Good morning, everybody. Welcome. My name is David Kinney. I'm the Head of Investor Relations for LyondellBasell. I want to welcome you to Lyondell's 2019 Investor Day.
Thank you all for joining us here in Houston. It's great to see so many familiar faces out here. It's great to see a filled room. We travel well. It's always pleasing for us to see your interest in the company.
So today, we're going to be discussing our plans for the future, which will include some forward looking statements and some non GAAP measures. We think our assumptions are reasonable and the measures are useful. Nonetheless, we hope you review the text on this slide, our regulatory filings and learn more about the factors that could lead our actual results to differ. You can find these materials, our filings and our reconciliations on our website at www.lyondellbasell.com/investorrelations. Before we get on with our agenda, I'd like to start with a brief safety moment.
In the unlikely event of a something unusual going on here today, you should exit through the doors to the right of the room or even more directly in the doors in the back of the room. The escalators can lead you down to the ground floor or there's a staircase behind the rear doors as well. Another important factor is the restrooms are located down the hallway to the right there. So today, we'll start with a session led by our Chief Executive Officer, Bob Telp, followed by a Q And A with Bob and our Chief Financial Officer, Thomas Abischer. Following the break, those of you who are in Houston, well, breakout.
It's a 3 breakout rooms. We're going to do things a little bit differently this time. If you have a red dot on your badge, you will stay in this room. The other third of the group, if you have a green dot on your badge, you'll go to the Mireland A ballroom, which is downstairs on the 3rd floor, so just take the escalator. Down one floor and it's on your right as you get down to the landing there.
If you have a blue dot on your badge, you'll proceed to the Myerland B room on the 3rd floor right next to Just to be clear, you don't have to rotate among rooms. You will stay in your breakout rooms for 3 sessions where we'll discuss some of our businesses. The speakers will rotate around the rooms for you. If you're on listening on the webcast, you will be staying in this room and you'll hear that presentations in the order indicated on the slide here. After the 3 breakout sessions, you'll have a Q and A in each of the breakout sessions as well.
And then, we'll take a brief break and we'll come back a session with Thomas and some closing remarks from Bob. After that, we're going to have a Q and A session with all the speakers here up on the stage. For those of you in Houston, you have the option of staying with us, throughout the day. We're going to take buses. And so we'll proceed downstairs and for a lunch and a tour of the construction that's underway at our Channelview site for our new propylene oxide plant.
It's about twenty miles away here. So we'll have materials on the bus for you to, consider as and then a lunch and a tour of some of the facilities, our technology center, as well as one of our control rooms on the site. After that, we'll return to the hotel for some refreshments to close the day. So we have a lot ahead of us.
So let me get on
and introduce, the leaders. Oh, one more thing. I know that, many of you were asking about the Wi Fi password. Our network is marquee_conference. The password is LYB2019 lowercase.
So let me get on and introduce the speakers that we'll be presenting today. So in front of you, you have a group of very experienced and thoughtful leaders they're bringing a lot of diverse experiences to the company and how we manage the company. By my math, their resumes add up some 250 years of industrial experience. Pretty impressive. So before I get started with the folks on the slide, I want to point out a couple of folks that are in the room somewhere I believe.
I see one of them at least. I see both of them. Today, we have, our Chief Legal Officer and Executive Vice President Mr. Jeff Kaplan, Jeff, can you stand just so people can see who you are back there? And we also have our treasurer, Mr.
Larry Soma, in the back corner of the room. So as far as the speakers go, let me start on the right side of this slide and introduce our Senior Vice President of technology Mr. Jim Seward. Jim, could you stand? Jim also leads our R and D and sustainability efforts in the company.
Next is, Richard Rudicks. Richard is our Senior Vice President for Olefins, Polyolefins, in the Europe, Asia and International regions. Next, I'd like to introduce a face that might be new to many of you. Some of you have met him already, but it's Torko Renman. Torko is our Executive Vice President in charge of Intermediates and Derivatives for the company.
Another new addition to our team is Ken Lane. Ken Lane is the Global Executive Vice President for Olefins and polyolefins. More familiar face might be Jim Gilpoyl. So, Jim Gilpoyl is currently leading our Advanced Polymer Solutions segment, the newest segments in the company. Jim is also responsible for our supply chain.
2nd from the left is Mr. Dan Combs, Dan Combs is the Executive Vice President for our Refining Segment. He also leads our Global Manufacturing And Projects initiatives. Finally, I'd like to introduce my boss and our Chief Financial Officer, Mr. Thomas Abischer.
Well, without further ado, I would like to introduce our Chief Executive Officer, Mr. Bob Patel.
All right.
Good morning, everyone. Thank you very much for being with us here in Houston. And for those following us on the webcast, thanks for joining us today. As always, we appreciate your interest in our company. I was talking with someone earlier that I remember 2 years ago when we did our Investor Day in downtown at the New York Stock Exchange.
There were a lot of people from Midtown who thought that commute was difficult. But on the other hand, coming down to Houston is not so bad, is it? Thank you for being here. I have we have a really interesting day for those of you who are here because you'll get to see one of our flagship sites at Channelview you get to see our large POTBA project. Well, let me get started.
First of all, a few introductory comments. What I hope you hear today is the presentation of a company that is that has a very compelling investment thesis, one that is well positioned to deliver substantial value and sustainable value 10 years, I'll reflect on a bit as we inform you a little bit about how we got to where we are today. But we're very confident and our ability to deliver outstanding results in a range of market environments. 1 of the hallmarks of LyondellBasell to date has been that we've been known to be a very strong cash flow generator. I'm here to tell you that that cash flow machine is alive and well and one that's going to kick into a higher gear as we move into the next few years.
And I'll show you the specific math on why we say that we're poised to deliver more cash flow irrespective of what happens in the market environment in the next 2 years. I'm going to show you our portfolio that that's that has advantaged positions is resilient. And I'll show you how to think about our company in a little different way and with a lot of proof points along the way. So I think those of you who have come to know us know that we're all about substance. And we'll present to you not only our investment thesis, but why we think it is so compelling.
Because I was getting ready for this Investor Day. You know, I talked with Dave and Thomas about the last investor days. So this is, for me, my 6th investor day with the company. And I remember the first one for a number of reasons, one, because it was my first with LyondellBasell, but many of you, as I look around the room, you were here, on that 1st Investor Day, And that was the Investor Day where I was getting ready to move to Europe. So, it was an exciting time for the company because we were starting to really established this back to basics foundation, if you will, which was operate well, operate safely, get our cost structure right.
We as we as I was getting ready to go to Europe, we were thinking about how do we do that globally? And at the same time, shield gas was become become beginning to emerge. And so the idea was as we solidify this foundation, how do we now start to take advantage of the shale gas revolution? I think our company was unique in some ways because we undertook debottlenecks rather than greenfield expansions during that period. So in 2013, we talked about seize the moment.
On one hand, were really consolidating our gains in Europe. And on the other hand, here in the U S, we were really kicking the debottlenecks into high gear. And through a series of debottlenecks, we added about 1000, sorry, a 1,000,000 tons of ethylene capacity. So about £2,200,000,000. And roughly half the time and half the cost of a greenfield cracker investment.
2015 was the handoff. It was my first as the CEO of the company. And, I remember coming to that investor day thinking that I want investors to walk away with a sense that first of all, what got us here won't be forgotten, safe, reliable, cost efficient operations. I was a part of all of that in the past. Not only that, but we had a great foundation and it was now time to think about what will we do with that foundation?
How will we build up build upon that foundation? In 2017, we talked about value driven growth. And I'm going to offer you some points and commitments that we made and and give you a scorecard on how I believe we've done since 2017 on those commitments. 2019, as we stand here today, we present to you a company that has leading global positions, one that's advantaged and is considered the best operator in the industry. One that has demonstrated a disciplined approach to capital allocation, leading advantaged and disciplined.
When you put those together, you create strong value for your shareholders. And that's what we're here to do. And we're going to be very clear about how we're going to go about doing that. So let's look at our commitments in 2017. First of all, we said to you that as we think about growth, we're not going to forget about running what we own well.
Operating our assets very efficiently, safely with the same low cost structure efficient cost structure that we've come to be known for over many years. We achieved top quartile performance in many of our assets, We've maintained a very strict cost discipline sort of culture. But what I'm most proud of is that through a range of market environments that we've seen, We've generated a tremendous amount of cash flow. And here you see that we've generated $5,400,000,000 on average annually between 2016 2018. That's resulted in our ability to pay a very strong, progressive and secure dividend.
Our dividend today based on this 3 year average has more than a 3x coverage. Our ability to run assets and generate cash 1st and foremost gives us the opportunity to pay a very large and secure dividend All the while, we've said to you consistently that we want to be a strong credit rating. Today, we stand before you a BBB plus company with a range of options in front of us. In 2017, we said we would be disciplined when it came to organic growth or inorganic growth. On organic growth, we've now we're nearing completion of our Hyperzone polyethylene project.
We should be in production sometime by year end. Our POTBA project is well underway. And I think when we talk about discipline, It's often important to talk about what you didn't do as well. We haven't undertaken a large greenfield cracker project. We are not going to build a PDH.
We're building derivatives that get product that get our olefins to market. Lastly, in inorganic growth, We closed the acquisition of Ace Schulman about a year ago. And at the time that we announced that transaction, we acquired about $50,000,000 of synergies by the end of 2 years. Today, we're prepared to tell you that we're committing to $200,000,000 of synergies. And my number with Jim is a lot higher than that.
We're pressing. And I think this is an indication of a company that's applying its strengths to create value through acquisitions, running others' assets better to create value. Disciplined organic and inorganic growth. This will be the hallmark of our company as we go forward. A brief performance snapshot over the last 12 months.
We've had $6,000,000,000 of EBITDA in the last 12 months. Now that includes a very challenging fourth quarter of 2018. You'll recall there was a period of significantly declining oil prices. And the entire industry had a more difficult Q4. Despite that, we've been able to deliver $6,000,000,000 of EBITDA, and our return on invested capital continues to be the best in the industry at 30%.
Today, our investment thesis is about these three themes, a company that has a leading global portfolio of proven and flexible and focused assets. We have an advantage global position that we believe makes us the best operated company in the industry. And when we generate the cash flow, From this great asset base, we put it through our capital allocation framework in a very disciplined way to create long term value for our shareholders. I'm going to go through each one of these and offer you proof points on why we believe that these strengths, these thesis has great underpinning, very solid and very resilient, and will position our company to be successful no matter what lies ahead. Let's talk about the leading global portfolio So first of all, we don't intend to resegment our business in this way.
But what we thought we would do is we would group our businesses a little bit differently to help you understand what underlies the segment structure that we report on a quarterly basis to all of you. The first of these, groupings of businesses is integrated polymers. This is our olefins and polyolefins franchisees, if you will. Olefins and polyolefins account for a little under 60% of the EBITDA of our company. Think what's what's really unique about this portfolio is that it's global.
It's large scale. Has a flexible set of assets in terms of crackers that can do that can perform well in a high oil environment and a low oil environment. And when you combine that with our operating operational excellence, we're able to consistently deliver value to our customers and to our shareholders. Our polyolefins business largely deploys our own proprietary technology and our own proprietary catalyst. Another source of strength for that franchise in olefins and polyolefins.
Another grouping that we offer to you is technology enabled products. So this includes our licensing business. It includes our Advanced Polymer Solutions business, the APS business that we talked about earlier, which is the combination of our legacy compounding business, which was mainly polypropylene and automotive oriented and the acquired a Schulman business which has a variety of end use segments beyond automotive. Our propylene oxide and derivatives business also exhibits almost specialty type characteristics in terms of its earnings profile, and it's underpinned by our proprietary technology in POTVA and POSM. These technologies, as you will see later from, from a Torkal's presentation or Jim's presentation, that, These technologies in PO are positioned in the lowest quartiles of a technology cost curve.
Well positioned to deliver outstanding value and our intermediates and Fuels businesses. These businesses have a stable base in terms of earnings, and have significant upside. For example, when the Styrene market really does well, we find upside, IMO 2020 is a source of upside in our fuels business to name a couple of, sort of upside opportunities in the intermediates and fuels area. So again, my colleagues will be presenting more details me in a little different way because there are businesses that are in segments that perhaps are seen in a different light. And today, we really want to illuminate why we believe this could be a very interesting way of you to think about how to value our company.
Thomas will talk a lot more about that as well in terms of how to put some more numbers to this grouping of assets. So let me step back and provide a couple of introductory slides about our company. For those who are new to us, First of all, we have a global business. We're a nearly $40,000,000,000 revenue company. With nearly 20,000 employees and more than half of those work outside the United States.
We have manufacturing sites in 24 countries and customers in more than 100 countries. This network of assets serves a $4,000,000,000,000 chemical industry we play in the heart of the chemical industry in in the in in the largest part of it. And as you can see here, we have leading positions in our work, you have a company that's a very strong one. I've talked about the word resilient. So we thought we'd put some numbers to why we believe we have a resilient portfolio And here, we show you our EBITDA from 2014 to 2019 last 12 months.
And what you see here is that our company has delivered very strong results in a range of market environments. Very high oil prices and very low oil prices. We've seen some fluctuations in GDP as well, depending on where you are in different parts of the world. I think what this shows, 1st of all, is the power of our global portfolio. That we have a natural hedge in Europe with enough scale that in a lower oil price environment, we're able to generate significant cash flow on assets that are not as capital intensive.
Those assets have been rightsized have a very lean cost structure to be able to deliver significant that also can do well in a range of feedstock environments. And I'm going to talk to that a little bit later in another slide. Our resilience from a demand standpoint comes from the fact that about 2 thirds of our sales go into and uses that are non durable. A lot of them are tied to growing markets like China and India, build out infrastructure and so on. And so I think the combination of our global asset base that has both strength in cracking, NAFLPGs in Europe and a flexible cracker fleet here in the US combined with 2 thirds of the markets that we serve are non durable in nature.
Provides us with a very Some of the macro trends that I think favor our company and favor our direction and where we're going. Infrastructure, the build out of infrastructure in emerging parts of the world, like China and India and eventually into Africa. For example, polyethylene pipe will be very important in building out infrastructure for for sewage for, delivering clean water. We have 1 of the strongest portfolio of pipe polyethylene pipe grades in the industry. Providing food safely us from farms that are far away to urban centers, for example, in China, polyethylene film enables that.
It keeps food fresh for longer. Cleaner air and fuel efficiency in automobiles. So when you think about our APS segment, light rating of our automobiles will be enabled by things. We're really well positioned to capture that as well. And with a growing demographic trend towards aging populations, not only here in the U.
S, but elsewhere around the world, our polyethylene and polypropylene grades are some of the more preferred grades in health care applications. So as you look at these macro trends and you look at the size of these markets, Our access to large growing markets will be part of what makes us successful going forward. Let me offer a few proof points on why I believe we have an advantage asset base that makes us the best operator to what we believe this advantage position as the best operator. Safety leadership, it underpins everything that we do. We talk about it at every earnings call, and I'll show you some statistics on our performance.
Operational excellence, how reliably we operate our plants, feedstock flexibility positions us to do well when LPGs are favored here in the U. S. And in Europe. Commercial Excellence. This is about delivering innovative products to our customers where those products create value and we're positioned to share some of that value with our customers.
And a backbone of innovation and the legacy of innovation in this company that goes back to the 1950s, safety leadership. So to me, safety is really about culture and about systems. At LyondellBasell, we have a culture of ownership, and I think we have a culture of family. We look after one another. When people come to work in the morning, they want to go home safely and they want their colleagues to go home safely.
We have discipline systems on safety, whether it's process safety or occupational safety. This is something every Monday morning when I have my staff meeting, we start by talking about how well did we do over the past week since we last met. I believe and my colleagues believe that the discipline to deliver safety, strong safety performance translates to everything else that we do and the discipline it takes to operate plants well, to operate with a low cost structure and to have the discipline to not have your costs drift when times are good. And the discipline to have structured innovative programs that create value for customers. Simply put this discipline underpins our success and we see that and you'll see this in the operational excellence slide that I show you next.
So here we show you that our assets consistently run at very high utilization rates. We have a process for this, and we have a system by which we measure how well we operate. We calculate every hour that were down in the value associated with that And the gap closure plans consist of what's the best possible from that asset, whatever scale it is, and how do we achieve that? So we're not necessarily thinking about what's the best for that asset in the industry. We're thinking about what's the best that asset could be.
And by the way, that gets redefined every year. We also benchmark relentlessly in our company where benchmarks are available. So there are many third party benchmarking services in polyolefins, in olefins, in refining. Those benchmarks also inform where those gaps lie and how do we close those gaps. Our commitment to sustaining capital $1,100,000,000 annually very important to achieving this kind of operational reliability and operational performance.
Now one of the things that Dan and I often talk about is that it's not just that consistency of the turnaround cadence, but also our effectiveness in how we spend that money. We want to efficiently spend $1,100,000,000 to maximize the benefit as we deploy that capital. Every dollar is pressured precious to us, and we want to have the highest highest leverage for the dollars that we spend to achieve this high reliability and consistent reliability, which is what our customers expect of us. I also think what underpins this great operational performance is a sense of ownership that our employees have. As I go around the company, I go visit plants, I'm always struck by the fact that operators really treat it like their own.
It's their company. And that sense of ownership translates into attention to detail and treating every dollar we spend like their own. I think it's one of the things that makes us unique. Feedstock flexibility, another source of advantage that we have We have one of the most flexible cracker fleets on the Gulf Coast. As I mentioned to you in my opening remarks that, In 2012 2013, we worked hard to capture the shale gas advantage.
Part of that was increasing our ability to crack ethane. At that time, I recall our conversations in our leadership team meetings, we said we don't want to convert to ethane cracking we want to increase our flexibility to crack methane because as we thought through a range of market environments, we said that we want to do well when ethane is favored, when propane's favored for short periods of time like we've had where naphtha's been favored, We've preserved the flexibility that we had before or our ability to crack heavier feedstocks but we increased our ability to crack ethane through our debottlenecks. And I think that is kind of the hallmark of our U. S. Olefins and polyolefins business are world scale crackers that are highly flexible.
We literally can change feedstocks within a week or sometimes within a couple of days. We've also now introduced predictive technology predictive analytics to help us think through the direction of pricing, could we anticipate where feedstock prices are going and be positioned and acquire those feedstocks before the price arbitrage closes. And we've been quite successful in that area. And just like everything we do in our company, we measure how well we do on that too. And we think through, does it really create advantage or is it just something nice to do?
I'm here to tell you that all of these things deliver tangible value to the bottom line. In Europe, we've increased the flexibility of our cracker fleet in this decade Back in 2010 2011, we had a cracker fleet that was mainly a naphtha cracking cracker fleet. Today, we're able to crack more propane, more butane, in bear and wrestling, and we're able to flex a lot more, than we used to 8, 9 years ago. And I know Richard will talk a little more about that. He leads the European O and P business.
In the O and P integrated chain, strength in olefins, flexibility in olefins is incredibly important and delivering strong profitability. And when you combine this flexibility with the operational performance that I showed you earlier, we can So I've talked a lot about safety, operating well, watching our costs, but ultimately, we're here to serve our customers. Some of our customers, they simply want a high quality product delivered when they expect it to be delivered. But more and more, our customers are looking for innovation in Jim's area and APS. Innovation is a very important component of our value proposition to our customers.
It's becoming more and more that way in our polyolefins business. And as the sustainability trends increase, There's more innovation through our QCP joint venture, which I'll talk about a little bit later. So as you go into the breakout sessions, you'll hear from some of our business partners our largest supplier enterprise and my friend, Jim Teague, he has done a video for us that you'll hear that you'll hear about and how he thinks about us as a customer. You'll hear about our from our largest PO customer, Brad Beauchamp at Carpenter. You'll hear from our partner in Suez, at QCP, he's the COO of QCP Jean Marc Forsier and Alejandro from Grupo Queo, who will talk about our sales of styrene to them.
So, you'll hear from our customers through these videos and hear what's important to them or our partners in the case of enterprise. So I talked about innovation and a heritage of innovation, Our legacy of innovation goes back to Ziegler and NADA back in the 1950s. For those of you who are familiar with our industry, Zigla and Nada developed the catalyst that produces most of the plastic. Today. They're a part of LyondellBasell's heritage.
They were scientists at our company many years ago. As you fast forward to today, we have some of the most leading technologies in polyethylene with our Hyperzone polyethylene technology. We'll operate that soon and we believe that it's positioned to deliver differentiated products and set a new benchmark in polyethylene. We have our spherozone polypropylene which is the latest technology in polypropylene. We're also very well known for our polyolefin catalyst Our scientists in Ferrara are some of the most capable catalysts scientists in the world.
And when you combine process expertise with catalyst expertise to get differentiated products. And you're able to be an industry leader in areas like polyolefins. The POTBA and the POSM tech came in through the Lyondell part of our legacy. And today, as I mentioned, and Jim will show you this in his presentation, that both POTBA and POSM our position at the lowest points in the PO cost curve when you look at a technology cost curve, we think this is a durable advantage And one, when we build at the scale like we're building at Channelview that many of you will see today, there's additional advantage related to the scale that we're building. Sustainability.
So if you go back to 2017, to our Investor Day, I was thinking back, and I don't think we even talked about sustainability. We talked about a lot of other things, some of the points that I mentioned earlier, But we didn't talk about sustainability. Well, I can tell you 2 years forward, as we stand here today, sustainability is one of the most As we think about our areas of focus for sustainability, I really think about 3 main areas: mechanical recycling, molecular recycling and bio based feedstocks. And you see some illustrations here of things that we're doing. For example, mechanical We entered into our joint venture with Suez nearly 2 years ago.
That joint venture is called Quality Circular Polymers, And at QCP, our partner, SUEZ, brings segregated waste that's polyolefin waste. We wash it. We grind it. We add our additives and our innovation capability to develop new products for mainly packaging customers, but you may have also seen a Samsonite suitcase that is now being made from products that come out of QCP. We're becoming a more and more important partner for many of the largest brands in the world, like Unilever.
Richard mentioned to me today that we, we got their partner of the year award. And, Richard, I'd like for you to talk about that during the breakouts when you, when you present. There's only one company that receives that and we received that yesterday. So we're very proud of that. And we're proud of the progress that we've made at QCP.
The key with sustainability, I think, is that first of all, it has to be underpinned by innovation. So that for us sustainability is not about marketing. This is about substance. And that innovation should lead to economic models that are sustainable, pardon the pun. We want economic models that will allow us to continue to reinvest.
And because of that innovation basis, we've now included that in Jim Seward's responsibilities because I want R and D and sustainability to be together. Innovation led sustainability strategy, one that results in viable economic models that provide the kind of returns that LyondellBasell expects. Some other areas sustainability where our company has been very active in leading the Alliance to End Plastic Waste. As many of you know, we stood that up earlier this year in January. It wasn't even a thought back in 2017.
And I would say to you that in January of 2018, it wasn't even a thought. Today, the alliance has more than 40 members across value chain. We have converters, brand owners, chemical companies, waste handlers. We will get retailers. We don't have any yet, but we will And the idea is to bring the entire value chain together to think about how to create Circularity end to end.
Our most recent project as an alliance that we're backing is called the stop program in Indonesia. We're particularly excited about this because what it aims to do is it aims to perfect the Circularity model in Gembrana in, in Indonesia. And the idea is that there Cembrana is one of the highest leakage areas in the world in terms of plastics leaking into rivers and into the ocean. And the idea is to collect the waste, to wash it, recycle it, produce new products all within a 20, 30 mile sort of radius. It's one of the most most important things in recycling is to not move the waste, great distances, and add more cost.
So to the extent that we can perfect this model, and then this model can be applied around the world and especially in the Far East, then I think we start to address systematically the challenge of plastic waste You see plastics are a great sustainability story. The issue are in plastics. The issue is plastic waste and the collection of that waste. And that's what the Alliance aims to do is to enable infrastructure, to collect the waste, have innovation, so that that waste can be converted into useful products. Educate people about how to dispose of waste and the value that's in the waste.
So it's not just thrown on the street and engage in some cleanup activity as well. So infrastructure, innovation, education and cleanup. Those are the main pillars of the Alliance to End Plastic Waste. The other area that our company is beginning to to assess his CO2 regulations. And so Jim and his team have been doing a lot of work on that as well.
And so I can tell you that 2 years Since the last Investor Day, today, sustainability is firmly on our minds and is at the center of our strategy. And it's one that I think can be value creating as opposed to just playing defense. So I've talked through why I believe we're leading or advantaged. Let me now talk through our discipline capital allocation approach. That drives value for our shareholders.
So you're familiar with our framework, but we showed this to you in a little different way than we have in prior engagements like this. First of all, our priority is to pay a strong progressive and secure dividend. I showed you in an earlier slide that based on our last three year average of cash flow from operations, we have about a 3x coverage. On our current strong and progressive dividend. Very secure.
And when you combine our leading advantaged positions, we believe that we can generate a significant amount of cash flow to assure that that dividend We'll continue to progress and we'll be very secure. Next, on our priorities is to continue to maintain our asset So they run at very high reliability. I talked about $1,100,000,000 sustaining capital expense rate. We expect that we will continue to have that rate over the coming years. And our aim is to target this investment to maximize reliability of our largest assets.
Our growth CapEx has been in the range of 700,000,000 will be our highest year in terms of CapEx because we're executing 2 large organic growth projects: our Hyperzone polyethylene and our PoTBA. Polyethylene project will complete at the end of this year and we'll continue on with our POTBA project. As we've not added another large project, our CapEx is poised to decline. And I will show you that in a minute. As part of our capital allocation hierarchy, we also continue to evaluate share repurchases versus inorganic growth and at times versus organic growth as well.
And I think we've proven through our actions that we've been very disciplined in how we've applied this capital allocation framework We've frankly moved on all fronts. We've increased our dividend. We've committed to sustaining capital. We're building plants. We've acquired A.
Schulman and we're delivering we're exceeding the synergy targets. And Jim's going to exceed the 200 that I mentioned. We're going to do a lot more than 200. All of this is undertaken with the objective of being a strong investment grade company. I think that's critical for us to be able to capture opportunities when others experience more difficulty or if the market were to get more difficult.
This framework makes us resilient and positions us to deliver outstanding value Now let me let me build out the proof points on our capital discipline, on our capital allocation discipline. Our pipeline of organic growth. I've talked a little bit about what we've already done, low cost debottlenecks, whether they're in ethylene, they're in polyethylene, I think on the left side of the slide, what's most important is that you don't see a greenfield cracker here, and you don't see a PDH. And you polyethylene plant will finish construction. We're already in the commissioning phase of many aspects of that plant by year end the CapEx will roll off will be completed and POTBA will continue with an expected completion date in the second half of twenty twenty one.
Our future investments, in some ways, look much like our past, we still have one more debottleneck we can do at channel view. 250,000 tons. We decided to prioritize building polyethylene first a couple of years ago And we consciously said, let's push the debottlenecks until we build more derivative capacity. We will do those. Those are very high return debottlenecks.
We've already done the engineering their shovel ready. Likely, in the second half of this coming decade, we will build another polyethylene plant, another polypropylene plant. But it's unlikely that we'll undertake those investments in the next 3 to 4 years. Our approach to inorganic growth We said we would be disciplined and we meant it. When we think about inorganic growth, What is it that we endeavor to do?
The first thing that we think about is how do we apply our strengths to create value? I talked about our strengths, which are safe, reliable, cost efficient operations, a global footprint, the ability to reach global markets. The scale of our company. Can we apply that to create value? Where are we going to play?
What would we think about acquiring? One of the things that I think is the hallmark of our company is we know who we are and we know which areas we compete in Our aim in M And A in inorganic growth is to continue to build along existing value chains. Perhaps some adjacencies, we want to leverage our feedstock positions around the world The APS platform that we've built with the acquisition of A. Schulman is an example of an extension of our value chains downstream. We were already in polypropylene compounding.
We've now increased our breadth in terms of participation. Joint ventures have been an important part of our growth strategy. Going back 10, 12 years, we have a portfolio of joint ventures in the Middle East in Asia where we're able to reach global markets, but we don't invest 100% of what's required. Our technology is what enables us to get into those joint ventures. Recently, we announced the signing of an MOU a joint venture in China with Borrow.
Ken's going to talk about that during his presentation, but I think that's an example of our discipline It's an example of how we think through what's the path to earn exceptional returns. Building at half the cost of Gulf Coast U. S, building at half the time, a project that's already half complete. Combine our technology with their capability with Bora's capability to operate and build. Produced in China for China.
That's the strategy. Ken's going to give you some numbers that will help you to perhaps estimate what kind of returns we could expect from a project like that. Speaking of returns, we're very value minded We said to you back in 2017 that our criteria was to earn at least 12% on inorganic growth. And depending on the type of inorganic growth, we may have higher targets. To compensate for the risk that we may be taking.
We said accretive to EPS in 2 years or less. We're delivering that on a Schulman. And all the while maintaining a strong investment grade rating. Ladies and gentlemen, I would submit to you that an inorganic growth it's important to think about not only what we have done like the A. Schulman, but also what we haven't done.
We had the discipline to walk away from acquisitions that we felt wouldn't meet our criteria. Wouldn't deliver exceptional value for our shareholders. We have the discipline to say yes, and we have the discipline to say no. And you should expect that that will continue for decades to come.
Now I'm going
to show you three slides to finish. And I want to walk you through the math of why I think LyondellBasell is poised to increase free cash flow generation in the next 3 years. Now this increase in free cash flow generation is not dependent on market factors. It's not dependent on cycled in polyethylene or IMO. Or any of that.
It's very simple, very straightforward. I talked about our CapEx moderating. 2019 is our highest CapEx here as we look at the next 3 years. As the PE plant construction completes, we'll take a step down And then in 2022, when the POTBA project completes, we'll take another step down. Now that doesn't mean that we're not going to be doing organic growth in the meantime.
We have a series of small and medium sized projects that we're executing. They're just not large enough individually to speak with you about but I'll show you the earnings potential from those in a minute. So we're continuing to do organic growth. It's more about phasing. It's not that we've stopped doing organic growth.
This is all about phasing the organic growth. But to be clear, we do not intend to build a greenfield cracker. In the US. We do not intend to build a PDH in the US. That I can take off the table.
So as you think about the investments we have been making, over the last 4 or 5 years, we're now on the cusp of realizing the benefits of those investments. As I mentioned, the A. Schulman synergies are still coming in. The current P and L, as reported, shows also cost to achieve. Those synergies, those will roll off.
So when you think about a bridge from 2019 to 2022, we expect from synergies, not from market conditions changing, an additional $200,000,000 of EBITDA from the H. Schulman integration. We have a series of small and medium sized projects. I'll give you an example of one. We're we're extending catalyst capacity.
As our licensing program builds out under Jim's leadership, we're, we have to we deliver, we supply catalyst to our licensing customers. So we're investing in new catalyst plants. We're building 1 in Edison, New Jersey, for example, where we have existing catalyst capacity. These are high return medium CapEx projects. And we have a series of these that we're executing, and I think this will continue to build our muscles on doing organic growth when we choose to build the next polyethylene plant.
Our major project the PE project $170,000,000 to $200,000,000 of EBITDA. Our POTBA project $400,000,000 to $450,000,000 of EBITDA the 2 together $600,000,000 of additional EBITDA by 2022. And then our JVs which include the Bora investment. So when you look at this, irrespective of cycles and market conditions, Our investments are poised to deliver $1,300,000,000 of additional EBITDA between now and 2022. So when you combine the lower CapEx with increasing EBITDA, you have a result that's a significant increase in free cash flow.
Let me walk you through the math. $1,300,000,000 of additional EBITDA by 2022 as I described to you in the prior bridge. Thomas will show you that our conversion rate of EBITDA into cash is about 80%, very strong cash generating company. That's about $1,000,000,000 of higher free cash flow. $1,100,000,000 reduction in CapEx.
You put the 2 together LyondellBasell has positioned to increase cash flow by more than $2,000,000,000, and that increase in cash flow is not dependent on market cycles. It's essentially realizing the benefit I've talked about a company today that's leading, it's advantaged, and has demonstrated its discipline in terms of capital allocation. We have a resilient and focused portfolio The resiliency comes from the global footprint. It comes from the feedstock flexibility. It comes from having IND and O and P and now APS.
Our focus on strong operations and safety on having a competitive cost structure When you combine that with our feedstock flexibility, we believe it makes us the best operator in this space and the most advantage chemical company in the world. We've demonstrated our discipline on financial policy strong investment grade rating. We've pulled all the levers to create value for our shareholders, strong dividend, disciplined organic growth. We've been disciplined on inorganic growth. We've bought back shares since the issuance Since we went public, we've bought back about a third of our share count.
We moved on all fronts to create value for our shareholders. And what I'm most excited about is that we're going to continue to think through how we build a great company for decades to come. As we continue to grow our company in a disciplined way through organic and perhaps inorganic means but as we've demonstrated to you, we'll be very return minded as we undertake those decisions. LyondellBasell is potentially the most compelling investment in our space. We're leading or advantaged and we're disciplined.
Thank you. Happy to take your questions. And Thomas will come up and join me for the Q And A. Okay. You want me to call them out, Dave, maybe?
Yes, please. Kevin, go ahead.
Just one question each, please. We only have about, 10 minutes here, I think.
Thank you, Kevin McCarthy Vertical Research Partners. Bob, you've made it very clear that, you're not going to be investing in US
ethylene, at least in terms of
a large scale cracker, U. S. PDA, likewise off the table. You have, however, we've signed an MOU with Bora in China. And, my my impression is you'll be funding that investment to some degree.
So talk about how that fits into the capital, framework that you've laid out over the next couple of years and what that's likely to look like?
Sure. So first of all, we think of that as more of an inorganic sort of transaction. It will be it'll be financed with leverage. So it's not all equity, like a greenfield project would be Ken's going to go through a lot of the details in his presentation about the investment costs, the amount of leverage, and, and the progress that we're making over there on the MOU and moving towards definitive agreements. But I think what makes that unique is that it's a project that's already in progress.
So it's about 50% complete. And, and it's built in a geography where CapEx is nearly half of what a similar investment would cost on the Gulf Coast. So I think it's that's what makes it or distinguishes it from a greenfield investment in the U. S, low cost, halfway through construction, and it'll be a largely debt to match. Vijay?
Kurt from Citi. Bob, another question on this China project. When you announced that MOU, I guess, how do you decide between being closer to the end customers in China versus being close to feedstocks in the U. S. Yeah.
I think, you know, P. J. For me, I always think about return. And there's different ways to get at a higher high return or one that meets our hurdles, right? So if the denominator is much lower in terms of the investment cost and we don't have to ship product from the U.
S. To China, Then I think that when you look at, the scale of that asset as well, we think that, the cost position will be relatively very strong in China. We'll be very close to the end market and we're investing less than half of what we would in the U. S. So I think is when we look back on this project 10 years from now, we'll say that it added to our resilience.
As we think through a range of oil to gas environments and so on, the key is to not put too much capital on the ground, right? And this one will be debt financed, largely debt financed as well, which won't affect our financial metrics. So it'll be JV financing, which we've done in many of other other JVs. Yes, David?
Thank you, Dave Begleitero Bank. I would think on PD imply propylene one point, you were a little more positive about perhaps building a PDH unit in the U. S. With a PP plant on back end. What's changed in the last couple of years in your thinking on PDH polypropylene near term?
So polypropylene, it really hasn't changed. It's just more about phasing. As I mentioned in one of the slides on the organic growth that we will build a PP plant, in the next decade on PDH, it's really we think through kind of make versus buy. And if we can buy based on having kind of owner economic, and, we can do risk because we have a partner who can execute the project well and they can focus on that while we focus on building the derivative unit that gets the product to market, then I think it's kind of a low cost way, low capital cost way of participating in the value chain. So You'll see more news on that in the coming week about our plans around propylene.
So we're not prepared to to discuss that today, but, but you'll see soon. Yeah. Frank? And then Jonas.
Beside Frank Mitsch, Fermium Research. Bob, I appreciate the picture dialogue of the previous investor days. So if we think about 2 years from now, if you have another investor day, what is the likelihood that we'll see refiner the refining as part of the portfolio. What's your outlook there? Obviously, you looked at monetizing that asset a couple of years ago.
How core is that business to, the line though?
Well, Frank, I've said this in prior earnings calls that, our highest priority has been to run that asset more of a live And I think under Dan's leadership, we've been doing that. We've been running at very high rates. Unfortunately, the light heavy differential has not has not has not has not has not could been favorable to us. Longer term, I've also said this often that I think that that asset likely creates more value as part of a network of refineries as opposed to one refinery in a chemical company. I don't want to speculate what we may or may not do.
What I always think about is do we create the most value with any of the assets that we have? And the refinery is no different frankly. And so today, our focus is on controlling what we control, which is operate well, watch our costs, think through how much capital we spend, and longer term, we'll think through what creates the most value for LyondellBasell. Yeah, Jonas?
Step back. Alright. Look at the presentation. It looks a lot like you're you're you're going back to your, sort of, 2010 outlook on on the world. Right?
You're you're slowing down your investments. You're not planning any or you're finishing up your investments. You're not planning any new ones. You're focusing on returning money to shareholders. Is there a genuine difference in how you see the world and your role in it?
And can you elaborate on that?
Yeah. I think Jonas of this more about phasing of projects. I mean, if you, if you go back and look at our investor communications over the last 2 years since the last Investor Day, we've said that we would build more polyethylene plants. To me, it's just about phasing. If we build the next Hyperzone plant a year later than we thought, I don't think that's a reflection some dramatic change in our view about the environment.
We've been pretty consistent about not building a cracker. If we were going to do it, we would have already done so. On PDH, I've been just thinking through and with my team, is it better to build or buy? And should we should we focus more on the PP, which is really what gets the olefins to market, and it, and it, leverages our technology. So I would say it's more about focus and phasing, not a significantly different view on the market.
We've, and on Braskem, I mean, it was really a value based decision. Just like it was on Chulman. So I our view of the world has not changed significantly. It's just more about phasing projects.
Right, Jonas. And as you have seen on what Paul presented on the EBITDA bridge, roughly $350,000,000, $300,000,000 contribution going forward now to 2022 from smaller projects, we've also presented the investment in profit generating CapEx in 2022, roughly 700,000,000. So what we are looking for at the end of the day is really the returns. And I think the 30% which was demonstrated over the last few years is a contribution and a proof point that we will continue to invest in growth initiatives with significantly and attractive returns.
And the other thing I would add there is that, our recent announcement of the Bora JV is an indication of our belief in the long term trends in the market. We talk about the growing middle class in China. We talk about growing middle class in India. Strong base business in U. S.
And Europe, which are large markets that are growing at GDP, GDP plus a little bit. So all of those trends are still very durable. And we're just we're thinking through how do we build out a portfolio of investments that positions this company to be very resilient and create significant shareholder value consistently. And I think that's what we've outlined Yes. Steve, last one.
Yeah.
Steve Byrne from BAML. What is your technology licensing business tell you about incremental new polyethylene capacity globally in the next couple of years?
Well, we've been fairly active in that space for more than a decade now And, what it's, 1st of all, what it's telling us is that there are fewer licensors of technology, that's been kind of one of the outcomes of of how the industry has evolved. And in terms of the pace of licenses, we see a very similar page to what we've seen. Maybe it's a little bit more, but a reflection of a growing base. So when you look at global consumption of polyolefins compared to 10 years ago, it's much higher. So 3% today or 5% today means a lot more plan that you need just to meet the demand growth.
So we're not seeing like the creation of another wave or something like at. And, and, you know, more of our activity is in, in China where the market's growing the most. But, but I'll tell you this on trade flows that, China will continue to be a very large net importer of polyethylene and buy what we see from the IHS of, figures that that, that short is, is, is as big or growing as we look through the decade in Polyethylene.
Okay. Thank you. I think that's all the time we have right now. We'll have plenty of time for other questions throughout the day. So before we reassemble at 8:45, we're going to take a brief break.
Just to remind you, we're going to split into 3 groups. If you have a red dot on the back of your badge, then you'll stay in this room. If you have a green dot on the back of the badge, you'll proceed down the escalator to the 3rd floor to Maryland A. And if you have a blue dot on your badge, you'll go to Maryland B, which is right next store. The speakers will rotate.
The webcast will listen to this room. So after those breakouts, we'll turn here for another plenary session with Thomas and Bob again. So please, 10 minute break, 8:45. We'll start again with a breakout Thank you.
Thank you, gentlemen. Please take your
I don't know if the mic there we go. Now the mic's on. Alright. Well, now what I'd like to do, we're gonna move into the breakout sessions, and I'd like to introduce 2 of my colleagues who will, walk through some information that gives you more color around the integrated polymers, of set of businesses. So Ken Lane recently joined us He's the Executive Vice President of Global Olefins And Polyolefins.
He had a long career with BASF and and with with Amico and BP back in the day. So, and then Richard Rudets, who runs our European O and P business. Richard and I have worked together for nearly the full 10 years that I've been with the company. So both guys are very well informed and we'll, we'll get into, some of the details of integrated polymers. But before we do that, we wanted to share a short video from the CEO of Enterprise, Kim Teague, and he'll tell you a little bit about our relationship with them?
We're, what's called a midstream company. We, we have about 50,000 miles of pipelines a 1,500,000 barrels a day of fractionation. Every 100 grade propylene splinters, we have plants that make propylene out of propane and isobutylene out of butane. We're a large exporter of hydrocarbons, everything from crude to olefins, and we're the largest exporter of LPG in the world. And we do a lot of business with LyondellBasell.
The thing I love about LyondellBasell is they know they are. What I say is professionalism looking out for the interest of Lyondell, but at the same time, understanding, we've been doing business for LyondellBasell. Probably 25 to 30 to 40 years. And our intent is we're gonna keep going with LyondellBasell because they're gonna be commodity chemical company around. So I want to grow with
Alright. Good morning. Glad to see all of you here. The room is a little thinner. I know that everybody's in their breakout session, so I won't take that personally.
But, first of all, I want to just echo some of the things that Bob had mentioned this morning and talk first about the, the strategy for the Global Olefins And Polymers business. And I really think about this in 2 story lines. The first one, is all about the integrated foundation that we have with a leading and advantaged portfolio of assets. So when you think about what Bob was talking about around our ability to operate these plants safely and reliably, with a lot of flexibility and optionality that generates tremendous value for us. We're also focused on differentiated products.
We've got a set of derivative technologies that allows us to produce products that do generate a premium in the marketplace. And that's something that we're going to continue to do in the future. The next part of that story is really building on that foundation that we have for the future. And that's around the disciplined growth and leveraging the innovation that we have to build more profitable businesses in the few one of the things that we're going to be looking at are the sustainable business models in order to help make our products have a longer life in use. Means we're going to focus on business models that advance circularity.
And as Bob said, builds a return for us in that business space. Just quickly, I want to talk about, the global olefins and polymers business and give you a little bit of a snapshot of what we have today. It's just over 50 percent of the EBITDA generated by LyondellBasell, so it's $3,500,000,000. We are a leader in polypropylene. We're number 2 globally.
We're also a leader in polyethylene focused on high density polyethylene as well as low density polyethylene And in all three of those lines, we've got, again, a very advantaged product portfolio. That's built around a robust manufacturing network with 29 sites around the world that includes both wholly owned and joint venture sites. And we're very, very excited to see that expand in the future. Now I want to shift and talk a little bit more about the advantages that we see in this I think if you go back to the beginning of the last cycle to a similar position where we are today, we didn't have the advantages of Shale. Sleep.
We're in a much better position today as a company. We've optimized our portfolio of assets, We've got access to advantage feedstocks, and that feedstock flexibility has improved in the years since then. So we are extremely well positioned to have a very solid performance and a very high level of cash generation through the cycle. Now the competitive advantages, I'm going to hand it over to Richard, so that he can walk you through what we see as really differential performance drivers for us in the industry. So we're short.
Thank you, Ken. Over the next three slides, I will explain you, I hope you're getting strategy, the free pillars for our differential performance, and how we add value and deliver value on top of our of our industry peers. This mindset sorry. This mindset is deeply rooted in our core values of excellence. Ownership and teamwork.
Focus on detail, whether in safety, operation or commercial, drives improved reliability and predictability. And this is leading to improved differential Our operating model is very simple. It's relentless benchmarking against our peers. Agility to identify initiatives to close the gap to 1st quartile performance and continuous improvements to maintain or extend our lead over our peers. As Bob mentioned, it all begins with attention to detail.
From our foundational focus on safety. This focus on detail carries over to operation leading to reliability because at the end of the day, we cannot predict when the market will offer opportunities. However, our high reliability allows us to capture profitability. The fact that you can find this result in all geographies and all products is a testament of its ingrained and resilient nature After operational after operational excellence, feedstock flexibility is a 2nd pillar of our, differential performance. Every single day, we optimize for the most economic feedstock in a given business and technical environments.
In the US, 2 Midwest hackers in Mois and, Clinton, were designed to take advantage of low cost stranded e sale and propane. Free or firecrackers on the golf course has the full range capability. They can crack or miss in, open, retain condensate, and naphtha. This provide a distinct advantage compared to new build crackers that can only process ethane with limited flexibility. In all our four crackers on the US Gulf Coast, we have improved the capability to process low cost and purified mix, energy, factions, known as way great.
And today, we are able to crack about a mid single digit in our feedstock. In Europe, in a similar way. We have improved our flexibility. And now our crackers can run up to 50% of advantaged stock. So we have explained operational excellence.
We have plain, feedstock fish flexibility, and now commercial excellence is a 3rd pillar of our differential performance. This operating strategy based on differential performance is delivering sustainable and resilient profitability. The net effect of the benchmarking activities is the polyethyl integrated polyethylene margin, additional margin we are able to deliver PS. It's typically $120 per tonne for the US and $100 per tonne in Europe. In the US, it's mostly driven from the olefin side and in Europe, it's mostly driven from the public side.
High commercial excellence is built around intimate knowledge of our customer's application and value drivers. Then we are defining the value propositions that fit customer needs And finally, we are aligning the resources accordingly in term of targeted innovation and product or support services. This positive reputation and recognition along the value chain be it from customers, from brand owners, or retailers, is providing or offering us unique opportunity to over participate in attractive markets. On a global basis, we are live technology and capability expertise to develop innovative grades to participate in IIM premium high margin segments. Ken will now provide a current view of global markets.
Thank you, Richard. So now I want to talk briefly about the global polyethylene market. Currently, we still see a very healthy operating rate in the industry. And we expect that to continue. That's going to be driven by robust market growth.
So even in the mid to long term, we're expecting a 4 percent growth rate. There are a lot of discussions right now about the new capacity that's coming on stream. And certainly, there is more capacity coming online. But I think if you go back to the third quarter of 2016 and you look at what was predicted then, It was predicted as shown here on this chart that there would be much more capacity and a much lower operating rate that we're actually experiencing today. We believe that history, is going to repeat itself here or at least the future is going to be very similar to that.
People make these decisions based on what they see happening in the environment. We definitely expect that, We're going to continue to see these capacities come on the market, but the capacities that are speculative, we do expect, are going to get delayed similar to what we seen in past cycles. But having said that, Zillion. We're in a very strong position. We've got an optimized asset base.
We've got advantages that Richard just talked about. And I feel like we're extremely well positioned for all seasons in this environment. Now I want to talk briefly as well about the Hyperzone investment and Bob had talked about this earlier, the project is really winding down in terms of construction. We are in the midst of commissioning that plant. And between now and the end of the year, we expect to have all of that complete.
Why we're so excited about this technology is really because of the ability that it gives us to make products that are going to be differential in the market space. We're going to be targeting applications like high pressure pipe, like a large part blow molding that are very technical, very specified, and they're going to give our customers the ability to process these products, these resins, very efficiently and not sacrifice the properties in the application that they're going to use them Certainly, we're expecting to see a significant impact next year from this asset as it ramps up through the year. And that's going to be something that's very exciting for the business as we go through and begin working with our customers to introduce all of those new products. So now I want to touch base on our joint venture model, which we've had a lot of success. This has been a very, profitable model for us over time.
It has generated high returns for us. It's a key part of our growth strategy and frankly has allowed us to expand our reach well beyond where we have our wholly owned assets. So with our reputation and our long history in this market We're an attractive partner. We help bring more value to our partners, and that's what they certainly appreciate in having LyondellBase in the joint ventures. And all of that drives a very steady stream of EBITDA for us.
And we do certainly see that continuing But there's an added advantage there that we have, and that is through our licensing business and through the catalyst business that we have. So when you leverage all of that, this becomes an extremely high return business model for us. And the one that we're going to continue to, to leverage as time goes on And I think that's a great segue then, and to talk about the MOU that we signed recently with Bora. Now this is a, the picture that you see here on the right, I think, is an important part of the story. That picture was taken just before the signing ceremony a couple of weeks ago.
So you can see this project very well advanced. And by the time we get to closing this deal sometime next year, the window between closing and operating this asset is going to be very narrow.
It is going to be
a CapEx light way for us to have a position in the largest fastest growing market in China with an advantaged investment position. We're looking at a $2,600,000,000 investment for the world scale cracker plus the derivatives. So that's everything included. That's 100%. Half of that investment is going to be ours.
However, 2 thirds of that is going to be joint venture financed through non recourse debt. So this is really a highly leveraged high return asset for us. And it's the right way for us to enter the market where we do see a lot of growth opportunities in the future. And I expect that it's gonna something that, that we can build on in the long term. So we expect to see operations commencing in 2020 And that's going to be again, a very exciting time for us and a big contributor for the EBITDA development going forward.
Now I want to come back to some of the models around sustainability that we've talked about. We've got, the QCP joint venture in Europe, that was launched just a couple of years ago. This is the mechanical recycling joint venture. It's up and running. And, I'm happy to say that what we've seen through this joint venture with Suez is our ability to make resins by leveraging our strengths and our competencies along with theirs For the collection and the sorting and the cleaning of these materials, these post consumer waste materials and converting those into resins that we can sell like Samsonite and like Unilever.
One of the things that we wanted to prove through this is our ability market these and get these resin prices up to at least, if not higher than virgin resins. And we are seeing that. We've been successful in doing that. The demand for these products, the demand for these resins is very healthy. And we believe that as we scale it up, the profitability is going to become even better.
So two examples that were mentioned earlier, you can see here a suitcase that Samsonite has already made and marketed. Now it takes 3500 yogurt cups to make that suitcase. So that's that's quite a lot of yogurt, I eat yogurt, but not that much. And, that's a totally recyclable suitcase. So the liner is also made from from PET recycled resins as well.
The other one I want to highlight here is the shampoo bottle with Unilever that we've developed. They did give us a distinguished supplier award that we're very excited to have received. I think this demonstrates the value that our customers are putting on the ability and the innovation that LyondellBasell brings into this market space. Next, I want to come back to the growth agenda. And we had talked earlier about the fact that we're winding down the large projects that we're investing in.
So Hyperzone, the polypropylene debottleneck here in North America, all of that is going to be winding down And as ability in our crackers and improving the efficiency of those assets. We will be ready when we need to be to make the next round of investments for the next polyethylene investment, the next polypropylene going to be very prudent in how we move on that. And now we shift into a phase where we're going to harvest from the assets that we've built we're going to harvest that and maximize our EBITDA generation and our cash flow from this business. So just to wrap this up, I want to come back to the fact that we're going to build on our leading position with our global asset position that's very advantaged. We're going to continue to be highly disciplined in the investments that we make going forward.
We will invest at the right time, but we're going to shift our focus to maximizing the EBITDA generation out of this business and to generate more cash for our shareholders. So with that, I want to invite Bob back up to the stage and we'll open it up for a few minutes here. I think we've got about 5 minutes left for questions.
Probably have time for a couple of questions.
And the mic's not old, guys.
Is it on? Just try that again. It's not on yet.
Thank you. Vincent Andrews from Morgan Stanley. I just want to go back to slide 40 and you've got the effective operating rates for Global Polyethylene. And just want to clarify 2 things. 1, that's, I believe, an amalgamation of consulting forecast, rather than your own.
Is that number 1 correct?
That's correct.
That's correct. Okay. Well, they're predicting, a deceleration in utilization rates, even though you're, you're your chart here would still, assume it's above 90%. It is a deceleration. Could you maybe talk about what your what your own view is and compare and contrast what you expect on supply side versus the demand side.
And in particular, address, I think the big thing that's changed in the consultant forecast has been the pull forward of capacity principally in Eastern Europe as well as in China. And just to sort of talk about how possible that truly is that capacity would come earlier than expected versus the historical cadence, usually a being later than expected?
Sure. Well, look, I think when you look at all of these analyst reports, what you'll find is that they bake into that a certain amount of speculative capacity. And that's what we take into consideration because we are on the backside of the cycle. There's no denying that. And as you get to those points, people make different decisions.
So they announce things, but history has shown us and it's going to continue, I believe, that they're going to delay those investments to a point in time where it's going to generate more returns for them. So that's that's the way we look at this, is that not all of the capacity that gets reported is firm or under construction. There's always significant amount that's speculative. And I think you have to discount that. And that's what we do in our minds.
Vincent, I would just add that also the financial wherewithal of some of these entities that have announced new expansions may limit them from executing So, because they're having to stand on their own as opposed to being, supported by the government, And in some cases, like the one next door to Bora, there's a project actually that's been announced. And when we were there for the MOU signing, We actually went to Pengine to the site and there's one bulldozer in the middle of the field. I mean, there's really nothing there. So literally, You know? So so I think, these things will evolve.
And just to reiterate what Ken said, if you go back 5 years ago and the amount that was predicted, Well, you know, a lot of it did come on, but project delays, some got pushed. And so we'll see a combination of that. Difficult to predict which ones but we think that, statistically history will repeat itself.
Hi. It's Parag Patel with. Yes. It's Parag Patel with Capital preservation Advisors. You had mentioned that these two gentlemen recently joined your company you had some previous experience with them before.
Could they briefly speak about, why they joined and what attracted them to come to Lyondell?
Yeah. Well, just just to be clear, this one's been with the company for 30 years. So he's about 30 days. So Yeah. Two lots.
2 months, 2 months.
So Ken So, I mean,
I'll tell you, this is, I've been in this industry, by the way, the chemical industry since the early 90s. And, So I've seen a number of cycles. One of the things that attracted me to LyondellBasell is exactly what we're talking about today. The strength of the portfolio, the streamlined cost structure that we have and the competitiveness of this business and ability to generate cash through the cycle. It's a sustainable business and one that, frankly, I'm excited to be a part of discipline and growth and knowing who you are and where you want to be, that's a great thing.
That's a great strategy. So I believe in that. That's why I'm here.
Yes, maybe just a comment yes, I've been with that company and predecessor company for 34 years. So it's quite a long journey. I think one of the reason why I stay with Leander Basel is because we really have this impression with all the team to build a legacy. We are building something which lasts we will last for decades. And that is one of the driver for myself but also a lot of people to stay with that company.
One that doesn't work.
Is that the one that doesn't work? Let's try that, Monica.
Thank you. Matthew Blair from tier Pickering. So slide 40 talks about global PE demand growth in the 4% range. Given that Lyondell is a leader in recycling and sustainability efforts, Bob. I was hoping that you could just help put them into perspective.
What's the risk long term to demand growth, from issues like, single, you know, focus on single use plastic, bag bands, those types of areas?
Well, 1st of all, single use plastics are a small part of, the overall polyethylene business and you still have pipe and large part blow molding and many other applications. Ultimately, I think Matthew, there will be recycling will have some impact in terms of demand growth, but on the other hand, the base is continuing to grow at a very high rate. So when you kind of net the 2 out, what we think about is could you see 50, 50 basis points come out of growth? Maybe but it's not so substantial that it changes sort of our view about how we invest longer term
Thank you. I just want to add one thing that that growth rate already has baked into it what we see emerging, right, in regulations and and potential deselections. So we've already got some downside baked into that.
Thank you, Dave Begleod, Deutsche Bank. Bob, just on
the China JV and Bora,
can you give us some background out as to how it came together? Why they brought you in so late into the process, and your confidence in their ability to operate the unit going forward?
Yeah. So actually the licensing agreement, we engaged in that, more than a year ago. And, as you know, I ran the technology business before, and I often talked to Jim Seward about, hey, look, whenever we sell a license, we had to think about, should we participate? And as time went on, we really kind of saw how well Bora operate. We didn't know them as well.
And they have a 300,000 barrel a day refinery right next door. And, and Bora decided that they'd like to have a partner to help them get the product to market And because it was our technology, as our discussions evolved, post the licensing agreement, we, you know, we thought maybe there's a way to co invest here. Richard was working on that for quite some time, leading up to the MOU. So if you want to add a couple words,
Yeah, I think it has to do with every partner is providing something different to this joint venture. So we recognize Bora is a very solid partner in term of operation. In term of local presence with the government and the regional government in its area. And we can provide also additional value with a technology business and a marketing effort. So this was recognition from both sides and leading to this MRU.
That's a model that we're very familiar with. We have that in our 3 Middle East ventures. We have it in in our Korean venture or our Thai venture. So essentially, we're going to replicate sort of the model that we have already in place. Basel back to before even LyondellBasell had started down the path of these joint ventures.
And so we feel very good about both partners bringing strengths. Great value. All right? So, well, thank you very much and we'll conclude this session. Ready?
So welcome everybody. This is the breakout for technology enabled products and we're going to provide you with some insight into how innovation enables and adds value to our growth initiatives and really spread across the company. We're going to start with a brief video from our partner and our innovative recycling recycling joint venture in Holland quality circular polymers. And this is Jean Marc Wasier, the Chief Operating Officer of Suez.
I'm Jean Marc Moshe, and I'm SUEZ, Group Chief Operating Officer. SUEZ is a worldwide leader for slots and resource management. Leander Basil is the partner of SUEZ. We have created a JV in Europe called QCP. We are producing together green polymer recycled polymer for big brands like Unilever and PNG.
We are creating a new world for the production of Green Polymers. Innovation is absolutely clear for both for our Yandell Basel and for Suez. And we are thinking already about developing new technology, new solutions to be able to produce high quality polymer for the future. Both Suez and Ligandel Basel are amongst the 2 founding members of the alliance to end plastic waste, which is a big brand coalition in order to, reduce plastic pollution in developing countries and notably in Southeast Asia. Our dream is to enter into the world of the production of green chemicals together.
Session, Jim Gilfoyle, and Jim Seward. 2 gyms.
Okay. Thank you, Dave. So welcome, everybody, to the, Technology enabled products section. What we would like to ask you to do is to spend the next 20 minutes' half an hour, thinking about Landel Brazil through the lens of technology. We have a tremendously rich heritage in technology, but more importantly, we believe that our technology positions us in a really unique way going forward.
Technology enabled products, it represents about a quarter of the company by 25% And what we're talking about, just to anchor you there, is our technology business, our licensing and catalysts, which I have responsibility for. Our propane oxide business run by Talker Redmond and, our Advanced Polymer Solutions business run by, run by Jim. Now when you think about LyondellBasell, we are a company that is quite narrow in terms of scope, but we're very deep. What I mean by that is that we play in our industries where we choose in technology, in products and in compounding. And we believe that it's this deep knowledge of our industry value chains that we're playing, which really helps.
And a lot of that is informed indeed by, by technology. It allows us to, to accelerate commercialization. I think it means that we are the partner of choice for many customers, suppliers and others, including joint venture potential joint venture partners. And it also informs the way we grow. We have a very disciplined growth approach as you've seen.
And I think that, our technology is one of the kind of North Stars when we think about deploying that technology for advantage to grow. So examples of that are the major projects we have, not the moment, Hyperzone, advantaged polyethylene process. POTBA, which Jim will talk about later. The joint ventures, as Bob says, has always been a very important part of our company. And, you know, when when we think about joint ventures, people very often come to us.
Partners will come to us because they seek our technology, and they also seek our deep and global market reach and customer intimacy. So again, that technology provides a kind of competitive advantage in the way we want to grow and of course informs an important way our M and A strategy as you've already heard today. Finally, technology or innovation is really the key that we seek to unlock the sustainability opportunities of today, as we try to create novel business models for tomorrow. When we think about technology enabled products, we're talking about $1,400,000,000 more or less, across those three platforms that I mentioned earlier, in terms of sites, most of the sites, in Jim's responsibility and APS about 85, I think we also have 6 large world scale and leading propane oxide sites and a number of technology sites essentially around catalyst manufacturer. As I said, we're the leader in a number of areas in this space, particularly in licensing and polypropane licensing, and we're also the largest producer of polypropane compounds.
I'm maybe in the largest producer of compounds, to be honest, globally as well. So where I repeat, you know, where we play, we play very meaningfully, we play to win and we're very deep in these basis. So we think from the economics of this, so we have a rising profitability over the last 3 years. That profitability has been driven, in part by licensing success, by our acquisition of A. Schulman, of course, our APS, And the future as you go forward, of course, are kind of, very important growth project, POTBA will drive that, that profitability growth further.
We think that these earnings are very robust and we'll talk about that very solid. And also in this part of the business, we have a very high conversion of EBITDA to cash as well. So how do we think about polyolef licensing? Let me say a couple of words on that. So some of our technologies we choose to license, for example, our polyolefin technologies, polypropylene and polyethylene, what we license broadly, and as I'll show you where the leading licensor our business model there is licensing.
And within technology business, we have licensing, we have catalyst and we have business services, and licensing acts as a kind of a pull if you like, Paul, so our catalyst business as well, which is important. So, if we think about, our polyolefin licensing business, it's It's a very strong business. As you can see from these, from these chart on the right, we're really the leader. We play in polyethylene and in polypropylene licensing. And really lead where we play.
To be honest, pretty much anywhere in the world, somebody wants to build a polyethylene or a polypropylene lies that polypropylene plant, chances are we'll be the first person they call. We have a very attractive business model, which we think, which is hard to duplicate. Partly because of our heritage, partly because of our leading technology, and partly, to be honest, because of our scale. So if we think about the size of our installed base, that makes us very low risk opportunity on the one hand, a low risk licensor, but also we have a recognized leadership and innovation. So if you're going to build a plant, you're going to build it for the next 20 years.
You probably want to build it with somebody that's going to continue to innovate in that space. So we think that, you put together a licensing business with the catalyst and the technical services and, and we think that creates a very profitable business, also for the years to come. I'm now going to hand over to Jim. He's going to talk about our propane oxide business.
Thanks, Jim. So as Jim talked about the licensing in polyolefins, we're switch gears and talk about the propylene oxide business and the proprietary technology that we have in that space, which was the business I ran before being assigned to our Advanced Polymer Solutions business. So there's 2 proprietary technologies. There's POSM, and there's POTBA, all within the line of the cell portfolio. As you can see on this cluster, both technologies represent cost leading positions in the industry.
POSM is propane oxide in combination with styrene monomer. This technology we typically deploy in markets where styrene is still owing, which is a bit challenging to find these days, but when you look at the space of Asia and China, you still see positive growth rates in that region. So we tend to focus our POSM technology in that space. For POTBA, again, tertiary butyl alcohol, the primary use tertiary butyl alcohol is for ether. So it's MTB and ETB to global gasoline market.
So as we go to market, in POTBA and try to find the appropriate place to build an asset. We look for cheap feedstock. We look for cheap butane. And that's why you'll see today for those in who will be going out to the site, we have elected to build our POTBA plant here in the Gulf Coast on the back of Shale gas and cheap NGLs. So the plant that we're building in Channelview is next generation.
As we as Bob mentioned in his opening remarks, we expect this asset will reduce our cash cost position of about 5%. Again, that's from an already leading POTBA position of the industry, primarily driven by scale, and by operating efficiencies. We've made modifications to our technology over the years, and this gives us an opportunity to employ that innovation in our new design. The growth rate of We find that with our position in respect to our costs of our technology, that we will be the supplier of choice in the space of propylene oxide. So a little bit on our new asset that you'll be visiting later today.
It is a 2 site location strategy with respect to the construction, we are building the POTBA plant in Channelview there are existing ether plants already in Channelview. So we will be making a new combination of facilities with an existing ether's derivative plant. The ether's plan is actually going to be built in Bayport, where we already have a POTVA unit already in operation. So what this two plant design does, it allows us to create efficiencies with respect to moving materials between the two facilities. Which is another, I would say, value that we've seen by creating a 2 location strategy with respect to the asset, but today you'll be visiting the Channelview facility.
Construction I'm happy to report is roughly 20% complete you were to go by the Bayport plant, you would see steel coming out of the ground. With respect to Channelview, it's a much larger site Mostly what you'll see today would be mostly foundational work. You'll get a sense of the scale and scope of the facility, but we've been really focused currently on undergrounds and getting the foundation finalized, but you'll be seeing that on the tour later, if you like to go. With respect to this facility, this facility will generate $400,000,000 to $450,000,000 of EBITDA once it, once it is commissioned. Again, what you're also going to see is a declining capital spend profile with respect to this asset.
So when this asset starts up at the end of 2021, we anticipate that full year 2022, you'll see the full power of this facility in our earnings. So propylene oxide, propylene oxide goes into many uses that we encounter every day. For example, to see cushions you're sitting on right now, made of polyurethane, which is one of the main uses of propylene oxide, which accounts for about 50% of the raw materials for that particular derivative. You'll also see it in mattresses. For those of you from New York, bed in the box is a big polyurethane application that we've seen growing fairly substantially.
Spray foam insulation, for the efficiency of homes with respect to cooling or heating, see it in coatings and adhesives and as well as other type of industrial applications like deicers for aviation. The demand growth rate in this space typically exceeds GDP primarily following the demographic change in the ever growing middle class. So we're going to switch gears now to tailored products, which is primarily centered on our new Advanced Polymer Solutions business. As you businesses of LyondellBasell, the specialty resins of LyondellBasell, which is the Catalloy and PB1 with our recent acquisition of A. Schulman.
The great thing about the combinations of assets and the upstream that we have with our commodity businesses is we can use our catalyst and our polymer technologies that Jim has described to you combine that with the innovation and customer touch of our polypropylene compounding position and provide too. So we think this is a unique advantage for us in terms of our opportunities to provide our customers really innovative solutions. We're lined of a sell, as Bob said, when we do acquisitions, we always try to think of what we can bring to, the company that would be part of lined of a sell. In the space of A. Schulman, it's operational excellence, it's cost structure, and it's also the commercial strengths in that whole market view that we have from our legacy commodity space as well as our downstream experience in the polypropylene compounding area.
What you're going to find is this these synergies that we generate are going to be an additional, cash generation tool for us going forward. So let's talk a little bit about synergies. Bob mentioned synergies. We promised 150 at closure of the A. Schulman transaction.
We're now indicating that we see a pathway to $200,000,000 in synergy run rate at the end of the 2 years from closure. So that is at the end of August of next year. That $200,000,000 represents a doubling of the EBITDA that we acquired, through the acquisition of A. Schulman. How are we going to that we have in the industry, which helps us in procurement, helps us in logistics.
It helps us in our safety culture and bringing that to Ace Schulman, which has been very impactful. We've already improved the safety performance at Schulman. We've cut their TRIR by a half. So we're seeing substantial improvements in the safety performance in establishing that culture. Our manufacturing excellence, our finance and tax strategies being a large scale company as well as our commercial combined with their and the innovation downstream into our, to our customer base.
So the success that we show here is going to validate to the market that we have the systems and the processes to successfully integrate acquisitions going forward. So Advanced Polymer Solutions, what does it do for lined up a cell from a market facing standpoint? The polypropylene compounding business that lined up a cell had was primarily focused in the automotive space, heavy OEM exposure. But what we have now with the A. Schulman acquisition is a much broader scope of markets.
We have ag, We have industrial, we have packaging. So it creates a much broader footprint for our compounding businesses support. The interesting thing about I'll give you an example. So automotive growth rates, we typically outpace the automotive growth rates because we're constantly looking for ways to do inter material replacement. Finding ways to lightweight tailgates, finding ways to lightweight vehicles.
This is more and more plastic that works its way into the vehicles. EVs is a good example where our position with EVs is very strong and the growth of the EVs will also help in the growth rate of our Advanced Polymer Solutions business. This is a highly fragmented market, $65,000,000,000 market, lots of small players, and we feel, and when we stand up this platform and we're successful in the capture of those $200,000,000 in synergies, we'll be ready to start looking at modest acquisitions it back to Jim, he's going to talk about the innovative solutions in the space of sustainability that will really set the future for line to be selling the stream.
Thanks, Jim. So let's say a couple of words on, sustainability and the initiatives that we have there. So firstly, I said earlier, the way we think about this is how can we view major trends in the industry or major trends in society, to be honest, as opportunities and turn that to business models. And for us, the concept of Circularity is really important. The concept of trying to keep products, molecules within the economy is the opportunity that we see that can be the platform for business models.
And we're doing that in three ways, some mechanical recycling, I'll talk a little bit about chemical and molecular recycling and also using fire based feedstocks. And what we've done in each of these areas is try to understand what good what success looks like in terms of sustainability of economic business model. So if I just say briefly in terms of mechanical this is our QCP joint venture with series you've seen before. It was clear to us that what needs to change in this business was the way pricing works. So previously in this market, you had companies that are involved in today, you have companies that are involved in recycling that are not connected to companies like us, not connected to the Virgin polymer us.
And therefore, what has happened is you've had a norm in the industry of discounting from prime product pricing to recycle. Recycles tend to be sold 70% or much lower than Prime. And what we're doing successfully is changing that model by applying our technology, by applying our customer intimacy. And I'm happy to report it now through QCP, but actually we are selling product at least the same price in some cases higher because we are able to forge those relationships to end users and bring that product technology to market. So that's the first example Secondly, when we think about, chemical recycling, which is very important for those plastics, mixed plastics or is hard plastics that are difficult to mechanically recycle, we've identified that actually the key to unlock value here is scale.
And so we are working very hard in our R and D to understand how we can redesign and reimagine those chemical recycling processes to provide production scale. So different driver, but the same idea. How can we present? How can we we deliver sustainable economic business models out of sustainability? For us, when we think about it as LyondellBasell, we see a huge opportunity, a wasted opportunity if you excuse the pun in the currency situation.
Our vision is that plastic doesn't become waste, is that plastic is used and becomes a useful raw material or feedstock for some other purpose. And we think that is a possible future state. As I think it's clear, we have a very disciplined growth approach to growth and just suffice to say that technology informs the way we grow. It's very clear that the way we think about growing is we on our strong technology our strong technology platforms, essentially utilizing technology, behind those growth strategies. And finally, just to, to summarize the, the situation, these technology enabled platform products, a high margin.
They're very they're very stable. We believe they're growing. So they represent a really important part of our portfolio, but in addition, the technology itself allows us to have higher operating rates, allows us access to product and customer intimacy and excellence, and also, I think, informs the way we grow for the future, a kind of north star, if you like, in the way we think about our business. And finally, of course, innovation will lead the way in terms of how we want to reimagine business model in the sustainability space. So thank you very much for your attention.
And with that, myself and Jim would be happy to take questions.
Steve Byrne from BAML. What was the headcount at Schulman when you made that acquisition? And what do you think it'll be next August?
Well, The headcount at Ace Shulman was roughly 5000 employees. When we acquired the company, I think I would prefer not to, to discuss maybe where we would end up, but I think it is fair to say that there are some cost measures that we are taking place to improve that position for us going forward.
Thank you. Vincent Andrews from Morgan Stanley. You mentioned that, some of these recycled plastics or polymers that you're selling now your pricing above, sort of virgin material. Could you talk a little bit about the profitability of those products and sort of where the overall QCP JV is? Is it profitable or what's the path to profitability?
Okay. So the 2 few things are late to consider in terms of that. So firstly, which is interesting, what drives profitability in this part of our business is not monomodeltas, of course, right? Because what you have actually is an input, which is waste. Now we actually choose to have quite a high value way.
So we pay for that. That's not free, but it's a pretty stable price. So what's really driving profitability is 2 things. Price? And scale.
So we think that, we have a path to really drive, for us, we want to get to reinvest in profitability because it's not going to be enough for us to have one key CP. That is not our vision. Our vision is it's a platform that we will be able to build on. So from the pricing part, as I mentioned earlier, we think we're making we're very happy with where that is. In terms of the scale, we've already moved QCP from 25 KT to 30 Katie, we're going to make a further step there.
So we will continue to continue to grow. So we see a very nice path in terms of getting from where we were, which, as I said, is in general, historically, the mechanical recycling business has been pretty tough. In terms of getting that step by step in terms of, of our target, which is reinvestment economics. I'm happy with the pricing part. We're working on the scale Bob.
Matthew Blair from Tudor, Pickering. Jim, you talked about these additional Schulman synergies at a time when it seems like APS is facing some, some headwinds here. Think EBITDA was down to $139,000,000 in Q2. Could you talk about what's working, what's not working in APS and what do you see as normalized EBITDA for this segment going forward?
Yes. So I would say in the space of synergies where we actually encounter more success than we anticipated upon closure. On the procurement space, I think we found a lot of value in the scale and scope lined up a sale and our ability to buy raw materials, I would say more competitive prices. We've also found that the consolidation of assets and the removal of fixed costs from our portfolio, we had quite a bit of assets running an extremely low operating rates. We've been able to combine those products into existing assets or consolidation of assets, and we found that that cost that was available to us through that type of manufacturing optimization has been greater than maybe we originally anticipated.
I think your comments around the performance of the business is right on. I think there are quite a few headwinds in the market right now. The automotive automotive market has not been, I would say, strong. I would say that we have seen some recovery now in the space of Asia, but think we still have a little ways to go with respect to regulations around automotive emission standards. I think it is creating somewhat of a bottleneck in terms of consumer demand.
The space of automotive. But I will tell you that the synergies we are capturing are real. The other thing you have to consider is we're offsetting a lot of the synergies right now with cost to achieve. So the thing you have to consider is into the future, the cost to achieve will roll out and the synergies will be sustained. So try to keep, keep balance the fact that we are also reporting run rates those as we qualify new grades, we transition to new raw materials transition into the new pricing, it will take some time.
But we are tracking run rate and unfortunately now you are seeing the cost to achieve offsetting some of that. I would say the run rate when we put all three businesses together, We advertised roughly $600,000,000 in terms of stable market conditions with respect to the APS segment. And of course, with $200,000,000 in synergy capture, that should push up close to 800 when we when the costs to achieve start to roll out of the division.
Okay. Thank you very much then.
Okay, good morning. And let's continue now welcome you to the breakout for intermediates and fuels. In this breakout, we'll give you insight into, how we deliver the value from our advantaged co product and PO technology, integration to advanced shell based, feedstocks and upside from market opportunities. We have a brief video prepared a video from, Brad Borschamps, the president of Carpenter, a PO and EO customer, as well as Alejandro De Vareda, the CEO of Grupo, Hoel from Mexico, but before he is a Styrene customer, but before we go there, I would like to introduce Torkel Redmond, who runs our I and T business. He joined us, 3 months ago, and Pam Combs who is in charge of refining and manufacturing globally.
And with this, let's play the videos, please. Thank you.
My name is, Brad Beauchamp, and I'm the president and chief operating officer for Carpenter Company. Governor company is one of the world's largest manufacturers of polyurethane foam.
Who is a Mexican conglomerate founded over 45 years ago with global presence in more than 70 countries.
I would say that LyondellBasell is one of the premium chemical raw material suppliers in the world.
Lionel Gassel is a professional and reliable company that honors its commitments, guarantees the supply and quality of its products, with the top notch terms.
They do a very good job of actively trying to understand our business, where we're going with it, and how it into the larger context of the global marketplace.
Their clear business vision, the ability to develop their own technology, coupled with the state of the art facilities and sustainable culture are key advantages for the future.
LyondellBasell is decision to make a large scale investment in the Houston area and the strong signal that they're interested in being in the business for the long term.
Thank you, Thomas, and good morning, everyone again. I will now cover the intermediates and the fuel portfolio, which should be seen as a portfolio of resilient businesses capable of capturing market opportunities. These businesses, have strong assets, advantaged feedstock, proprietary technologies and unique capabilities as you'll hear about the Houston refinery. We take a very focused approach and disciplined approach to growth. Plus, they support our sustainability effort And I'll talk about the oxy fuel benefits in terms of reducing greenhouse gas.
And we also make biofuels, which is part of this. We see these pillars as long term durable advantages And on top of this, we'll leverage our company's core strength in operational excellence. This portfolio generated $1,000,000,000 EBITDA 12 months trailing. While assets are located in the U. S.
And Europe, 40% of the product is exported outside of those regions. This business is comprised of 3 value chains: the Oxyfuels, our Houston refinery, our intermediate chemicals, acetals, styrene, ethylene, oxide, and derivatives, They are interconnected to various degrees with other parts of the companies on feedstock and now also in operations. From an earning standpoint, let me describe how they benefit from the market upside that I introduced as a theme. For this portfolio. If you look at the graph, in 2018, they benefit from upsides in Styrene and acetals as the industry struggled with supply.
With LyondellBasell's high asset reliability, where we're able to capture market upsides, both in volume and margin making 2018 a very strong year. In 2019, we see styrene and acetos weak but we have an upside on the oxide fuel sides that we're capturing and oxide fuels delivering a very strong year. For 2020, we see upsides that that will talk about for the marine fuels in our IMO 2020. Now to the first business, Oxyfuels. We make oxygen fuels from TBA, but 1 third of the TBA is used for making isobutylene that goes into end products such as tires and lubricants.
We have our new POTBA plant starting up second half twenty twenty one that Bob mentioned. This plant will have 5% lower cash cost and will be the lowest cost PO plant in the world. Lower than the 2nd lowest plant, which is also a lined Ebersel plant. This new plant incorporates the next generation POTBA technology and will be our 6th POTBA plant that we build. You will see where some of these advancements when you visit our Houston Technology Center where they've been working on the improvements in this process.
Ethanol is our competition, but we see oxi fuel as a cleaner, more efficient fuel, and better at reducing pollution such as MARG. We see new regulations driving efficiency in cars and strict and stricter air quality as growth drivers. Oxyfuels currently only have a 3% penetration in the total fuel space we see opportunities to increase this penetration through the benefits of the product from a sustainability standpoint. Just look at the graph in terms of performance. For 2019, you see crack spreads lower, but butane upgrade very strong and hence a good year and again supporting our team of capturing up signs.
For more on fuel, let's all hear it from you, Dan.
Alright. Thank you, Torko. And, and also thank you all for being here with your interest in LyondellBasell today. We have one refinery. It's located here in Houston.
And Houston, and our location is very strategic because we're located on the Ship Channel with their own docks. We have access to Canadian crude through the pipeline and through rail. We have access to heavy crudes from around the world. And access to not only our own pipelines, but terminals and pipelines for many others to receive the best valued crudes for our operations and to sell our products domestically into the U. S.
Market or to export them around the world. So it is also one of the largest refineries in the United States at 268,000 barrels a day, but more importantly, it's a very complex refinery. And it has the ability to take the heaviest, highest sulfur crudes in the world and convert them to ultra low sulfur products. In fact, it is one of the highest coking capacity per crude capacity at 35% of a refinery in the world. And it also produces about a 50% distillate yield, which is above the U.
S. Average of 35%. So it's a machine that's designed to take the heaviest, highest sulfur crudes and convert them into ultra low sulfur fuels. Our operations have also been much stronger over the past 3 years. And in fact, Bob reported, the earnings call over 97 operating rates through the middle of the year.
And that operations, those good operations are continuing. So now I want to shift gears to a chart that talks about the benefits of IMO. IMO stands for International Maritime Organization. It's an agency of the United Nations who, regulates maritime, shipping. So, they have passed a regulation as of January 1 2020 that will reduce sulfur in marine fuels from 3.5% to 0.5%.
So it's a major change in marine fuel regulations. And so there are many refiners around the world today that can take a heavy barrel. They can top it, and they can blend some of those higher sulfur products in the heavier ends into maritime fuel. Their ability to do that will be restricted. And so we believe and the consultants believe that the demand for heavy high sulfur crudes will decline.
Furthermore, since the ship owners will need to buy lower sulfur components, We also believe the demand for the, low sulfur distillate products will increase. So decrease in demand for heavy high sulfur crudes increase in demand of low sulfur distillate products. That fits the ability of our refinery very well. So HRO, Houston Refining is very well positioned for this. 1st of all, we're operating well.
2nd of all, we've completed all our major maintenance activities for the next 2 years. So we don't have another major maintenance turnaround scheduled for over 2 years. And this chart shows the Maya 211. So you see, a historic chart and then you see a band going forward. The band is because we've taken, the, the range of 3 consultants.
So remember, we run 95,000,000 or more barrels a year of crude oil, 95+1000000 barrels of crude oil per year. A $1 shift in this margin would be worth $1,000,000 roughly for us. So these consultant views range from $5 to $10 per barrel. So one is a 105 to 10 times that. It shows a range of benefits that the consultant views would have for our refinery.
We're very well positioned for this, new regulation. And, and I will turn it back to Torko who will cover the intermediate's businesses next. Thank you.
So let me then start with styrene. And styrene is made from our second, advantaged, co product technology for making properly non side. So this is the 2nd lowest cost technology. We have, 3 assets. We have one located in Europe, But if you look at an equity basis, actually 80% of our capacity is based in the U.
S. With advantaged, low cost ethylene and natural gas. What sterling growth in the U. S. And Europe is probably less than 1%.
In China, we see the growth being above 4%. And with that, starting being imported in an lack of supply in China. We see styrene opportunities growing there. So for us, logic, what we're looking at is, potential investments into PSM expansions, into China. On our acetyls sites, Here, we take advantage that these assets are all based in the U.
S. We start with natural gas to make methanol From butane, we make TBA and with TBA plus methanol, we make our MTBE, which is part of our oxyfuels. From ethanol, we also make acyric acid. And adding ethylene, we make van. Today, we are about 75% integrated in met methanol, EG, that we consume 75% of our ethanol internally.
As we start up, the new POTBA plant will actually be 100% integrated into methanol. ED, all, all of it will be consumed in house. So this portfolio, all U. S. Based, take maximum advantage of shale gas benefits that we have.
And we see this making it the very long term, durable, sustainable, business. The markets that this platform serve is very diverse, going from durable, non durable, consumer, industrial transportation, and we see that this diversity make supports making this a very, earning stable business. On sustainability, 50% of our Oxyfuels is ETBE, in making it to be about 42% of the component is bio based ethanol. We are the number one E2B producer in the world, and from the strong sustainability benefits we see growth opportunities. And I'll take it as an example.
This is a recent study that has been made in Europe. Europe currently has about 95 octane gasoline is the most commonly used. If you would increase the octane level to 102, and take the advantage of higher efficient engines, you would see a reduction of total fuel consumption by 7% and the corresponding CO2 reductions in Greenhouse gas emissions will reduce in the similar amount. Gasoline price would go slightly up, but the cost per driven mile will actually decrease. So the consumer, a typical European consumer, would save like $150 a year if this would be a change made in euro.
But it takes advocacy effort to do this. So we're investing in that together with the industry to make to promote those changes to happen. But we see growth opportunities in these sustainable fuels that benefits, the climate and pollution. As Bob mentioned, we take a very disciplined approach to growth and our capital allocation. Our POTBA project builds on proprietary leading edge next generation POTBA technology and will contribute to SEK 4,450,000,000 EBITDA.
Once complete, we have lower CapEx and hence a double boost to cash flow. To capture the opportunities in China, both for propylene Oxide and styrene, we see their opportunities for expansion with POSM. But we see it likely through a joint venture. We and through that, as Palm explained, we have lower equity through leveraging up. We have lower CapEx.
We have faster execution by having a local partner and hence, we see a better return. So what what I would like you to take away, from this portfolio businesses that this is a resilient portfolio, taking advantage of our technology, the advantaged feedstocks and market opportunities for upsides. We have a track record of delivering on those market opportunities. And we'll see more opportunities in the years ahead. Dan talked about the IMO 2020.
I see opportunities for roxa fuels, acetyls, styrene in China. So the opportunities for this platform to also profitably grow. On a personal note, this is a very exciting time to be joining a strong company. I'm very impressed with what I see in our operations side and how lean one can manage to operate as well as we do. With that, I look forward to leveraging those strengths in taking advantage of the opportunities that we see for the for this business.
And I'm I'm sure that that sees the same excitement when it comes to capturing the IMO opportunities on the refinery side. Thank you. I'd like you to open up for questions.
Okay. So we do have questions. We have microphones. And if, you'd wait for the microphone. Please say your name so that the audience will know that's online who you are and then take question.
Thank you, Dave Begleod, Deutsche Bank. Just on Styrene, there's a lot of paths coming on in China. How do you think that will impact U. S. Styrene margins going forward.
How is the link can they be in the face of this new Chinese capacity?
I think we're already seeing I think we've seen margins compressed already with, I think a slowdown in the growth of styrene. Being new to the business 3 months in, I'm still learning in terms of that outlook, but I see still, I think everybody is beliefs and the opportunities for growth in China, the probably the question mark would be about the capacity utilization in other regions.
Thanks. Matthew Blair from Tudor Pickering. I had a question for Dan on the flexibility refinery as it relates to IMO. So in August September, we saw Gulf Coast, high sulfur fuel oil prices really come down At the same time, Maya Crude stayed relatively elevated. Could you just talk about can the Houston refinery switch to running fuel oil as a feedstock in that kind of a pricing environment?
What kind of impact might it have on your yields?
Yes, okay. Good question, Matthew. First of all, we did see the fuel oil markets moving downward. So the price of high sulfur fuel down in August There's been some instability in that in September related to the Saudi events more than likely. But the refinery runs my accrued.
And so, but we also have the ability to run many other crudes from around the world. So, we can run about 10% lighter crudes and about 90% heavy. We do source a number of other feedstocks, intermediate to the crude if we have, and we do typically have additional cat cracking capacity or even coking capacity based upon the the feedstock. So we run the plant to its most optimum. We buy crudes to get to create the most value and we have that flexibility.
And we do expect, again, the benefits of IMO to be more seen in the fourth quarter and certainly into next year as people start getting ready and get the fuel in the tanks and getting it sourced in the right places. Around the globe now
Thank you, Vincent Andrews with Morgan Stanley. With the prospective joint venture in China that you're considering or would look to consider on, on styrene. I mean, obviously, you bring the technology to the cost position, but what in particular are you looking for your partner to bring to the equation and how much of the JV would you want a fifty-fifty JV or what what do you look to get out of it?
Yes. We I think, we have multiple options. We already have a joint venture with Sinopec today. So we have multiple options in terms of who would be with, but we look for a partner to be a local terms of bringing the ability to execute quickly at low cost, low capital cost, those are the advantages But I would also emphasize that even though you know, styrene is interesting because of the growth, our investment is primarily to capture the appeal opportunity, the Styrone is a compliment to that platform, which makes us very, very competitive because we have the benefit of both. I don't know if that answer your question.
Next
question.
Steve Byrne from BAML. You mentioned you had 3% penetration globally in Oxyfuels. And I'd just like to hear your view. Is there a real value proposition of the oxy fuel or is this really driven by regulatory drivers?
It's a combination of both. I think the regulatory is, of course, needs to happen for the industry to change. And the U. S, as you all know, went to ethanol. But if you look from all these sort of the experts, Europe went for Oxyfuels with, you know, MTV, E TB, Japan went for E TB, Mexico went for MTV, It has a stronger sustainability, story.
The reason why the U. S. Went for, for ethanol, in my view, are twofold. Supports the grain lobby. And secondly, you had leakages of tanks, that contaminated the groundwater.
Now in other regions, you know, everybody's has double hull tanks. And you have, we have not had any leakages of groundwater into Europe or other regions. So it's, you know, for us, you know, we do our lobbying effort and, you know, our promotion advocacy we think we have a fantastic story in terms of the benefits of MTP and ETP. So that's the way I look at it.
Yes. I think Dave again.
Thank you again, Dave Begleod, Deutsche Bank. Two quick things. First, on the PASM JV in China, any sense of timing? And secondly, any desire to get bigger in acetyls in U. S.
Acid and or van? Thank
you. On the first one, I don't have any anything to say at this time. We hope to come back, when we are ready for it. On the asset tools, I like the business. It's, we, as I mentioned, the strengths that we have being integrated into low cost feedstock and we're not the largest in this, as you know, but I think that the opportunities for us to grow this business in a profitable way being new to the business, we're of course going through working our strategy.
But it's one that I find very interesting.
Thanks, Matthew Blair, Teeter Pickering. Dan, I was curious, how excited are you about these Tier 3 gas lane standards. They originally came into effect in 2017. We haven't really seen too much of an octane premium since, but octane spreads have been widening out so far this year. How much of an impact do you expect to see in 2020 when Tier 3 comes fully online?
Yeah. Tier 3 will be more
of an impact next year than it has been. We completed our investments, to produced Tier 3 gasoline, which is less than 10 parts per million sulfur in 2017. And the ability of people to use credits from the tier 2 regulation will end at the end of this year. So, 2020 will be more impactful because number 1, we can produce the gasoline to that standard. And then number 2, some of the gasolines that we're imported up to that point will not.
And there are some refiners that cannot meet that standard. So they'll need to get credits from those that can but without going back to those historic tier 2 credits. So we do expect this to be another benefit for us and our capability to produce these ultra low sulfur products, including distillates and gasoline as well, Matthew. Great question.
Any further questions?
Thanks Vincent to Andrews again. If you could just clarify on the POT-eight BA, a channel view, you made a comment about 5% cost coming out. Just want to make sure is that that facility is going to be 5% more cost competitive than the other facilities, but you're taking up 5% of the cost out of all
of your POTPA per It's the new technology and all the advancements that we have in designing and building the new plant that will lower that plant's cash cost by 5%.
Such as that one.
Which will make it, you know, the leading plants globally. Any further questions? I'd like to thank you all very much
Thank you.
Okay. Thank you very much. Now we have take a 15 minute break and please reconvene in here at 1045. Thank you very much.
Ladies and gentlemen, please work your way back to your seats. We'll be beginning it shortly. Please, do you mind please work your way back to your seat so we'll begin shortly.
Welcome back, everybody. If you can take your seats and, we can move on to the next session where we're going to discuss our financial performance and, But before we get, towards the end of the program, I just want to take some time to thank some people that helped us out quite a bit. Beyond our Investor Relations group, we recruited, somebody from Mike Waldron's communications group to help us out. A woman named Veronica Adam Chegg and she did outstanding job and coordinating all the production and everything that goes on today to make this run smoothly both here in Houston. Out in Channelview later this afternoon.
So I just want to thank her for that. In the Investor Relations group, I'm trying to see who's in the room right now. I think Cheryl Fletcher, who many of you know, for many years has worked with us. She's outside there probably somewhere still and Cheryl has done a great job and organized this. Sandra Martinez will be my assistant moving forward.
Cheryl's moving on to Torquil. So, we're going to have a rotation in the group there. I wanted to make sure that all of you had a chance to meet or will have a chance to meet this afternoon, Anna Chang. If you could just stand up, Anna, She's the newest member of the Investor Relations group here at LyondellBasell. And so, I hope you all get her contact information or business card and know how to reach out to anybody in Investor Relations.
Finally, I'd like to acknowledge the hard work of Carrie Bear. She just did an amazing job in getting these materials together. Designing the slides, keeping everything consistent, everything on track, just an amazing job. So please a big hand of applause Carrie Barry.
Samantha?
Great. Well, now I'd like to to tell you the program, and, we'll move into financial performance. And I'd like to introduce our chief financial officer, Tom Savage.
Okay. We'll come back to the plenary. I assure you had very informative and interesting breakout sessions with our three platforms with my colleagues Bob talked about leading. Bob talked about advantage, and I would like now to spend a little bit more time with you on the discipline approach to value creation. The first thing I would like to start with is the slide you've already seen.
And this slide is just a different, depiction of the capital location framework in LyondellBasell but really hasn't changed. So 1st and foremost, obviously, the start is a very strong cash flow generation from operating activities. That cash flow generation, a strong cash flow generation, which will go into a little bit more detail in the following slide, is distributed in a very meaningful and in a very disciplined way. First of all, we finance with our cash flow from operating activities our dividend. So when you look at this circle here, we are looking at 2020 to 2022.
So we estimate our total dividend payment to be somewhere between $1,400,000,000 to $1,500,000,000 that takes into account certain assumptions, obviously, with respect to dividend increase and also with respect to opportunistic share buybacks. 2nd, equal importance is obviously maintaining our assets. So the investments going forward 2020, 2022 in maintenance sustaining CapEx between one point $11,200,000,000. And that maintenance CapEx number is extremely important to 1st and foremost invest into safe operations, which is tied to performance, financial performance. You heard that from Bob as well.
The way I look at it as a finance person's firstly Our safety performance statistic is a leading indicator on how we are going to do in our business. So very important and the rest obviously is to maintain our assets. We maintain our assets well. Otherwise, it wouldn't be possible to run at these very high utilization rates, some of the highest in the industry in certain businesses, the highest in the industry that wouldn't be possible. Contrast at $1,100,000,000 to $1,200,000,000 in sustaining CapEx with a depreciation charge somewhere between $1,200,000,000 to $1,300,000,000.
So it virtually is in equal parts, maintenance CapEx on one side, depreciation charge on the other side. We talked about gross CapEx. So gross CapEx 2020 somewhere in the neighborhood of $1,200,000,000 going forward. And in 2022, 700,000,000. There was a question earlier around that moderating CapEx envelope for growth for profit generating CapEx.
Don't forget to remind, I would like to remind yourself the EBITDA bridge, Bob has shown These smaller growth CapEx have very, very interesting returns. And I will talk a little bit more about return on invested capital on the following slides. And then last but not least, we have surplus cash available to continue with opportunistic share buybacks as we have done since 2013 and or obviously value generating in organic growth. You have seen the, the parameters, the investment hurdles we have put forward, the after tax, at least an IRR of greater of 12%. Paul, I've shown that to you and that hasn't really changed as we have looked into opportunities also in our past.
Everything and every decision we made. And also as we obviously stress test our dividend, as we stress test our profit generating CapEx, our investment in inorganic opportunities. The guiding principle clearly is a strong investment grade rating. So let's move and go a little bit deeper. How do we actually generate cash flow from operating activity.
A very important piece to it is how lean and efficient and effective we actually do run our business. So you see here on the bottom right, the chart, the chart which shows you on the SG and A level at what level LyondellBasell operates versus some of our peers, 2.7% That's the, the number as a percentage of revenue. So clearly the best in, in the industry We don't make shortcuts. We, when we have a value proposition towards a customer, for example, we obviously test that value proposition towards a customer. And we deliver that value proposition as long as we get the value for how we service our internal and obviously, even more importantly, our external, customers.
Benchmarking not only in manufacturing, but also in SG And A is part of our DNA. So we benchmark virtually anything where we have a benchmark to compare ourselves to 1st quartile We generate cap closure plans. And as we then put together budgets and plans, we execute on these cap closure plans going forward. But I would like to say it one more time, the lean and effective and efficient cost structure is really part of the DNA of LyondellBasell. It's part of our culture.
And because it's part of our culture, we believe as well, it's very difficult to copy. Another important factor at cash conversion is our focus on networking capital, We have very frequent meetings. We sit together as a management team, at least on a monthly basis, to go in detail, do the different components of net working capital. What you see here is our cash conversion cycle. In average, 2016 to 2018 53 days.
You see on the left hand side, on the bottom of the left hand side, the chart Also in this metrics compared to our peers, clearly an outstanding performance and do not believe that we are satisfied with 53 days we continuously look for opportunities to actually improve the cash conversion cycle even further be it on inventory management be it on our procurement, working with our procurement on the supplier side and obviously continuously as well with our customers on the customer side. The effective tax rate, we said that in the second quarter call for 2019 is forecasted to be 17%. So that's the effective tax rate. The cash tax rate for 20 19 will be significantly lower than the 17%, significantly lower than the 17%, And obviously, that's another contributor to that very high conversion rate from EBITDA to cash flow from operating activities, which We have achieved over the last few years a conversion, a yield, as we call it, of 80%. And again, we continuously look forward to improve that yield even further.
Next, I would like, I would like to talk about the leading cash generation. Companies in the material sector are often defined by products and markets they serve. The rationale is that more specialized products and markets deserve higher valuations. This year shows you on the bottom left hand corner chart how we fear vis a vis some of our peers. Clearly, less volatility and cash flow and the higher percentage in terms of enterprise value of cash flow we produce.
So when you look at this, that consistent cash flow delivery over time at a rate somewhere between 12% 14% of enterprise value that discount as we trade towards other clearly leaves a lot of room for value creation and further improvement on our valuation. Now let's move on to the increasing cash flow profile. I think Paul went to the simple math on how we look at the business from where we have invested, what we have invested and how are we now going to harvest the fruits of our labor over the coming 2 years. So I remind you again, we expect about $1,300,000,000 of additional EBITDA. Out of this growth investment we have done, you convert that with a yield of 80 percent into cash flow from operating activity.
So that's roughly $1,000,000,000 of additional cash flow. I talked to you about the reduction, respectively, the lower levels of profit generating CapEx that's another $1,100,000,000 a little bit more than $1,000,000,000 over that period of time. So on a free cash flow basis, we're going to generate more virtually, we're going to double the free cash flow, as you see on the slide, from roughly 2,000,000,000 to, to more than $4,000,000,000 of free cash flow. That only takes into account the cash generation from investments we have done or we are in the process of doing. Hyperzone, which will is coming on stream almost as we speak, POTBA 2021.
We talked about the Schulman acquisition, And we talked also the smaller profit generating CapEx envelope, which has a very, very attractive return profile. Well, it does not include these market dynamics, which may provide headwinds, which may provide tailwinds, That's obviously some, you know, all of us have maybe some different expectation on these assumptions. So we're spending just a moment on, again, the past because before we go into the future, So I think it's important to remind us since 2016, since 2015, we have invested into growth CapEx about $3,000,000,000. Some of these projects have started back then or are ongoing, as I said, a very large, the 2 very large projects, We have invested $2,400,000,000 during that timeframe, which obviously mainly was Schulman into inorganic investments, And because of all these investments over that period of time, in average, we have produced a return on invested capital of 30%. So really very attractive numbers.
If you are interested in reconciliations to these numbers, they are in your they're in your handouts. At the very same time, so we work on all cylinders. At the very same time, we have paid the dividend of 5,800,000,000 and we have, down share repurchases of 10,300,000,000. So let's spend a little more time on dividend. The dividend is sacrosanct.
You heard Bob talking about stable and progressive as we go to the cycle of a dividend. We are currently in the 93rd percentile of the S and P 500 with respect to our dividend, we have had 11 dividend increases since 2011, We paid the 1st dividend in 2011 with $0.55 and have a dividend now, of $4.15. So on an annual basis, totally on an annual basis, it's $4.20 which gives a dividend yield per share with the current share price of somewhere at 4.9%. So these yield numbers don't mean much if we don't translate that into how secure the dividend actually is. And the coverage ratio, if you look dividend, versus and you compare it to cash flow from operating activities.
So it's a 3 times coverage we have on the law, based on the last 12 months. Over the last five calendar years, we have continuously produced stable cash from operating activity between 56,000,000,000. So on this 56,000,000,000 basis, it's clearly even higher than three times coverage. All this is supported by the strong balance sheet. So we have currently a total liquidity of $6,100,000,000.
So that's the liquidity by the end of August of 2019. So very recently, including the tender we've done back in July, on our own shares of roughly $3,100,000,000. We have a very strong, one of the strongest credit rating in our space. With a BBB plus from S And P and the Baa1 from Moody's. And our target total debt to EBITDA ratio is between 1.5x to 2.5x.
You may ask yourself, so where are you currently in that ratio and currently within that ratio, we are about in the middle. We're about two times. So clearly, that balance sheet gives us flexibility and gives us opportunities to act if we want to act on any type of value creating opportunity. There may be it inorganic, be it organic or be it, for shareholder remuneration. The balance sheet is supported by a maturity profile.
Some of you may know, we have just recently issued 2 tranches of each 500,000,000 in the euro market, bonds in the euro market, a 7 year with a coupon of 0.875 percent. And the 12 year is a coupon of 1.625 percent. So the cost of debt with this transaction, the total cost of debt is currently roughly 3 point 87% to 3.87% is before tax and before any positive impact on our derivative strategy we are deploying with respect to fixed to floating. Very balanced profile. We finance mainly in U.
S. Dollars. And in Europe, which obviously is a natural hedge towards our assets, which are also mainly in Europe and in the United States. So low refinancing risks. And as we go forward, we continuously work on that profile on that maturity profile to even further improve it.
So before I close, Let's come back to the 3 platforms. So one of the aims of the 3 platforms really is to separate our business based some of the attributes, which hopefully you have learned a lot during the breakout sessions with my colleagues, And another message clearly was we are not just an O and P company only. So we talk about integrated polymers, $3,500,000,000 on the last 12 months, our EBITDA, a margin, an EBITDA margin of 23% We talk about technology enabled products, last 12 months EBITDA of $1,400,000,000, margin of 19%. And I'm sure you learned a lot in, with respect to James Gailfoil in the advanced polymer solution in the, in that section with respect to the execution and capturing of synergies in that space. So the expectation clearly is that that margin is going to further improve.
And then last but not least, an intermediates and fuels platform is about $1,000,000,000, and we talked about, that was part of that session in the intermediates and fuel platforms We clearly talked about the opportunities, the upside we see in that space. So Lyondell traits are the blended multiple currently of, approximately 6.3 times. So when you compare this with the 3 platforms, clearly the lowest trading multiple. So I think what I conclude here, clearly, if that discount point 3 times is moderating clearly a significant, potential value upside over time. So in conclusion, 3 points, leading cash flow generation prudent fiscal management and disciplined capital allocation.
I hope we could bring across a little bit better today and closer to you, how we generate the cash flow and how we are focused on actually maintaining that leading position in cash flow generating EBITDA and turning that EBITDA into actual cash flow. We shared with you our prudent focus on the balance sheet. Our focus on maintaining a sound and strong balance sheet in a strong with a strong credit rating And last but not least, our very focused and very disciplined capital allocation strategy, working on Organic CapEx working on inorganic and obviously as we have done in the past and we'll continue in the future. With a decent and attractive shareholder remuneration. So with this, thank you very much for your attention.
And I would like to hand over to Bob for some of the closing remarks. Thank you very much.
Okay. Thank you, Thomas. Let me offer a few closing remarks before I invite the management team up for our closing Q And A. First of all, I hope that you found the breakout sessions to be informative as we explain a little bit more in detail by the groupings of the businesses what why we believe they're leading why they're advantaged. And why those advantages are durable.
The other thing we talked a lot about today was resilience. And I think that that comes through in the EBITDA over a period of time and high oil price, low oil price environment. The resilience is bolstered by global footprint. It's bolstered by, feedstock flexibility. We have, we have enormous feedstock flexibility here in the U S.
We've increased fixed feedstock flexibility in Europe, and I'm convinced that our cracker fleet across the world will do well in a range of market whether it's higher or lower oil price. Today, we introduce you to this very sort of compelling investment thesis of a leading global portfolio of proven and flexible assets, advantaged in terms of our flexibility and our footprint our ability to operate well, which provides for a strong fact cash flows in a range of environments. And when we generate that cash, we put it through our discipline capital allocation framework to create value for our shareholders. Thomas talked about our our framework. I wanna repeat it one more time.
Strong, secure, progressive dividend, consistent sustaining capital, disciplined organic growth measured by what we have done and what we haven't done and a very disciplined value minded approach to inorganic growth. Again, demonstrated by both what we have done and what we haven't done. All of that solves for a solid investment grade rating which we believe gives us flexibility to take advantage of opportunities. As I mentioned about our inorganic growth, it aims to apply our strengths of operational excellence and commercial excellence to create value with assets that are in or adjacent to the value change where we compete today. I think our strategy is very clear on who we are and what we want to be long term.
And we have the patience to execute along those lines. Free cash flow improvement I walked through this math earlier. Thomas repeated that this does not depend on cyclical improvements in markets. These are essentially benefits from investments that we've undertaken over the last 3, 4 years. We're now about to harvest the fruit of these investments.
We're continuing with small and medium sized projects we will do more polyethylene and more polypropylene expansions as we go into the next decade. It's merely a matter of phasing those projects as we see how market markets develop with an increase of one point $1,300,000,000 in EBITDA and $1,100,000,000 reduction in CapEx, we'll convert that into $2,100,000,000 of additional free cash flow. When you combine our leading position, our advantaged assets, our disciplined approach we think that creates extraordinary value for our shareholders. And I would submit to you that the LyondellBasell today is positioned to do very well in a range of outcomes and is one of the most compelling investments in our space. So with that, I'd invite the management team to come up for the closing Q And A.
Okay. So we're happy to take your questions. There's one in the back of the room.
John Roberts, UBS Bob, at the last Investor Day, Thomas had the slide with your investment capacity and it was up to $30,000,000,000 Is there, I mean, we sense a pivot here that something big is not on the horizon here, or is it just that you've been, again, preoccupied with Braskem There's been very, very hard to tee anything else up in your transitioning CFO right now. So if we go out to when you have a new CFO in place and another year from now and you've got all new cash flow, do we kind of go back to the you look at those big opportunities again?
No, I think first of all, the number you quoted has grown since we last spoke. But, I think the idea here is this is our company strategy is very consistent there's a bit of an evolutionary element to what we're doing. But I think, John, what's important is that you think about inorganic growth, we're very value minded. We want to be opportunistic and we're solving for us solid investment grade rating post a transaction. But as we've shown you by our actions, we're not in a rush to get something done.
We're going to be value minded and we will we will play that card when we see the value potential and we're willing to be patient. On that. I don't think that's changed. I think is very consistent with where we've been since 2017, and I think our actions have shown that. Yes.
Jeff Zekauskas at JP Morgan. In your presentation, you divide your businesses up into 3 categories. And one is your technology and technology enabled products. And you look at that and you say, you know, this really deserves 9 times each DA multiple. So if in the course of time, the multiple of Lyondell doesn't really change very much, does it make sense to re examine whether these businesses should be a part of Lyondell, separate them off and try to capture that above average EBITDA multiple.
Or even on a smaller scale, you've done a very nice job with the compounding business of Schulman. Should that compounding business be spun free again? And go into the public markets to try to capture a higher EBITDA multiple?
Thank you for your question. First of all, when you think about those businesses, many of them are based on our olefins backbone. So they're either ethylene or propylene based businesses.
Sure.
It's very important to keep all of that connected. And I think that's what makes this company so resilient in terms of its earnings power in a range of market environments. In the case of compounding, as I've said to Jim, often Our focus today is to really set up the platform that we have envisioned, with the combination of our legacy business and with Ace Schulman, Our work is well underway. I like the progress that we're making, but I want to see that platform complete And then I think we'll be positioned to grow from there, whether it's inorganic or organic. But today, our focus is on standing up a great platform.
And by the way, our compounding business was the only business on the planet that belongs inside of a company where we have process technology, catalysts, base resin production, and compounding. And I would submit to you that that that integration of capability makes us very nimble in terms of how we innovate for our customers, whether it's for light weighting of vehicles, or for unique packaging solutions. And so today, but it all fits very well together.
Yes,
Thank you. Vincent Andrews from Morgan Stanley. There isn't a slide in here on polypropylene and the market outlook. And I can walk backwards from your pushing out your PP plant and all that. And you're not buying Braskem and I could one could conclude that maybe the PP market going forward is going to be a little softer than you expected a couple of years ago.
Maybe you could just give us a broad outlook of where you think that market stands today. What you think supply and demand outlook is and what the margin expectation is?
Sure. Well, first of all, we didn't include it because we thought really the polyethylene cycle is most on investors' minds and we had limited amount of time today. You know, polypropylene business has been, very constructive. Yes, there's more capacity coming, but I think given our position, our global physician in polypropylene, we feel very good about the prospects of that business. Going forward, the timing of the PP expansion It's just phasing.
It's not an indication of us having a view about, about the PP business itself. And in fact, the Bora JV will have polypropylene as well, as output. So I think we're and we're growing also in our Thai venture, we're growing in our Korean venture. So there is polypropylene growth in our company globally. It's a matter of just phasing it as we think through a multiyear strategy as opposed to what are we just going to do this year?
Right. So I don't know if my colleagues, Ken, if you want to offer any other?
No, I
mean, I would agree and
we are expanding the capacity currently with the debottleneck in North America. So we've got a high return investment there that's going to be coming online, but certainly it's going to be a market that continues to grow, and has been a stable earnings generator for us over the short term and we expect that to continue in the midterm.
Bob, I mean, one of Tom's slides you highlighted very high ROIC of roughly 30% for the last 4 years, which is great, but implies you may have missed or pestless and value creating opportunities. You've been too cautious.
Would you agree with that assessment and is
that frame you're thinking going forward that being made being maybe a little more aggressive either organically going forward over the next 3 to 5 years
I'll tell you, I feel very comfortable with the investments we've made and I don't I don't think we've missed an opportunity. If you think about back to 2013, 2012, we did the debottlenecks. We were early on that. I would argue that what we did was we built an integrated complex we did it over 5 years or 7 years. We built the ethylene first.
Now we're coming behind it building the polyethylene. We did the Schulman acquisition POTBA. What I like about our investment profile is that we're investing in each of the large businesses in the company. We're not just investing in one business. And I think that positions us to do well in a range of market environments and And all of these products have their own cycles, if you will, and the ability to invest along 3 value chains.
Ethylene polyethylene, propylene, polypropylene, propylene, propylene PO, I think, makes us unique. So my sense is we haven't missed any opportunities. Yes. Question in the back.
Great, thanks. Arun Viswanathan, RBC. I guess I just wanted to get your again on China. There's been a lot of new capacity that's slated to come on. A lot of it is naphtha, but it seems like there's a little bit more capacity to swing to LPG for some of those facilities than initially thought.
Do you envision a future where many of those crackers are running more LPG and naphtha prices come down structurally, such that the North American advantage shrinks from, say, $0.15 or $0.30 down to a $0.05 to $0.10? Or how do you think about the North American advantage evolving over the next several years?
Ken, you answered a similar question during a breakout. Right.
Yeah. So our view on the advantage in North America is that that's going to continue. I mean, If you look at the development of NGL production in the in North America in this market and you include a conservative view for export Even with that, we expect that there's going to be a significant excess of ethane in this market. So that advantage is going to continue LPG has already traded around the world. That's not going to change, but it's also not going to detract from the value and the advantage that we see here in the North American market.
Frank
Mitch Permian Research, offsetting through the various breakout sessions, And, you know, understanding that operating rates don't look like they're going to collapse. You know, you've got Hyperzone, you've got Schulman synergies, you got IMO 2020. Is it reasonable sitting here today to assume that 2019 is a trough in terms of Lyondell EBITDA?
Well, I think when you add up all of our investments that are now coming to fruition and, yes, I think One could draw that conclusion very easily. Yes. In the back there. Yep.
Jose Almonte, Legal And General Investment Management. I just want to ask, with respect to your commitment to the strong investment grade ratings, as you think about inorganic opportunities that you might have over the next several years, how do you think about that balance sheet flexibility and your willingness to, I guess, take leverage beyond the target and what your plans might be in that situation? And what would you be willing to accept in terms of a credit rating, a minimum threshold, if you will?
Look, I think we have a lot of capacity on our balance sheet today. There's frankly no need for us to contemplate having more aggressive financial policy. I think given the kind of the parameters that Thomas has described, it avails us to the kind of opportunities that may have interest in, overlaid with this sort of drive for returns and leveraging our capabilities. So So I don't foresee a need to have to do that, Thomas.
No, absolutely agree. I don't think we, we just shared with you our targets and we are not, now kind of footing the targets at risk. I mean, the targets are what we have communicated But I think you you know, we have some debt, investors here amongst us as well. The 1.5 to two 0.5 times really if you look at it into the rating space, leaves you actually very nicely at a strong investment grade rating. And that's what we are solving for, and that's what we are not going to put at risk.
So that's a very important message today. As I said, we are somewhere in the middle of that range. So I leave it to you to calculate what that means in terms of, of capacity, you can run the numbers as well as we can.
Yeah.
Hi, P. J. Juvekar. Bob, you mentioned adjacencies. So what does that mean?
Would like, vinyl emulsions that go into paints and coatings or MDI would that represent our adjacencies to you? And how do you think about investing in specialties versus just ethylene and polyethylene if you want to improve your multiple?
So if you if you think about our company, PGA, the backbone of our company is the cracker, right? So we make from C1 to C4, And then those molecules have, value chains that go downstream. I think about those value chains as kind of our playing field. We could go upstream if we found interesting opportunities in the midstream space. We don't today, but if we did, we may be open to that.
And downstream, we've talked about compounding as kind of being the outer boundary on the down on the downstream side. Because it still connects very well with the cracker technology catalyst and all of that. Specialty versus commodity, mean, first of all, if I were to poll all of you, you'd probably have a different answer on what you really think a specialty is, right? The way I think about it is specialty businesses tend to be very heavily innovation oriented, very customized, and don't really lend themselves well to a company that runs large scale assets. So this is where it's very important for us to be real clear on what it is that we're good at and how do we apply that to create a value?
So what are we good at? Safe, reliable, cost efficient operations, We were demonstrating our ability to build assets reasonably well. We're going to get better and better. We've demonstrated our ability to integrate And our backbone is polyolefin and Po technology. So we're going to stay pretty close to that core and think through what are we good at and how do we create value.
And I think real specialties don't belong in this company. Yes Jonas. Oh, I'm sorry. Matthew. Matthew, let's go to Matthew first.
I'm sorry. And then Jonas. Yeah.
Thanks. Matthew Blair from Tudor Pickering. I'm a little reluctant to ask a question on politics, but several U. S. Presidential candidates have floated this idea of of a total frac band starting day 1.
Bob, I think it was one of your first slides. You mentioned the benefits of the Shale Revolution on your U. S. System. Have you looked at this issue?
How do you think it would impact your business? Obviously, a desperate impact on U. S. Versus non U. S.
And, what kind of alternative measures or mitigating factors could you take to offset some of the potential negatives here?
Yeah. Well, Matthew, 1st of all, as you said, probability is fairly low. I mean, when you think about how energy has has really turbo charged sort of the U. S. Economy.
It'd be difficult for something like that to really come to reality and the citizens of the United States of America would be okay with that, right? Now in the context of sort of being more environmentally responsible in thinking through how do we further our sustainability efforts? Absolutely. We need to do that as an industry, whether it relates to emissions or plastic waste or what have you, I think that will continue to be a global phenomenon. What I'd rather the way I'd like to address your question is really think through more, things that could happen with energy price changes because of supply demand.
As I mentioned, given that we have such a large European footprint, we're building out our Asian footprint. I think the global participation that we have in our global reach, which is expanding, makes us more resilient in a range of sort of political outcomes, if you will, around policy. And that's why I think we need to continue to think of ways in which we can increase flexibility of our existing crackers, think about ways that we can participate in Asia where it's value creating as well. And continue to support our European asset base, which we believe is, is 2nd quartile or better. On a European cost curve.
Jonas? Yes.
Thank you. Jones Oxgaard Bernstein. So we we mentioned the Chinese building new capacity, but there's also the oil majors plowing ungodly amounts of CapEx into the space that he's promising to. As far as I can tell, if those 2 put the amount of money they say into the, into ethylene, there's no room for anyone else to build a cracker in the next 10 years. So in that world, where what role does Lyondell play?
And as a possible leading follow-up to that, are you positioning the technology part of the business to be your escape patch?
Well, so, you know, Jonas said it's difficult to predict what others may do. And the trend that you're describing is one that's on many investors mind. But the way I think about it when I bring it back to our company is that certainly we should be thinking about a range of scenarios, whether it's a supply side or the demand side, but ultimately, think our actions really show that we're a company that's very, very deliberate, very thoughtful in how we're undertaking investment And I like the fact that as we sit here today, we have really a range of optionality, whether we continue to raise the dividend, which we've said we would do, build, buy back our shares, And I like the position we're in today. I don't think we have to make a large capital allocation decision today. We'll move when we see it and we're monitoring, what, what might happen in the big oil space, but it seems to me that the reason they have interest in the downstream is because it creates value.
If that very value gets destroyed, then you have to say to yourself, why would they invest further in it. And that's I think the the deliberation that we'll have to see how it plays out. I have no insights into all of that other than I think about how does a company like ours prepare for a range of outcomes and be resilient so that we can create extraordinary value no matter what happens. And today, what we've presented to you, I think positions our company to do that. Kevin?
Right, upfront here?
Kevin McCarthy Vertical Research Partners. So an earlier questioner, probed a little bit on your technology related businesses and whether you might separate Schulman. I guess I had a similar line of questioning as it relates to technology licensing. If we look at some of your peers in that space, they tend to traded 11 or 12 times EBITDA kind of on a bad day or maybe double lined else multiple roughly. Some of them claim that not being in the polyolefin business is a competitive advantage for them because they're licensing.
Polyolefin Producers. And so, I guess my question is, if it turns out over some period of time, you don't command a meaningful premium to, let's say, the West Lakes of the world, might you be tempted to separate? And if the answer is no, we really wouldn't be tempted maybe you can just elaborate on the value that you think that it creates a resident inside of Lyondell.
Yes. So I think it's a little bit building on Jonas's question about whether we would license more to generate cash flow. Actually think about this business, the technology business is being very strategic. So, great companies have great technologies. And I think we've shown today that in the key product areas, we have those technologies.
And we continue to invest to develop the next generation, whether it's PO polyethylene, polypropylene, or the catalysts that go into polyolefins. Kevin, the way I think about it is that first of all, after the compelling arguments that, Thomas provided, we're certainly going to get more credit on some of the parts. So we're going to look forward to that translating. But in the event it doesn't, I I continue to think that technology is an enabler for our company and it's a real source of strength. And it's not one that we would, we would monetize or separate for that amount of EBITDA the value that it creates in our product business, I would tell you that our ability to innovate because we have end to end capability we're we're much more nimble.
So when we think about the Hyperzone polyethylene process, 2 years ago, we were taking pilot plant material customers in Germany and here in the US to trial the product. And we were able to get the proof of concept that yes, indeed, these products provide the benefits to our customers that we thought they would. It's all done in house. We're able to do it quickly There's no concern about who will own the IP if now I have to get a producer involved. So I think it's a form of integration that over the long term creates value just like ethylene and polyethylene, I think having the technology and being able to develop and test your your new developments in house allows us to be more agile and create value over the long term.
So again, I think of technology as an enabler.
Yes, to that. Please. On the specific point about having a technology business and a product business, right? So the first thing to say, I think if you look at the technology and the licensing playing field, we have been incredibly consistent over 30, 40 years. And when you're unique in that, you look at the space, technology companies have been bought and sold and bought and sold.
You also look at a proof point our market share and licensing, we've tried that earlier, we're very successful. And what I hear from, licensees is they love the fact that we are also a product player and they love the fact for 2 reasons. Firstly, when you buy a license, you buy a license for 20 years. I said that earlier, and you're buying into the fact that we will continue to innovate and we will continue to innovate because we're in licensing, we're in catalyst and we're in product. So you're not buying a static point in time, you're betting on the fact that we will continue to be a leader in innovation.
And the second point is simply in the marketplace, many of our products are the benchmark products in that marketplace. We've been really successful in China, for example, because our product with our grade name is the benchmark product in high density polyethylene pipe in China. So when a licensee comes to us, they say, okay, if I buy your technology, I already know that you've done the hard work in terms of of establishing benchmark products. I already know that with your reputation, you are going to keep innovating. So if I'm going to have a relationship with you for the next 20 years, I want to derisk myself by aligning myself with you, by partnering with you.
So actually, I've heard this question before, but my, almost, you were universal, Reaction from licensees is they love the fact that we understand products, we understand their business, and we're committed to continued innovation.
Well said, thank you. Yes. Question in the back.
I'd like to see your framework for Nomura Instinet. Do you have an internal view on how recycling and other government actions in area might impact industry demands for polyethylene, polypropylene or other residents. And should the industry adjust its capacity growth plans because of that.
Ken? So, yeah, we've obviously got a view on that. And when we look at the growth rates in the industry, we look at the applications where we see recycling or some institution being the most threatened. Those are the non durable single use plastics that's actually single use plastics is a relative small part of the market. And our portfolio is really geared towards the more durable part of the portfolio.
But when we look at the growth rate, we talked earlier about a 4% growth rate, we've already baked into that. What we see with a longer term view in terms of some of the recycling impacts of the targets that are being set in Europe as well as some of the states and United States. And that takes about 0.5 percent off of the growth rate. So we've baked that in with what we think a reasonable view. I know there's a lot of ranges out there in terms of the impact.
And what Bob said earlier is the key is we've got to be ready with our position in terms of our assets and our product portfolio to be able to compete in any environment going forward. And I think we're in a very good position for that.
Vashar, did you want to add anything about your experience in Europe with the recycling?
Yes. I think one of the key points there is to be able to offer to our customers a full range of products, whether this is prime product, recycle product, or any blending between And effectively, what we are doing is changing our business model where we, if we are anticipating, if we are one of the first company to be able to participate in those different markets. We will establish, as mentioned by Jim, we will establish the benchmark. We will establish, the target markets. And that is, all the work we are doing right now in Europe is to elaborate what could be the future market and making sure LyondellBasell is one of the pure needs in those activities.
Yep.
Very good. Thank you. There's a question right up here.
Hi, Mike. Sorry. Mike's just on Wells Fargo. If I think about the $6,000,000,000 in EBITDA you're at now, And then you add the 13 from future investments. It takes you a little over $7,000,000,000 in 2022.
If the economic environment actually accelerates or improves over the next couple of years, where does that $7,000,000,000 potentially go And then if there's sort of a weak spot over the next couple of years, what's the resilience in that 7,000,000,000
over the
next couple of years.
Great question. So on the upside, you could go back and look at 2017, 2018 margins in our O and P business and imply that onto the asset base in 'twenty two. And you could get upside there. Also our refining business. I think there's kind of a 2 step sort of upside process there.
One is just more normalization of the earnings, the earnings have been depressed because of the market conditions, especially the light heavy differential really coming in because of the issues in Venezuela. And on the other hand, because sweet crude production has been so high out of the Permian, right? So we think that refining margin should normalize. That'll provide a step and then IMO could provide another step. And likely, you heard Dan talk about our leverage and what, $1 per barrel means to us.
It's nearly $100,000,000 of additional EBITDA. So So on the upside, we have not incorporated that into into our numbers or into our bridge. Because I think you have to take a view on the market and we'll we'll let you do that. On the other side of the equation, the the the the sort of the downside case, if you will, Yeah. I think this is where we really wanted to bring out the resilience of our portfolio, the IND business, complementing O and P, having a European position, having a U S position.
So, you know, I think our portfolio And with the backbone of very competitive crackers across the world, I think we'll be very resilient in terms kind of earnings we've we've delivered. I mean, look at 8, look at, 2019, their their last 12 months. You know, we're around 6,000,000,000 with arguably a really bad fourth quarter for the industry that was one of the worst in the past few years. So even with that, we were at 6,000,000,000.
Right. And just one quick comment. If you're gonna buy another Cleveland based company, the browns, you might wanna get them early
because, you
know, I see a lot of Super Bowls coming to Cleveland.
I like that. I like that. You listen to that. You hear you hear that?
Alright. One more. It's Parag Patel with capital preservation and Parag Patel with capital preservation advisors. Your public disclosure has indicated that you have a superior safety record. Forgot these stats on accidents.
Can you talk about the company culture procedures process that allows you to achieve that
Yes. So, you know, in my opening remarks, Parag, I mentioned about systems and cultures. So the systems are we have this operational excellence standards where we do audits very regularly, Dale Frederick, who's here who runs our HSE team, his team and the manufacturing folks collaborate very well together to do routine audits around process safety management. We also have a culture, I think, of ownership and 1 where at each site, even if I you'll see this a channel channel view, I think, today, that there's a great sense of ownership and a sense of family at these sites. They look out for one another, and they're really focused on the task at hand.
And they think through, do I have all the equipment I need? Do I have safety gear I need? Do I know the procedures? Do I feel equipped to do the work that I'm about to do? Every individual has the authority to stop the work.
If they say, look, I'm not, I I don't feel comfortable, or I see something unsafe. Every individual in this company has the authority to stop the plant if they have to literally, then maybe you'd like to add more.
Yes, I think you did very well, Bob, but I think it starts with a basic value in our culture. Values are what you use to set your priorities and safety is really a core value of the company. And so we don't sacrifice, anything for safety. Stockwork Authority, a good audit plan. We call our framework operational excellence, which is health, environment safety, and also goes into reliability so that we are running safe and sustainable operations and our customers can expect that.
And our employees certainly are a key part of that and then show their families.
Now I want to add one more thing to this, Parag, which is that, I go out to the sites reasonably often And typically when there's a big turnaround, I like to go out and do during the shift change at night. And I like to talk to the contractors. And I can tell you what makes me really proud is that universally, the contractors, not the management of the contractors, but the guy with the wrench in his hand, he says to me, he one guy didn't know what I did. He just said, you must be someone important. Because, you're here.
I don't know what you do, but he said, whenever there's a turnaround at Lyondell, I asked my team my boss, if I can work there, because he said, I always feel safe. When I work at one of your facilities, I always feel know that I'm I'm a person that's cared for whether I'm a part of a contractor or I'm an employee, those lines get blurred once I cross the gate. I'm a person who should be kept safe while they're on the site. And I and I hear that in Lake Charles, I hear it in bestling in Germany across the company, contractors say I have the choice. I'm gonna work at 1 of your plans because I know that you'll keep us safe.
That, to me, speaks volumes about the culture. In the company. One last question. There's one there. Yes, Steve.
Okay. Alright. Any other, any other questions then? Yes. There's one more back there.
And then we'll, we'll, we'll leave it there.
You're showing $1,900,000,000 EBITDA, expectation for 2022. Should we think about it as a trough for which it will grow going forward or a normalized level that you expect over the course of the cycle? Or could you just frame that?
From the new investments you're asking.
Think it's $1,900,000,000 total for the company, if I understand correctly. CapEx.
Oh, CapEx. Right. I thought you said earnings. I was like, wait a minute. And we have a typo somewhere.
Okay. Good. So CapEx. I mean, I look, I think
you should definitely
think about our CapEx in 2019 as a high watermark for the next 5 years. I feel very comfortable in in in telling you that. I think we'll have to see how things develop, how the opportunities develop beyond that. We, we were very clear about no cracker by ourselves in the U. S.
No PDH unit We will likely build another polyethylene plant, second half of the of the next decade, a PP plant, So I think you can kind of think through layering in those sorts of investments. But by then, as the company has grown in terms of its earnings capability, I think that the cash flow story of LyondellBasell has been proven, very strong, and the message you should take away today is that that cash flow machine is about to move into our higher gear in the next 3 years. Okay. So with that, thank you very much for your participation. We really appreciate the attention and for you to come down.
And for those of you who are joining the tour, I think you'll really find this to be very interesting. And I encourage you to engage our people and ask them about how they feel how they feel about working at Channelview And AtlyondellBasell. Thank you very much.
So thank you, Bob, for those of you on the webcast. That, concludes our program for today. We appreciate your attention So for those of you in the room, for those of you here in Houston, we have some lunch for you. Just got some great barbecue, got some vegetarian options out there too. If you're joining us for the afternoon, please proceed downstairs.
You wanna go to the Crawford Street side of the hotel, is towards your backs as you sit right now. If you have baggage, we can take your bags at our reception desk over there. We have a locked room that will keep them in while you're gone. And, we'll be here until about 6:30 or so after our, reception when we come back from the plant. So if you're boarding the buses, we do have color codes for the buses again.
So green dot means bus number 1. Blue bus, blue dot, these bus number 2, and, again, is color coded, red for bus number 3. We're going to go to channel view. We'll first all have lunch altogether and then the buses will go in different directions depending on the phases of the tour that we'll be heading. We'll be looking at the control room there.
We'll be looking at construction site and we're going to tour the research center. After the tour, we'll come back. And so we're going to try to get back to the hotel, probably leave the site perhaps 3:30. We'll see how quickly we can get everything done over there. But the idea is to get back downtown before rush hour so that, we can get on with the refreshments.
So Thank you, everybody, and, look forward to the afternoon.