Relations. Please go ahead, Mr. Greger.
Yeah, thank you. Good morning, ladies and gentlemen, and welcome to OMV's earnings call for the fourth quarter of 2024. With me on the call are our CEO, Alfred Stern, and our CFO, Reinhard Florey. Alfred will walk you through the highlights of the quarter and discuss OMV's financial performance. After his presentation, both gentlemen will be available for your questions. And with that, I'll hand it over to Alfred.
Thank you, Florian. Ladies and gentlemen, good morning, and thank you for joining us. In the fourth quarter of 2024, OMV continued to deliver solid earnings, demonstrating the strength of our integrated business model, which has proven to be resilient and effective in navigating the volatility of the markets and balancing the overall stability and profitability of the company. Oil prices remained fairly range-bound throughout the fourth quarter, averaging $75 per barrel, which was below the level of the previous quarter. European gas hub prices rose significantly due to cold weather, much lower renewable power output, and uncertainty over Ukraine transit flows. The refining indicator margin regained some strength compared to the third quarter, as stronger middle distillate and naphtha crack spreads offset the seasonally weakening gasoline crack spread.
Naphtha experienced increased demand in the chemical sector as an alternative to propane, whose prices had increased due to rising heating demand. Olefin indicator margins in Europe declined slightly compared to the previous quarter, as higher Naphtha costs put margins under pressure. Polyolefin margins improved significantly compared to the same quarter of the previous year when they were impacted by the global economic slowdown and unprecedented destocking. Our clean CCS operating result rose by 31% compared with the previous quarter to around €1.4 billion, coming in slightly below the fourth quarter of 2023. This performance was driven by significantly increased earnings in chemicals and energy, while the fuels and feedstock contribution declined. The clean CCS tax rate increased to 50%, mainly due to a higher share in the overall group profits from companies in the energy segment located in countries with a high tax regime and lower tax incentives.
Consequently, clean CCS earnings per share declined by 17%. Thanks to our integrated business model, cash flow from operating activities reached over EUR 1 billion, coming in almost on par with the fourth quarter of 2023. Polyolefin sales volumes, including joint ventures, grew by 16% year on year. Fuel sales volumes were notably robust and declined only marginally. Hydrocarbon production was 7% down year on year. We also announced that last week, excuse me, we also announced last week that there will be a change in the executive board composition. Daniela will step down at the end of February. In the interim, her responsibilities will be taken over by Martijn van Koten, EVP for Fuels and Feedstock. Before I discuss the details of the fourth quarter performance, I would like to reflect briefly on the full year 2024 highlights.
Despite the challenging market environment, we were able to increase our total polyolefin sales volumes, including the joint ventures, by 10% compared to 2023. This growth was driven by an improved demand following significant destocking in 2023, acquisitions in Europe, exceptional utilization rates at Borouge, which led to record high production and sales volumes, and the ramp-up of the new Baystar polyethylene plant in the U.S. This growth reflects our ability to deliver high-quality products and meet market demand. Fuel sales volumes remained consistent with 2023, despite the divestment of our retail stations in Slovenia and Germany. The weaker demand for diesel and heating oil was partly offset by increased aviation sales volumes. The oil and gas production volume decreased by 7% to 340,000 BOE per day because of natural decline, well productivity, and force majeure in Libya.
In November 2024, OMV received a final arbitration award under the rules of the International Chamber of Commerce in relation to Gazprom Export's irregular German gas supplies in 2022. Following our decision to enforce this award under the Austrian contract, Gazprom Export immediately halted the gas supply to OMV. Due to multiple fundamental breaches of contractual obligations by Gazprom Export, we subsequently terminated our long-term Austrian contract with them. This contract, which began in 2006 and was originally set to continue until 2040, had limited earnings potential with single-digit margins annually. However, it carried significant potential risk exposure, which has now been eliminated. Over the past three years, our Gas Task Force team has worked intensively to diversify our gas supply sources and secure additional pipeline capacities. Today, our gas portfolio is stronger and more diversified than ever before, with sources now including Norway, the US, and Italy, among others.
Thanks to these efforts, we have been able to supply all our customers without interruption. Reviewing our full year 2024 financials, we achieved a clean CCS operating result of EUR 5.1 billion, with notable growth in our chemicals segment. We were able to increase our cash flow from operating activities, excluding net working capital effects, by 14% to EUR 5.3 billion. Consequently, our cash flow from operating activities, the basis of our dividend decision, reached almost EUR 5.5 billion and was only 4% below 2023. This resilience underscores the effectiveness of our integrated business model, which continues to support robust cash generation even in a volatile market environment. As announced at our capital markets day in June of last year, we launched an efficiency program with the goal of generating additional cash flow of at least EUR 500 million by 2027.
In 2024, we already achieved around EUR 180 million, with the majority coming from the energy segment. Moreover, we maintained strict discipline in our organic capital expenditures, coming in at EUR 3.7 billion, which was slightly lower than originally planned at the beginning of 2024. Our balance sheet remains very strong, with net debt of EUR 3.2 billion and a leverage ratio of 12%. This excellent financial position affords us the flexibility to navigate market uncertainties, invest in future growth opportunities, and in the transformation of OMV. Ladies and gentlemen, as promised, our shareholders will directly benefit from our success. For the financial year 2024, we will propose to the annual general meeting to distribute a regular dividend per share of EUR 3.05, along with an additional dividend of EUR 1.70. In total, this will amount to a cash dividend of EUR 4.75 per share, resulting in a dividend yield of 12.7%.
Despite the weaker market environment, we were able to maintain the same attractive dividend yield as in 2023. This payout will represent 28% of our cash flow from operating activities, consistent with our shareholder distribution policy that has been in place since 2022. We also made significant progress on the execution of our strategy in 2024. Let me briefly highlight some major milestones. In the chemicals segment, Baystar successfully ramped up our new Bay 3 polyethylene plant in the U.S., utilizing the latest third-generation Borealis technology. Additionally, the operations of the cracker have been optimized, running stably at high rates. We have mechanically completed the ReOil plant in Austria, and it is now in the phased startup process. We further strengthened our circular economy solutions business by signing a long-term supply agreement with TOMRA, which will ensure a consistent supply of sustainable and high-quality raw materials for our operations.
In fuels and feedstock, we reached a significant milestone with the FID for a 250,000-ton-per-annum SAF HVO plant and two green hydrogen plants in Romania. This project represents a major step forward in our efforts to produce sustainable aviation fuel and renewable diesel, benefiting from the prospects of market growth and supporting our long-term sustainability goals. Additionally, we completed the construction of our first green hydrogen plant in Austria and laid the groundwork for a larger-scale plant. We also made significant strides in expanding our EV charging network, which now comprises more than 800 fast and ultra-fast charging points across our locations. Through selective acquisitions in the retail sector, we strengthened our refinery integration and further enhanced our position in core markets. In energy, we successfully divested our E&P assets in Malaysia, thereby streamlining our portfolio and focusing on core regions.
We also made a significant gas discovery in the Norwegian Sea, and we made exceptional progress in the mega project Neptune Deep, with all major execution contracts awarded and 90% of the execution budget committed. We are on track to commence drilling in 2025, and first gas is expected during 2027. In light of this progress, in the fourth quarter, OMV Petrom started gas marketing activities, which is another important step in the project. We have also advanced towards our goal of 3-4 terawatt-hours per annum of renewable power by 2030. In Romania, OMV Petrom has already secured around 2.4 terawatt-hours per year of prospective power production by 2030, highlighting our commitment to expanding our renewable energy footprint. In December, we started drilling our first geothermal well in Austria, marking a major milestone in our efforts to explore and develop alternative energy sources.
This project underscores our commitment to innovation and our dedication to reducing our carbon footprint. Furthermore, we received a second CO2 storage license in Norway. Drill or drop decisions for both licenses are expected this year. Let me now turn to the performance of our business segments in the fourth quarter of the past year. Compared to the fourth quarter of 2023, the clean operating result of chemicals increased by €76 million to €81 million, driven by an improved polyolefin market environment, leading to improved polyolefin indicator margins and higher sales volumes. In our European business, we recorded positive market effects of €33 million, attributable to rising polyolefin indicator margins. The utilization rate of our European crackers increased by 7 percentage points to 84% compared to the fourth quarter of 2023.
While the Burghausen facility experienced a lower utilization rate, partly attributable to customer outages, this was more than offset by substantially higher rates at our Schwechat, Porvoo Stenungsund facilities. The contribution of Borealis, excluding joint ventures, increased by EUR 69 million, driven by a significantly stronger polyolefin business. Compared to the fourth quarter of 2023, polyolefin sales volumes, excluding joint ventures, surged by 19%, with a particularly strong increase in polyethylene. Sales volumes across all industries served by Borealis developed positively, primarily due to improved demand. Notably, we were able to increase volumes in the consumer products, healthcare, and energy industries. The contribution of the JVs grew by EUR 20 million because of a better Borouge performance and a less negative contribution from Baystar. The Borouge result improved primarily due to a new record quarterly sales volume.
The contribution from Baystar also increased, driven by a significantly higher cracker utilization rate and increased sales volumes due to the ramp-up of the Bay 3 polyethylene plant. While the standard polyolefins business showed a similar development to the European market indicator margins, our specialty business demonstrated remarkable resilience and has consistently increased its earnings base in recent years. The pricing of these specialty grades is based on performance driven by innovation and technology. We produce specialty materials for various industries such as energy, mobility, healthcare, and consumer products. In energy, we sell specialty polyolefin solutions for the insulation of high-voltage cables that are used in mega projects such as the German energy corridor. In mobility, we are one of the leading suppliers to global OEMs and Tier 1 producers.
The Clean CCS operating result of Fuels and Feedstock decreased significantly to €112 million because of much lower refining indicator margins, a decreasing marketing contribution, and a lower result from our own refining and trading. The European refining indicator margin declined by $4 per barrel, resulting in a negative impact of €109 million. The overall refining utilization rate saw a slight increase compared to the fourth quarter of 2023. This improvement was driven by higher utilization rates at the Schwechat and Petrobrazi refineries, partially offset by a lower utilization rate at Burghausen. The marketing contribution decreased substantially because of lower margins. The retail performance declined primarily due to reduced fuel margins, which were partially offset by higher volumes and stronger performance of the non-fuel business.
In 2023, margins had been supported by the removal of price caps at the end of the previous year, but this effect did not carry over into 2024. The result of the commercial business also decreased due to lower margins caused by weaker demand for diesel and heating oil and import price pressure. This decline was partly mitigated by an increased contribution from the aviation sector. The contribution of upstream refining and global trading decreased significantly by EUR 40 million, mainly due to a weaker market environment. The clean operating result of the energy segment rose by EUR 200 million, mainly due to a substantially better gas marketing and power result and an improved exploration and production performance. The market environment negatively impacted our earnings.
While higher gas prices and favorable foreign exchange developments provided some support, these were more than offset by lower oil prices, resulting in overall negative market effects in the amount of EUR 113 million. Production volumes declined by 27,000 BOE per day, primarily due to reduced production in Norway and New Zealand, as well as a decreased contribution from Malaysia following the divestment of the business in December. This decline was partially offset by increased output in Libya. Production costs decreased by 9% to below $10 per barrel, driven by lower production expenses across most of the portfolio and supported by various cost-saving initiatives. Sales volumes declined only slightly by 2,000 BOE per day. This was primarily due to overlifting in Libya, where we were limited to sell only minimal volumes in the third quarter due to the impact of force majeure .
The result of gas marketing and power increased by EUR 169 to EUR 268 million, mainly attributable to the arbitration award, with a positive impact of EUR 210 million. The result of gas and power in Romania decreased considerably to minus EUR 15 million due to significant decline in the power business. This downturn was driven by the change in legislation that came into effect in April 2024 and lower power margins driven by increased gas prices. As already mentioned, at the beginning of 2024, we launched a comprehensive efficiency program aimed at generating at least EUR 500 million of sustainable additional annual operating cash flow by the end of 2027. This initiative will generate additional cash flow across all three segments and will help to offset the inflationary cost increases we have experienced over the past two years and the economic downturn.
At the end of 2024, we successfully delivered approximately € 180 million, with around 60% of this amount coming from the energy segment. We achieved this by optimizing reservoir potential and infrastructure, reducing OpEx, improving maintenance efficiencies, and net working capital. Turning to cash flows, at almost € 1.2 billion, our fourth quarter cash flow from operating activities, excluding net working capital effects, was almost stable compared to the same period of 2023. In contrast to the typical seasonal trends of cash inflow from net working capital effects, this quarter they generated a cash outflow of € 138 million. Higher gas prices and the temporary impact coming from the buyback of the hedges related to the Gazprom contract were partially offset by active management of the net working capital. The organic cash flow from investing activities was around -€ 1 billion.
Besides ordinary ongoing business investments, this included the Neptune Deep project, the PDH plant in Belgium, the EV charging network, the SAF HVO plant, and green hydrogen plants in Romania and the waste sorting plant in Germany. As a result, the organic free cash flow before dividends for the fourth quarter of 2024 came in at EUR 15 million. The inorganic cash flow from investing activities generated an inflow of around EUR 640 million, supported by EUR 715 million received from the successful divestment of our Malaysian E&P business. Over the four-year period, cash flow from operating activities, including net working capital effect, amounted to nearly EUR 5.5 billion, which was only 4% below the strong 2023 level. After payment of record dividends of EUR 2.5 billion and organic investment cash flow of EUR 3.5 billion, the organic free cash flow after dividends was negative EUR 500 million.
This was partially offset by more than EUR 300 million of net cash inflows coming from inorganic divestments and acquisitions, notably the divestment of operations in Malaysia. Moving on to the balance sheet. In the fourth quarter of 2024, our net debt decreased slightly to EUR 3.2 billion, while our leverage ratio remained low at 12%. At the end of December, OMV had a cash position of EUR 6.2 billion and EUR 4.2 billion in un-drawn committed credit facilities. Ladies and gentlemen, as mentioned before, we will propose to the annual general meeting a regular dividend of EUR 3.05 for 2024, which represents an increase of EUR 0.10 per share versus the previous year, and an additional dividend of EUR 1.70. This means our total cash dividend for 2024 will amount to EUR 4.75. This dividend proposal is subject to approval at the annual general meeting and will be paid in June of this year.
This is the third year that we will pay an additional variable dividend as part of our competitive shareholder distributions. Once again, we reaffirm our commitment to a progressive regular dividend and a total payout of 20%-30% of the cash flow from operating activities, provided our leverage ratio remains below 30%. Should the leverage ratio exceed 30%, we will continue to pay our regular dividend, but we will not pay an additional dividend. At the end of 2024, our leverage ratio stood at 12%, giving us substantial headroom of around €7 billion, which allows us to continue with attractive shareholder distributions while investing in the growth and transformation of our company. To emphasize that the variable component of our dividend is an integral part of our competitive shareholder remuneration policy, we have renamed the special dividend as an additional variable dividend.
While our dividend policy remains unchanged, this clarification underscores our commitment to consistent and competitive shareholder returns, provided our leverage ratio remains below 30% and, of course, barring exceptional economic circumstances. Under this framework, the minimum level of our total dividend will be represented by the regular dividend, which we aim to increase annually or, at the very least, maintain at the previous year's level. Additionally, there will be a variable dividend to further enhance shareholder returns. Ladies and gentlemen, rewarding our shareholders through attractive distributions is of utmost importance to us. I will now move on to the outlook, starting with capital spending. For the year 2025, we are expecting organic Capex of around EUR 3.6 billion, which includes around EUR 100 million of non-cash leases. In chemicals, our organic Capex is estimated to be around EUR 900 million, slightly lower than in 2024.
Major projects are the PDH plant in Kallo, the plastic waste sorting plant in Germany in partnership with Interzero, and growth projects for polyolefin specialties and compounding capacities. The PDH plant in Kallo, with a capacity of 750,000 tons of propylene, is anticipated to commence operations in the first half of 2026. The Borouge 4 mega project is making good progress. Once completed, the project will be recontributed to Borouge from ADNOC and Borealis and will increase production capacity of Borouge by 28%. In fuels and feedstock, our organic Capex is estimated at around EUR 700 million. This includes investments in the SAF HVO plant in Romania, another potential SAF HVO plant in Europe, and a potential second green hydrogen plant in Austria, as well as the expansion of our EV charging network.
In energy, organic Capex will increase to EUR 1.9 billion, in line with our plan to develop the Neptune Deep gas field in Romania. In addition, we will invest in the development of gas fields in Norway and Austria, as well as workover and subsurface operations in Gullfaks and Romania. We carefully balance investments in new businesses while optimizing our traditional operations, ensuring alignment with customer expectations and market dynamics. At this point, we believe that some of the investment projects in sustainable chemicals will face shifts beyond 2030 due to the uncertain economic environment in Europe and slower than expected progress in the development and adoption of regulations in for us relevant markets. We remain committed to our sustainability goals and to supporting the transition to more sustainability in the markets that we operate in.
However, we have adjusted our pace of growth to ensure that our operations in the circular chemical space will be profitable. We will continue to drive a responsible transformation by investing in high-value projects that generate double-digit returns while preserving cash to support our dividend commitments and making prudent and strategic use of our balance sheet. Let me conclude with our outlook for key market assumptions and operations for 2025. We forecast an average Brent price of around $75 per barrel and expect European natural gas prices to be above the 2024 level. We assume an average THE price between €40 and €45 per megawatt hour, while the OMV average realized gas price is expected to be around €35 per megawatt hour. In chemicals, we anticipate the market indicators to be at least on par with the previous year's level.
In Europe, we expect that the ethylene indicator margin for the full year will be slightly higher than 2024, at around EUR 520 per ton, while the propylene indicator margin is expected to remain at the same level as 2024. The European polyolefin indicator margins, both for polyethylene and polypropylene, are projected to be around EUR 400 per ton. The utilization rate of our European steam crackers is estimated to increase to around 90%. Two plant maintenance shutdowns are scheduled for April and May, one at the Porvoo facility for the smaller units of phenol and aromatics. In addition, we plan a maintenance shutdown at Borouge 3 polyolefin plant, which is estimated to reduce polyolefin sales volumes by approximately 320,000 tons.
The polyolefin sales volumes of Borealis, excluding JVs, are projected to be higher than the 2024 level, at around 4.1 million tons, supported by volumes from Baystar, marketed by Borealis in Europe. We anticipate that the Baystar cracker will operate at a utilization rate above 80%, taking into account a plant maintenance shutdown of around one month in the first quarter. Polyethylene sales volumes are projected to increase substantially, leading to significantly improved financial performance in 2025. We expect substantial dividend payments, once again from our successful Borouge joint venture. In the second quarter of this year, we await to receive around EUR 220 million from Borouge as the second installment for the 2024 dividends. Borouge announced today that it will maintain the dividend level from 2024 for the year 2025, distributing a total of $1.3 billion in cash dividends.
These dividends will be paid in two tranches, the first in the fourth quarter of 2025 and the second in the second quarter of 2026. In fuels and feedstock, the refining indicator margin is projected to be around $6 per barrel. We anticipate the utilization rate of our European refineries to be around 85%-90%, considering optimization of production within forecast economic environment, changing product mix, and scheduled maintenance work throughout the year at all three sites. Total product sales volumes are expected to be higher than in 2024. Retail margins are projected to be slightly below the level seen in 2024, while commercial margins are also anticipated to decline. In energy, we expect average production of around 300,000 barrels per day in 2025, reflecting the divestment of Malaysia, natural decline, and assuming no interruption in Libya.
The decrease in production volumes is expected to raise the unit production cost to around $11 per barrel for the full year 2025. However, we are actively countering this increase with various planned cost initiatives aiming to achieve our 2030 target of below $9 per barrel. Exploration and appraisal expenditures for the group are expected to be around € 220 million, which is consistent with the previous year's spending. At the beginning of January 2025, we received a second final arbitration award under the rules of the Stockholm Chamber of Commerce in relation to our Austrian supply contract with Gazprom Export. We were able to recover part of the awarded amount by offsetting outstanding Gazprom Export liabilities in the amount of € 48 million. In order to further offset the inflationary cost increases and ensure OMV's competitiveness, we will continue to drive progress with our efficiency program.
The clean tax rate for the full year is expected to be around 50%. Before we move on to the Q&A session, I know many of you will have seen our ad hoc announcement on Friday evening. This relates to the already announced potential joint venture between OMV and ADNOC, combining Borealis and Borouge polyolefin businesses. In connection therewith, OMV and ADNOC contemplate, subject to respective agreements with Mubadala, a potential acquisition of Nova Chemicals by the future potential joint venture company. Nova Chemicals is a leading polyolefin producer in North America with integrated polyolefin facilities. We believe the inclusion of Nova Chemicals could have a compelling strategic rationale for OMV and our shareholders. It would create a global polyolefin business with a material presence in Europe, the Middle East, and North America, and bring together our advanced technology with attractive feedstock positions.
While I understand that you may have questions, I must emphasize that the discussions are ongoing and remain open-ended. As a result, there is a limit to the additional information I can provide at this point. Additionally, I want to highlight that the potential cooperation of OMV and Nova, as such, is subject to reaching an agreement with Nova. Now, thank you for your attention. Reinhard and I will now be happy to take your questions. Thank you.
Thank you very much, Alfred. Let's now come to your questions. I'd like to limit. I'd ask you to limit your questions to only two at a time that we can take as many as possible. You can always re-queue for a follow-up question. We'll start the Q&A session with questions from Josh Stone, UBS.
Thanks, Florian, and good morning.
Yeah, two questions, please.
Firstly, Alfred, I understand there's constraints to what you can share on the ADNOC merger, but I was hoping you could expand a little bit on the potential acquisition of Nova Chemicals. What is it about this business that makes it attractive to OMV? When I look at the assets, it's not that much specialty in the mix. I understand there's a feedstock advantage, but are there other synergies to note that you're particularly interested in? And if the deal does go through, is the intention that OMV will then inject more capital into the joint venture to fund it? And then the second question, again, Alfred, I was interested by your comments around the slowdown on circular chemicals, which you've linked to weaker regulation and a less certain environment in Europe. But in practice, what does this mean for your CapEx plan over the next five years?
Because you've allocated around 15% to sustainable chemicals. So how much of that comes out in your view, and which projects are most likely impacted? Thank you. Josh, thank you for your question. Maybe let me start with the Borealis-Borouge combination. As we announced a while ago, we continue to negotiate with ADNOC a combination of Borouge and Borealis on an equal shares, equal partnership basis, and that joint venture should be a joint growth platform for next steps, of which potentially we are now considering Nova being such a step. What would be the interest? This would create a global company, a top global company, and additional synergies would be strengthening the polyolefin position through this addition. And as you point out, a strong feedstock portfolio would be that.
As we are still in ongoing negotiations, I want to refrain from speculating of what the outcome of this could be. I just want to emphasize we are in ongoing and open-ended negotiation, and it will require that we find an agreement also with ADNOC, and in relation to Nova, there's also the requirement that an agreement is found with Mubadala as the current owner. The slowdown on the circular is quite simply explained. I think the introduction of the packaging waste directive was delayed in the EU, and the transposition into the national laws was delayed, and this is, of course, creating a delay then in the entire market change. We remain focused on seeing driving forward our activities in circular economy, and we believe with our ReOil technology, we have a very strong technology that allows us to capture the benefits in that market.
But it is important for us that we roll this out in synchronization of the market demand as it is generated so that we can get the right returns for these projects. So we will continue to push for the same targets, but I think some of it will get delayed beyond 2030 to accommodate for this. I want to end here with that we just finished building the 16,000-ton ReOil plant here, and that we are in the startup phase. We have actually been able to produce several hundred tons of pyrolysis oil, which is the output, the circular feedstock that we make.
So we are making good progress on this, and we are looking forward to bring this fully on stream and then also create the right cooperations there already on that 16,000-ton plant with a further look to the next size plant to make sure that we can also get double-digit returns on those investments.
Thank you, Josh, for your questions. We will now move on to Matt Smith, Bank of America.
Hey, good morning, guys. Thank you for taking my questions. Had a couple as well. The first one I did wanted to test sort of what you could say on the Nova Chemicals release as well. I just wondered if you could touch upon the timing here and the sort of logic for attempting to include the entity at this point in time.
I suppose the question is sort of why add it to what sort of seemed like quite complex deal negotiations already, or should we infer that sort of the finer details of the potential Borouge-Borealis combination already in a good place, which allow you to sort of move on to this discussion? So that'd be the first one, please. And then the second one, perhaps sticking on the theme of M&A and actually on the E&P business, the energy segment, production this year stepping down on natural declines and as well due to the Sapura disposal. So just wondered how motivated you were to replace those barrels via M&A and if you could characterize how you see the market for that at the moment, please.
Yeah, let me start with your question regarding the potential combination of Borouge and Borealis.
The idea is really that the future potential joint venture company between Borealis and Borouge would acquire Nova Chemicals. I think the strategic direction of the potential joint venture is of key importance. We have always said that that combination needs to be a growth platform for polyolefins and drive that further to become a key player in this market. We believe Nova Chemicals would be a good strategic fit as it would strengthen the Borouge's position, in particular in North America. It would further enhance the feedstock position and also allow to extract additional synergies. Again, there's a good compelling industrial logic to potentially include Nova Chemicals as an inorganic growth opportunity. We have never put a timeline down for this, and we will also not put it at this moment because for us, it's more important to make this value-accretive step for OMV.
On the energy production, you're correct. It was the Malaysia asset produced about 28,000 BOE per day. So that is the biggest step down in the production for this year with 300,000 barrels per day. We have communicated in our strategy, and we maintain the goal of 350,000 barrels per day in 2030. Now, we are working diligently on Neptune Deep that will increase the production again. I've also talked about Austria, smaller Wittau, and then Halten in Norway. We will drive those forward. But with all this, we will probably require some inorganic rounding activities in order to get to our 350,000 barrels. Perfect.
Thank you for that, folks. Thank you very much, Matt. We will now move on to Sasi Chilukuru, sorry, Sasi, and from Morgan Stanley.
Hi, thanks for taking my questions. I had two, please. The first was on the dividends.
Can you help me in understanding how you decide upon the dividend payout relative to CFFO? This year is 28%, last year 29%. I recognize these are small differences, but at a 30% CFFO payout, you could have kept the dividend flat year on year as well. So I was just wondering what factors do you look into? Slightly related to this, the year-on-year growth rate of the regular dividend is also lower at 3.5% this year compared to 5% last year. Again, what does the slowdown in the growth rate of the regular dividend imply? Is this the sustainable growth rate that we can think of under current circumstances and the current macro environment? The second one was on the Borouge 4 project. You reiterated that the project will be recontributed to Borouge from ADNOC and Borealis once completed.
If you were to single out this transaction, what value should we expect for the project? What's the expected cash inflow, and when can we expect this to be done as well?
Yeah, thanks, Sasi, for your questions. Regarding the dividends, the percentage that we chose in the range of 20%-30%, once again, is a very high percentage. So it is in the upper end of the upper half of the range, and the difference to the payout ratio in last year is only in the decimals. So therefore, we see that this is actually a signal of strength, a signal of confidence that we have that in spite of many challenges that we see in the economic environment, we are rewarding our shareholders as we promised and keep the payout ratio in the high end of the ratio.
When it comes to the increase of the regular dividend with our progressive dividend policy, again, we kept our promise to increase, and we increased that by EUR 0.10. And again, this is not much different than last year. If you put it in percentages, yes, it's slightly lower, but that has a reason. And the reason actually is that, of course, the higher you get, the more important it is to also keep a certain balance between the additional variable dividend that in the range between 20% and 30% and the regular dividend can be paid out.
It is important to send this message that while we introduced three years ago the additional variable element by calling it at the time a special dividend, we continued to pay this, and we continued to make that a regular element as long as we are below the 30% threshold in the leverage where we are far away from. This is important, and therefore, it is also important to give this a certain weight and not cut too much by increasing the progressive regular dividend. As you see, we are keeping our promises on the dividend. We are rewarding our shareholders in a very generous way, and this is the way how we want to keep it. Second question on Borouge 4. The concept of Borouge 4 to be recontributed to Borouge is, of course, up.
This has also nothing to do with a potential transaction between Borealis and Borouge. Please understand that the project is still up and running, and we cannot specify exactly a value on that. But as we at the moment hold it, 40% of Borouge 4 is held by Borealis, 60% by ADNOC, and that will also be the distribution at recontribution when it comes to the cash payment from Borouge for this recontribution.
Great. Thank you very much.
Thanks a lot, Sasi, for your questions. We now come to Michele Della Vigna, Goldman Sachs.
Thank you very much, and congratulations on another strong year of cash flow and dividends. Two questions, if I may, on two of your low-carbon activities. I wanted to start with geothermal. You seem to be quite satisfied with the first well drilled there.
I was just wondering, how material do you think this business could become in terms of EBITDA contribution by, let's say, the end of the decade? It's a very exciting business, but I believe it's got quite a long time to market. And then secondly, on biofuels, it's been a very volatile, largely disappointing year, I would say, for margins in the last 12 months. How do you see those evolving, and do you still remain excited about the opportunities for SAF in the years to come? Thank you. Yeah, maybe let me start with biofuels here. Indeed, we have seen last year, due to some regulatory changes in some countries and some capacities coming on stream, disappointing margin developments. I do want to remind you that the FID that we took on our SAF plant was last year, so we are planning to come into production in 2028.
And what we see in the development until then is that we will see the demand both from regulatory side and voluntary demand pickup, so that we will be rather in a short market position that we want to use. The advantage that we have as OMV, of course, is that in the corridor where we are active, we are, of course, also a key supplier to some of the key airports where we are around, such as Munich, Vienna, Bucharest, for example. And we continue to build out our customer portfolio and the access to different airports in order to make sure we are also building the demand side. Maybe you remember we also announced various MOUs that we continue to convert into sales contracts to make sure that we are also building this up.
So on the SAF demand, we are definitely excited, and with the mandates developing this year from 2% in Europe to 6% by 2030 and then 20% by 2035, we do believe that this will represent attractive markets that we can aim for. Just also to mention here, we are aiming more to supply the renewable fuel volumes, the biggest portion into SAF, then some of it into biofuels, but then also as chemical feedstock. And we think with this portfolio, we are in a strong position to capture also the market growth of this. As far as the geothermal goes, I would like to reconfirm what you just said.
We have just now started drilling the first well, or we have actually finished drilling the first of three wells for that first pilot production that will supply then about 20,000 households with geothermal energy in the district heating network of Vienna. That district heating network has about 400,000 households connected to it, and we want to ramp that up to about 200,000 households supplied through geothermal. For this, we have to repeat what we are doing here about seven times in order to get there, so some development work, some investments are necessary, and we want to make sure we do this step by step. The advantage that we have in Vienna is that we have a great joint venture with our partner Wien Energie, that is the district heating network operator and has access to all the households.
Because of that setup, I think we have a very good combination. I do not have exactly in mind how much the geothermal contribution will be, Michele, but we are looking by 2030 that out of our sustainable projects, about 20% of our cash flows in total will be contributed out of these sustainable projects.
Thank you.
Thanks, Michele, for your questions. We will now come to Peter Low, Redburn.
Hi, thanks. The first question was on Baystar. What is the path to profitability for this asset? Do you need to see a recovery in industry margins, or are there operational improvements still to come there? And perhaps what could that contribution look like? The second was just a clarification on the CapEx guidance of EUR 3.6 billion.
I think that's a little bit below the guidance at the CMD that kind of implied to be at about EUR 3.8 billion in the coming years. Is that down to this slowdown in investment in circular chemicals that you've referenced? And if so, should we think that it kind of remains at that slightly lower level going forward? Thanks.
Peter, let me start with a CapEx question. You are absolutely correct that in the CMD, we still guided at EUR 3.8 billion. Now for 2025, we are proposing EUR 3.6 billion. Now, this is for good reason, that on the one hand side, we are seeing that there are quite some challenges in the market where we want to keep a very strong balance sheet, a very strong cash flow, and therefore we will keep a strong discipline in the way how we spend.
CapEx efficiency is the main part of the difference that we try to be, first of all, selective, but secondly, also in the way how we spend very efficient. That is part of our improvement program that we have also put up with the more than EUR 500 million cash flow impact of improvement measures. So there, we will also contribute from the CapEx side. Is it a shift of sustainability? This is only a part of it, but of course, we are also selective on the return expectations that we have on the sustainable projects, and therefore where we are not seeing a perfect market environment at the moment, we may slow down a little bit. But as Alfred said, this is more of a shift in time than a change in the philosophy that we have towards that.
So this is the way how we want to keep it and respond also to the environment in order to keep a very strong balance sheet. Your first question, Baystar, path to profitability is very clear. It is first getting the operations stable. This means we have made significant progress on the cracker facility. We are, as we speak, making significant progress also on the polyethylene plant. The polyethylene plant will undergo a maintenance window in the first quarter where we are implementing additional optimizations on the operations, and that is where we are seeing that the operation side will be improving. But the second side, of course, is the commercial side. At the moment, we are more or less producing what we can sell in the spot market.
Of course, with reliable production, we are, on the one hand side, able to produce more attractive grades, more grades that have a broader market where we can also go in yearly or monthly contracts which have better margins. Overall, what we see is that there is a good opportunity to contribute in 2025 to an improvement of the EBITDA contribution. Ultimately, we want to achieve, when having the ramp-up concluded, that will probably be after 2025, a level of 500-600 million EBITDA from the Baystar facilities.
Thank you.
Thanks a lot, Peter. We now come to Giacomo Romeo, Jefferies.
Yes, thank you. If you allow me, just a clarification on the news around Nova. Can you confirm that if you decide to proceed with the Nova acquisition, you will still seek to maintain joint control of the large entity?
The second question is on gas storage. I think your storage capacity is now close to the level you had at the exit of winter last year. Obviously, winter-summer spreads we've seen do not support injection. What's your plan for injection this year on this basis? Thank you.
Yeah, let me start with your question regarding Nova or Borouge Borealis. As we stated in our ad hoc announcement on the 14th of July 2023, OMV is pursuing negotiations with ADNOC on a potential cooperation with respect to their polyolefin businesses. So that means a combination of Borouge and Borealis businesses as equal partners under a jointly controlled listed platform for potential growth acquisitions to create a global polyolefin company with a material presence in the key markets. And this has not changed. This has stayed the same. Your second question regarding the gas storage.
We are at about 65%-67% of the, yeah, 67% of the gas storage. One year ago, that was higher. There were above 80% of the gas storage. And I think that's a result of multiple things. Number one, the winter this year is colder than it was last year, or put the other way around, last year was an even more unusual warm winter with less gas demand. And secondly, the stop of the flows through the Ukrainian pipeline to Europe. Those two things have led to a situation where the storage is being depleted. And as you know, there are some storage mandates, minimum filling requirements that we will need to fulfill. And we are currently working to do this in such a way that it does deliver a good business case.
At the moment, the summer-winter spreads are negative, so that's not actually possible at the moment, and key will be to choose the right timing on refilling the storages for this to ensure that we are also going to be able to do a profitable business there.
Can I ask a follow-up here on this one? This 90% target, what is the actual enforcement mechanism in place to make sure that this is reached if the winter-summer spreads remain negative?
So I'm not sure I have a clear answer to this, Giacomo, but what I can say is that, first of all, the gas market is very transparent, so it's visible, but we do need to report to the regulator what the storages are. I don't think we know of any. We have seen cases where the mandate was not fulfilled.
I don't know what the measure would be then. What I do know is that in Germany, there is some discussion due to the situation how to handle this. I would say maybe Florian and his team can follow up what the actual measures there are.
Thank you.
Thank you, Giacomo. We now come to Ram Kamath from Barclays.
hHello, good morning. Most of my questions have been answered, but still I have a couple of places. On a general petrochemical sector, it looks like the price outlook of polyolefin for 2025 suggests that the pace of recovery seems rather slow. With quite a few new polyethylene projects starting up, particularly in China, I was just wondering if you can think there is supply-side risk where you possibly see some further pressure on prices or margin for polyolefins.
And on the second, on refining, the contribution from ADNOC Refining has been rather weak this year. I was just wondering if you could perhaps talk a bit about what you think, why the performance was weak, and what you think the contribution can be for this year, please. Thank you.
Ram, thank you very much for your question. On the polyolefin business, what we are saying for 2025 is that we should at least be at the polyolefin margin level of last year. So what we are saying there is both for polyethylene and polypropylene above 400 EUR per ton of margin. And we are at the same time also saying that our sales volumes at Borealis, including the sales from joint venture supplies, will go up by another 200,000 tons to 4.1 million tons.
As I highlighted in my speech, right, I think it's actually quite amazing that last year we were able to grow volumes 10%, which is showing quite some recovery, and though those 10% happened in addition to recovery of the margins in the market, so that's a key contribution to the improved results, and on the positive side, I would say that with the high percentage of specialty sales that Borealis has, that growth was across specialty and productivity sales, so across all the different segments, which I see as a positive sign. We'll see then through the year the further steps that we see, but we are saying at a minimum we will be above this EUR 400 per ton. On the ADNOC refining performance, Reinhard can maybe answer this question better than me.
Yeah, the ADNOC refining performance was clearly deteriorating.
What we have seen is that the local refining margins have clearly dropped. The reason for that actually is in the quite crowded export markets of refining business. We are seeing, on the one hand side, more pressure from Chinese refineries, while the domestic market, specifically when it comes to vehicles, has been conquered by a quite significant pace of electric vehicles, and therefore fuels are being increasingly exported. On the other hand, we are seeing through countries outside Russia, Russian crude being processed in refineries, and the ban that we see in Europe did not really hold. Therefore, there is also competition from Russian products through refineries in India, in Turkey, in Pakistan, etc. All this had an impact on the global market.
We are also seeing that, of course, in Europe, some of the refining margins were coming down. 2024 was significantly lower than 2023, $11 versus $7.1, and we are seeing also the expectation in the outlook that Alf showed you that we are expecting $6 per barrel in 2025. At the moment, as we speak in Q1, we are even below that.
Thank you, Rem, for your questions. Next is Henry Tarr, Berenberg.
Hi there. I just had two questions, really. One was just on the gas and power legislation in Romania that you referenced. What does this mean for going forward for this business? Should we expect it to be sort of loss-making now through 2025?
And then the second question, just conceptually, I guess, would you be willing to sign another contract with Gazprom for gas supply if sort of circumstances changed and the opportunity arose, or would you consider it too big a risk? Thank you.
Thanks, Henry, for the questions. Quick answer on the gas and power legislation in Romania. I can confirm you that all the measures are running in Romania to avoid that this will be a loss-making business. In the past, we have been able to provide good profitability. Of course, it is being deteriorated by some measures from the Romanian state, which we view as temporary. And the capping specifically of gas prices for households, respectively electricity prices for households, is something that we can counter also with some export activities.
So we are currently both on the gas side as well as the electricity side able to export certain volumes that keep this business profitable. In addition to that, of course, the expansion of our electricity production beyond gas into the renewable side will provide a good basis for profitability as those are valued contributions also to the gas market, to the electricity market, and would also undergo certain exemptions from legislation. So in total, we are not concerned that this will be a loss-making business.
And regarding the Gazprom contract, I want to bring this back to what happened. So the Gazprom, over the last times, they have made multiple and fundamental contract violations. They have caused OMV significant damage in 2022.
And we started arbitration proceedings against Gazprom in the beginning of 2023, to which arbitrations we then received awards, including damage awards that we were assigned at the end of last year. And what we did is offset these damage awards against open payments for gas supplies in Austria. And as a consequence of this, Gazprom terminated the supply again, both a contract and law violation, which we then had to react to to terminate the gas supply contract. As you know, in the gas market, being a reliable supplier, or in other words, being able to count on reliable supplies through long-term gas contracts is a key prerequisite. And through those multiple contract violations, that was no longer a given with Gazprom for OMV, and that was the reason why we terminated the contract.
We did not terminate the contract because of sanctions or any laws against Russian gas, and still to this date, there are no sanctions or laws against Russian gas supplies. However, what we did learn at OMV very intensely is that relying on a single gas supplier is not a good idea. And this is why we diversified our gas suppliers. I am of the opinion we now have the strongest gas portfolio that we ever had because it's diversified across own production, third-party suppliers through pipelines from Norway, from Italy, and LNG supplies from the U.S. internationally, and so on.
Okay. Thank you.
Thank you, Henry. We now move to Matt Lofting, J.P. Morgan.
Thanks for taking the questions. Most of my topics have been asked. I perhaps just ask you two sort of quick points.
On chemicals, I wondered if you could just talk a bit about your perspectives on the stocking cycle. It seemed like that perhaps weakened a bit into year-end 2024. How have you seen that in Q1 to date? And what assumptions have you made specifically around that part of the cycle in the context of your outlook and margins in chems for 2025? And then second, just coming back on the earlier points around gas storage and working capital, is there a sort of a scenario that working capital requirements on that part of the business remain structurally higher than in the past as a side effect of the termination of that Gazprom contract and needing to then sort of source alternatives from broader regions? Thanks.
Matt, thank you very much.
On the chemical market and market assumptions, I do think that previous to 2024, we have seen a very long destocking cycle, but I think that was really caused. I have not. I've been in the chemicals for a long time. I haven't seen such a long destocking cycle before, to be honest. And I think it was a bit an effect of multiple things coming together, COVID being one, broken supply chains being the other, increased demand through the COVID and so on, right? But in the end, that destocking cycle, I think, was over at the beginning of 2024. And you can see that actually we were able to sell about 10% more volumes through Borealis last year. In the fourth quarter, it was even better than that. And that was across all the different segments.
So I would see that as a positive signal because, in addition, the margins improved. And I think that in total gives a bit of a better picture. I would agree with you that year-end is, of course, always something where people are trying to manage their working capital and their storages and so on. So a little bit of change. But I do see that for the year, we are looking at margins that are above EUR 400 per ton for polyethylene and polypropylene, at least. And then we also see that opportunities to sell higher volumes partly because also the ramp-up of, for example, Baystar, but of course also because of our view of the market. And for the net working capital on gas storage, maybe Reinhard can answer the question.
Yeah, sure. Matt, I'm not particularly concerned about net working capital on the gas side.
We are operating the gas storage business as a profitable business, and every investment that we put into storage has a very good return. So therefore, of course, you see temporary higher net working capital if the price level goes up. But that comes back also because we are having a quite strong swing between the high storage levels to the low storage levels. I'm more concerned about a situation where summer- winter spreads actually would not give us the opportunity of a very good foreseeable business because we are not storing a single cubic meter without having it forward sold. And if there is no margin, if there is no spread, we will not forward sell. So that is something where we are currently in a wait-and-see position, how the market develops.
But in general, I'm not concerned that net working capital will bring us an additional burden because this is swings, and whatever we put in as net working capital, we get out as net working capital in the opposite direction during the year. So therefore, this is a little bit of a give and take. And we cannot take a cut-off date at a certain end of the quarter or end of the year as the guidance for making the business. For us, it is important how much we can forward sell and how much profit we do with that.
Thank you, Matt. We have one more. The next question comes from Paul Redman, Exane BNP Paribas. Hi everyone, and thank you very much for your time. I have two questions, please. First is just on gas exposure.
You spoke earlier about how you're happy with the new gas portfolio, not having to take gas from volumes. But how do we think about that in terms of a cost sense and the difference in the contracts between maybe buying off the spot market versus the Gazprom contract? Does that flow through on a cost or cash flow basis at all if you're going out to a market that's currently pricing gas around EUR 50 per megawatt hour? And then secondly, just on chemical utilization rates, congratulations on the improvement in utilization rates year on year. You're also highlighting that next year you expect utilization rates to be even higher. Could you just describe what's driving that? Is this part of what you were describing earlier with the destocking cycle ending and more customer demand, or is it technical improvements at the crackers? Thank you.
Yeah, maybe I start with your second question, and Reinhard can then answer on the gas portfolio. But on the chemical utilization, one of the significant drivers in this half is the ramp-up of our Baystar joint venture. So we anticipate that that will be running higher utilization rates and that will allow us to drive the things forward and increase the sales volumes. In addition, I do see that some operational improvements and also a continued focus in selling out our volumes on the market also will help us to push the things forward. The way we see the market a little bit is that maybe it's a bit of a, after a significant improvement last year, maybe a little bit more of a sideways further improvement this year that we can use here with our product portfolio.
And the second piece I want to emphasize is what we are observing is that the growth rates we don't only have on the more commoditized kind of products, but across our portfolio, also in the specialty products. That is including where we are, where Borealis is the global market leader, the energy wire and cable insulation market, where we have seen, for example, attractive growth markets. And there's good underlying reasons why this should happen. There's programs and projects out there where the demand is actually there for those products.
Yeah. And Paul, to your second question, you asked about potential exposure regarding potential higher costs in the diversified gas portfolio. Our gas supply and trading business is not a cost play; it's a margin and arbitrage play.
Therefore, when we compare the specific margins and arbitrage that we could do on Russian gas supplies, this is maybe even quite lower than what we see with the diversified gas portfolio that we have at the moment. This is not determined by individual market prices or by the indices. It is more by the ability to have trading arbitrage and certain supply margins that we have with our customers. That is not negatively affected. If the availability of gas volumes is there, and therefore we have booked transport capacities, we have booked our terminal in Rotterdam for LNG volumes absolutely full, we are not concerned that there is also a positive result coming from that.
Thank you, Paul. We now come to the end of our conference call and would like to thank you for joining us.
Should you have any further questions, please contact the investor relations team. We will be happy to help. Goodbye and have a nice day.
Thank you. Goodbye and have a good afternoon.
Thank you.
That concludes today's teleconference call. A replay of the call will be available for one week. The replay link is printed on the invitation, or alternatively, please contact OMV's investor relations department directly to obtain the replay link.