Good morning, everybody. Can you all take your seats, please? Welcome. We're here at LyondellBasell's 2023 Capital Markets Day. Glad to see everybody here in person again, this historic building, iconic room here. I just wanna thank the New York Stock Exchange for everything they've done to get us ready for today. I trust all of you on the webcast can see in here as well. We're glad you're here today as well. It's been a long time since we met in Houston three and a half years ago. We had some good barbecue out of Channelview. We saw some steel coming out of the ground for our new POTBA plant. A lot has changed in the world, and a lot has changed at LyondellBasell. So we're very happy that you're here today, and we got a lot to talk about today.
For those of you that don't know me, I'm Dave Kinney. I'm responsible for investor relations at LyondellBasell. I've been with the company for over 30 years now in a variety of roles. Some of you that have visited us in our facilities know that we have a tradition of safety moments in our company, and today is no different. We'll have a brief, short and simple one today. There's two doors behind you. In the unlikely event of an evacuation or some other event, New York Stock Exchange staff will help you out and bring you to the appropriate location. If you need to take a break today, there's restrooms down the hall to the right. Today, we're gonna discuss our strategy, our forecast for the future, including some forward-looking statements and non-GAAP measures.
We believe that the assumptions that we have are reasonable. The alternative measures are useful for investors. We encourage you to read the slides behind me, the regulatory filings, and learn about the factors that could lead our actual results to differ. You can find that on www.lyondellbasell.com/investorrelations. Today's forecast will be framed in terms of normalized income and EBITDA. We're not gonna try to predict the cycle. We're not gonna try to predict geopolitical events. We're not gonna try to predict the price of oil. It's all pretty hazardous. What we're gonna do is talk about our average historical margins and operating rates for the company through the past 10 years from 2013 through 2022. We think this is a reasonable timeframe and representative of a cycle for our industry. It's a really understandable reference for thinking about through cycle economics.
We're gonna begin with 2022 actual results and normalize that to our average historical margins and rates and then see how the new strategy carries that through to the future. Some of these average historical results will be lower and result in norm-normalization that brings our 2022 results down, and some naturally will be higher and increase our 2022 actual results. We'll be using a 20% tax rate for all of our income and cash forecasts. We're gonna assume that our EBITDA continues to get converted into cash at a 80% rate as it has been in the past. Our forecast also includes our current beliefs about acquisitions and divestitures. Naturally, the magnitude, timing, and structure of these things are very unpredictable, but they represent our current beliefs.
On March 7th, we filed an 8-K with the Securities and Exchange Commission. We provided you with unaudited historical financial results for Catalloy and polybutene businesses. We moved those businesses from the Advanced Polymer Solutions segment on January 1st and put them into the Olefins and Polyolefins Americas and Europe, Asia, International segments at that point in time. Our forecasts reflect those changes. Now I'd like to get the program underway and introduce our Chief Executive Officer, Mr. Peter Vanacker.
Thank you David. Thanks everybody for coming also thanks everybody for following us online today. My name is Peter Vanacker, as introduced already by David. Happy to be here. My first Capital Markets Day, not the first one in my life, but the first one at LyondellBasell. What a company this is, LyondellBasell. We have very passionate people in the company. We have, as you will see, a very clear strategy, a very clear framework, and within that framework, we will continue to deliver as you're used, I mean, from us. Of course, what you will hear from us today is, first of all, our excitement from the members of our executive committee team.
We decided that it would be good not just to have a Capital Markets Day with Michael and me standing here, but I have also the chance, some touch and feel, so to say, to see members of the executive committee. These are the people that are having ownership, responsibility. Therefore, I believe it is important that they are standing here and talking about their excitement. The team is prepared to leverage upon our foundations that we have at LyondellBasell, and they are very strong foundations. Leveraging upon these foundations to establish a value creation engine will keep that heritage. Let there be no doubt about it, and you will hear me say that over and over again. We're the safest operator in our sector. Safety is extremely important. We'll continue to work on our safety track records.
I believe that we are the most reliable operator in our sector, and this is something that doesn't happen just from today to tomorrow. It's a lot of hard work. It's focus, concentration, passion. We're gonna continue to work on our reliability. We are the lowest cost operator in the industry. We're not gonna give that away. We're gonna continue to focus on being the lowest cost operator, but we will add new attributes to that heritage, and we'll talk about that also today. With our renewed strategy, we truly will unlock the potential that we see inside of our company, the potential across the globe. We'll outline our plans in terms of organic growth, margins expansion, improved returns. Our strategy is enabled by our technology position, technology that we have built up since many, many, many years. It's built upon our sustainable solutions.
It's built upon the advantage positions also that we have in attractive and in growing markets. So let's let's jump into it. When I was approached, I mean, with this LyondellBasell opportunity, and thanks, I mean, if members of the board are following, I was intrigued. I had a lot of respect because I've had quite some experience, I mean, with LyondellBasell in my career. When I was running polyurethanes at Bayer, my largest joint venture partner was actually LyondellBasell on propylene oxides. When then later, when I did my first CEO job, I ran a company under private equity ownership, which was the largest BOPP films manufacturer in the world. Surprise, who was the biggest supplier? That was LyondellBasell. Now after that, when I was CEO of Neste Corporation, who did we build a partnership up with? That was LyondellBasell and w e did write together.
We did write history because it was the first time on the planet that we produced polyethylene and polypropylene in our Wesseling sites, the LyondellBasell Wesseling site in Cologne, that was based upon renewable raw materials, based upon renewable hydrocarbons made out of waste. So I've seen LyondellBasell, I mean, from different angles. I've been extremely impressed, I mean, by the focus on safety, focus on costs, focus on reliability, and being the best operator. All that is still true. You just have to look at our results in 2022, despite a difficult market environment in the second half of the year. We have a fantastic foundation in our assets, our people, our relationships, the skills, the global reach. LyondellBasell, if any of you doubt about it, is a true leader in global chemicals. 2022, $50 billion in sales.
We generated $6 billion in cash, directly employed more than 19,000 talented employees that wanna work, I mean, for us, work for the company every day, do their best. With sales in more than 100 countries, we have more than 100 manufacturing sites and joint venture sites. We have a sales mix that is balanced across our products and across the geography. These businesses that we have, whether it is technology, the O&P business, the I&D business, the APS business, they all have a very logical fit as you will hear today again from the presentations. They are all poised for attractive long-term growth. Now, we lead in our markets by leveraging that low-cost manufacturing position that we have and by having access to advantaged feeds. Again, part of our heritage, something we will continue to treasure.
As I mentioned, this is the safest, most reliable, lowest cost, leading to superb cash conversion company that I have seen in my career. This is something personally I like. I have my commitment. You have my commitment that we will continue to focus on this. Safety, highest priority. We have an outstanding record in terms of safety. We're not leaning back. We're trending lower. We're ahead of our peers. We're gonna continue to work on it. Our efficiency leads to a superior profitability. Look at the strong EBITDA margin that we have. Look at the return on capital employed. Look at our cash conversion. We almost reached, I mean, 100% last year, despite in the second half of the year, the difficult market environment. Scale in this business, as you know, is critical.
We have scale, we have 50 million tons of products that are of the highest quality that we are producing every year, supplying in our markets. The proof that we are a leader in terms of technology. What's the best proof? Well, if you look at our out-licensing strategy that we have, if we continue year after year after year to be chosen for our technology in different parts of the world, it shows that we have a leading technology. This is not because, again, we are relaxing on our technology that we have developed so many years ago. It's because we continue to further develop the technology over and over again. You will hear from Kim on our propylene oxide, our PO-TBA plants, big investment, largest investment in our history. By the way, propylene oxide is coming out of it as we speak. We're up and running.
There is a lot of new technology that we have built into these plants. Kim will outline it. More than 100 different new tweaks that we have built into the plant. We keep on reinvigorating our technology. We're leading on a global basis in number one, number two, and number three positions, and I will talk about what is core, I mean, for our business. Let's turn to our long-term strategy. Strategy is all about making the right choices and being very decisive in terms of its execution. Here is what you can expect from us at LyondellBasell. Our strategy is there to maximize the potential and to build upon our core strengths, and then to deliver best-in-class returns. We have three pillars that we have developed that give the guidance, the foundation, you can say the sandbox direction of our strategy.
First of all, we grow and upgrade the core. We focus on our portfolio and the parts of the portfolio that have a lasting and competitive advantage. We will reinvest in those advantage areas to generate returns at scale. Second, we're building up a profitable circular and low-carbon business. We're establishing our leadership position. We're addressing the massive customer demands in a profitable way, which means all hands on deck. You will hear from Yvonne, very bullish about this, $1 billion incremental EBITDA by 2030. We believe in attractive returns for this business. We see the demand that is there. Why? Why can we do it? Because we can leverage upon our scale, our market access, and our technology leadership. By the way, also here, our core and the APS business, they are synergetic to realize this plan. We will explain that today.
The third pillar of our strategy is stepping up our performance and culture. We have a strong operational performance, strong operational processes, but we have applied them in history to a singular focus on cost. That is important in our business. As I said, we will continue to be the low-cost manufacturer. If you do that over a longer period of time, you may lose certain value opportunities. This is not about one or two or three big projects. This is about lots of smaller projects that can create value. We will elaborate more today upon that and give examples. Now our strategy in itself is also circular. It's not about having three different pillars that are completely independent from one each other. These pillars are cross-fertilizing one each other.
It's by stepping up the performance and culture that we are creating value that we can reinvest in growing, upgrading our core. Value that we can reinvest in establishing a circular and low-carbon solutions business. We can be more successful than anybody else in building up a profitable circular and low-carbon solutions business because we are the largest in terms of our compounding business. We're the largest, which means that we have the access to the market. We know what the demand is of the OEMs. We know what the demand is of the brand owners. We know how the value chain is actually working together. As a result, we know what answers need to be delivered, what solutions need to be provided, what products need to be provided, and how to capture that value. It's all about value.
Let's now have a look at how our strategy is actually also differentiated. We've benchmarked, of course, our strategy to other winning strategies, and not just, I mean, limited to our sector. Looked at what makes companies so successful. Our strategy is differentiated by our ability to do these three big initiatives, the pillars, do them all at the same time simultaneously, because that is what we are doing. That's what we have been doing all the time. We have a strong track record. We have an excellent focus on execution with passionate people. We also know how to run low costs. We have excellent cash generation, and we have a strong balance sheet. Our core has also lasting advantages. We will grow with focus and disciplined reinvestments, and you will hear that from our business unit heads.
In terms of the circular and low carbon solutions business that we are building up, we're advantaged in technology. We know how to scale up. We know how to develop catalysis. We know how to develop projects. We know how to develop assets that are having the lowest energy consumption possible. That fundament provides also the confidence that LyondellBasell is uniquely qualified to be a leader, and you will hear more from Yvonne on this. On the Value Enhancement Program, we've talked about that during earning calls. We have a tremendous enthusiasm. You'll hear from Dale. It's enormous. I mean, how our people are reinvigorated, how they are participating with ideas, is becoming already today part of our DNA. We have these synergies across the three pillars that I'm absolutely confident it will ensure that we have a profitable and sustainable future.
What is growing and upgrading the core now mean? Let me set the stage a little bit on that. It means that we're focusing our portfolio around our legacy strengths. We invest at scale to expand our competitive advantages at attractive returns. We understand and we appreciate the legacy, that technology I'm talking about, the assets, our people, our customer relationships, our low cost approach. By reflecting on those legacy strengths, when we were discussing in the executive committee, we said, "You know what? It would be good if, again, we define what the sandbox is. What are those criteria to say what is core?" Leading positions in growing markets with attractive returns. Second, advantaged feedstocks are important, which means location. Third, an increasingly advantaged circular and renewable feedstocks that support the growth in our Circular and Low Carbon Solutions business.
Having significant competitive advantages, we will be disciplined in reinvestment at scale for exceptional returns. With those criteria, it becomes also, I hope for you, obvious that we have taken the decision. We didn't wait to exit our refinery in Houston. We'll talk more about that because we have good people there, we have good assets there, and we have a core team that is looking at what can we do with that? Classical oil refining is not core of our business, but we have people, we have assets, we have knowledge, there may be very good ideas that we have to transform that refinery so it fits with our Circular and Low Carbon Solutions business. We took a decision also on exiting the polypropylene Australia business, which looking back at the criteria, is obvious that this is not core for our portfolio.
Kim will also discuss in her part about our plans on ethylene oxide and derivatives. We've also have, of course, regional strategies. We align our LyondellBasell strengths with these regional markets to maximize again our value creation. Let me give and go through the regions. North America, scale, low cost feedstocks at world-scale Gulf Coast assets. You know that, yeah. We are in a best position there, something we will continue to focus upon. In South America, it's more being close to the market. It's a market focus solutions approach that we have where we are supporting our global customers on a local basis. In Europe, we all know, and especially, I mean, also last year, very difficult environment to operate in and traditionally, Europe is less competitive.
We see that there are great opportunities for a circular and low carbon solutions business in that region. Customers are asking us for our solutions. Regulation is more advanced in that regards. In the Middle East, we have already leveraged our technology position and our global market network. Already today, we are the partner of choice to gain low cost feedstocks access through those companies that get these concessions. If we talk about Asia, then here our approach to markets is not changing, which is having market access with a low capital intensity through our technology leadership position and our joint venture structures. Message again here, we will be extremely disciplined in our approach to each market. We will maximize the returns while gaining global scale and leverage upon our competitive advantages.
All starts with our heritage of technology leadership, something we have cultivated over decades, independent of the economic cycles. Chemical engineering is not simple. I'm a chemical engineer myself. It takes time, it takes talent, it takes investments to succeed. LyondellBasell is built on the foundation of two Nobel Prize winners, Professor Ziegler and Natta. That's our heritage. For me, what is the most impressive is that LyondellBasell has continued to invest in people, in technology, in catalysis, in product development, without distraction of the economical cycles. The result is that we have a leading technology business. We have continued to reinvent ourselves. I'll give a couple of examples, and you will hear from Jim about them. Hyperzone for superior crack-resistant polyethylene. Our advanced recycling technology, what we call the MoReTec technology.
Our state-of-the-art propylene oxide, POTBA, for propylene oxide and clean-burning oxyfuels, with all the improvements that we have made. These are just three examples. There are quite a lot of examples that otherwise I would be able to give. Now, we generate earnings through several avenues also. We can decide, I mean, to build and operate, we may decide, I mean, to out-license our technology. Therefore, if we invest in technology, listen to what Jim will say, we can eventually have a double benefit out of it, because we can use it for our own means, or we can out-license it. We are the world's largest licensor of polyolefins, with more than 300 lines globally that we have licensed out.
Of course, if you have those licenses there, if you have those partners, it gives us also the opportunity in terms of developing catalysts, continue to improve our catalysts and supplying catalysts because they're being used by our partners every day. This is extremely impressive. I thought LyondellBasell, great in polyolefins and propylene oxide when I was on the outside. When I then joined and I started visiting all the different manufacturing sites, it became so obvious to me how strong that core is in terms of catalysis. Catalysis is not easy to replicate. Definitely something to treasure, and definitely something that helps us in building these leadership positions that we have in our core, plus also building up that new business, that circular and low-carbon solution business. Technology also helps establishing LyondellBasell as an ESG leader.
We talked a lot about building the circular and low-carbon solution business already. Our ambitions go beyond that, as you know. We wanna establish LyondellBasell as a clear ESG leader in our industry because we can create substantial value by doing so. We've accelerated our greenhouse gas reduction targets already in December to align them with science-based guidance and the Paris Agreement to limit global warming to one and a half degree Celsius. You know, we have communicated our ambitions, 42% reduction in Scope 1 and Scope 2, 30% reduction in Scope 3, and that by 2030, baseline 2020. That is leading our industry. Again, we're not doing that just because we believe that we need to have those targets and they need to be aligned.
That plays an important role. We believe even more so if we are the leader in that field, we can create value our customers are asking for us. Here today, also, we have a more senior management team. You see that topic of diversity, which is also important if we talk about ESG. We have a broader employee base, we have clear targets that we have set ourselves, and we're not doing diversity just for the purpose of diversity again. I truly believe, I mean, that quality comes first. You see that the kind of discussions that we have when we are sitting across the table with the executive committee, they're completely different if you have a higher degree of diversity. They're multifaceted, and it leads to better decisions. The next pillar of our strategy is building a profitable circular and low-carbon solutions business.
We are a leader in polymers. Our products are essential part for modern life and we believe that there will be also growth in the future in that field. Plastic waste is a problem, yes. Plastic waste is also a very good source of carbon. It should be reused again and again. There is no life on the planet without carbon. Polymers, best solutions over their life cycle for a low-carbon future. Give a couple of examples. We need better insulation materials. Insulation materials are based upon our materials that we have. Everybody these days talks about electric vehicles. You add weight, I mean, to those vehicles. Plus also, what do you do, I mean, with the batteries? I mean, you need to make sure that they are safe. You need to encapsulate them, our materials play a role.
You need to reduce the weight of the cars. Our materials play a role. You need to do it in a safe way. Our materials play a role. We're confident there will continue to be growth for our business. As such, you will hear also from Yvonne, our circular and low carbon solution business is not cannibalizing the other part of the business, but it will be additive. We also believe that the future will be more circular, and it will be based upon more renewable materials. We are best positioned, as I said, I mean, to do that because we have a complete range of solutions. Look at the entire Circulen family that we have launched in the market. It is in the market. It's not something we need to start doing tomorrow. We're technology agnostic. We develop our own technology.
We leverage upon startup companies and technologies that have been developed there because we know how to scale up. We're capturing healthy margins because we do believe that we see that demand will continue to outpace supply. There will be very healthy margins in this field. Let me say something that my colleagues, I mean, also will repeat. This is a different market that is being built up. This is not a premium market. This is a different market, and it will have its own supply and demand. There will be huge opportunities to create value. That's how we go to market, creating value for the brand owners, for the OEMs, for the converters, the players in the value chain. We've made a clear commitment, at least 2 million tons of recycled and renewable polymers annually by 2030.
The third pillar is key also to our execution of the first and second pillar, as I said. That's where every employee can act as an owner. I said multiple times already, we have a successful history and track record of operational excellence. Low cost is in our DNA. We want to keep it. No doubt about that. Long time focus on low cost leads to missing value capture opportunities. Let's address that. We did a deep and detailed diagnostic, involved our people, hundreds of workshops, thousands of people were involved, a very good communication and excitement to identify these opportunities. We established the stage gate. We have a center of excellence completely up and running. This is an engine. This is happening. You will hear about it from Dale.
All that work convinced us that we have a huge opportunity here, and we need to prioritize the projects, invest smaller amounts. Eventually, some people here, some people there that have focus on the implementation of those projects. Some CapEx here, some CapEx there, not hugely expensive. Again, these are not things that are costing huge amount of money. It's about how do you do it and how do you focus on it. We add the skill to our DNA. Now, with our line of sight and also our leaders empowering our teams, help them to think like owners, take measured risks that we are convinced improves our results, and we see the track record already happening. As a consequence, also, we changed our delegation of authorities. We are making sure that we have more lines of sight management in the organization.
$750 million recurring EBITDA by the end of 2025. That's a big number. We're not going to stop there. You will hear again from Dale. This is not a project. It doesn't have a beginning and an end. It's becoming part of the DNA. It continues. It is continuous improvement. We're excited, I mean, by the energy of this cultural shift. We hear, I mean, over and over and over again from our employees, I mean, that they are so happy with that empowerment, that they are so pleased that we have this Kaizen approach bottom up, that they can contribute in the value creation. Of course, we have not waited, I mean, to start with our execution. Already in April last year, mentioned it, we decided to exit refining. We divested the Australian polypropylene business.
They did not fit the criteria for core. Also, we investigated intensively how to transform these refining assets to fit them with our Circular and Low Carbon Solutions business. I talked about that already at the beginning of my presentation. Of course, since then, we've taken more steps, and you see already a little bit the speed. Customer and commercial excellence team up and running, high focus, how can we capture more value? Reorganize the company to be more business-focused and agile. New organization, completely done, implemented, working very well. Circular and Low Carbon Solutions leadership established, full line of sight management, PNL responsibility, team is in place, ramping up fastly. You see from the different things that we have done during the last couple of months, all the announcements, how fast this is moving. Our Value Enhancement Program, launched it in October on track, full speed.
Broader ESG approach because we want to capture value. The accelerated greenhouse gas emission reductions because our customers are asking for us, they have made ambitious targets to reduce their Scope three. You see, I hope that that bit of passion also comes across, I mean, to you, we have an enormous amount of passion and focus at LyondellBasell. You will hear that from our Executive Committee members that this pace that we have is much faster. We'll share regular updates on future capital markets days, on earnings calls, press releases, as well as meetings that we have with you. This is truly a team effort, and this is a very dynamic and a very talented team that we have. I'm highly confident that this experienced Executive Committee will successfully execute our strategy.
There's over 300 years of global experience with diverse, I mean, industry backgrounds. We've seen what good looks like by having worked, I mean, in different companies, but also by having people that have the whole heritage inside of LyondellBasell. We've changed also the organization. We have an improved accountability. We have line of sight management. We have strategic business units. Manufacturing is reporting into the business unit. Full ownership, full accountability. We've moved supply chain management and procurement closer to the business in context of how we do wanna run the business and capture value. We have a strategy which is something we have not developed on our own, just in a dark room. We've involved, I mean, more than 100 senior leaders in the company, which is enormously helpful because we hit the ground running. I mean, these people are involved.
We have global leaders forums where we communicate, where we involve also on the further development of what kind of values do we need in order to implement our strategy. Now take the time, of course, also to meet the members of our team. Tricia has just joined our team, so maybe I take the chance, I mean, also for people in the room. Tricia has joined us in February, and she is leading the new function, People and Culture, because people in this business are extremely important to us. Culture is extremely important, and Tricia knows what good looks like. Of course, no strategy is there complete without having a financial aspiration. If I would be standing up front, I mean, here in front of you, and we don't talk about the financials, you'd probably be disappointed.
What are the financial aspirations that we have? We are confident that the execution of our strategy will deliver strong, profitable growth. We believe that we can reach $9 billion in EBITDA by 2025, and $10 billion by 2027. That's based on our average historical margins and operating rates. What you may expect to continue is cash generation focus, disciplined capital allocation, generous returns through dividends and share repurchases. Taking into consideration a lower share count that will result in an EPS that is rising to $23 per share by 2027. Michael will talk more about that. We're excited, but we're not just growing for the sake of growth. I think that message is a very important message that I wanna make sure that comes across. We will grow with discipline. We will grow with capital efficiency and strategic focus.
We'll continue to focus on safety, low cost, and operational excellence. We're not only increasing the EBITDA and the earnings, but our portfolio as well will expand our competitive advantages. It will sharpen our focus on areas with leadership positions. It will cement ourselves as a preferred supplier for our customers, and it will establish a profitable leadership in a growing market for circular and low-carbon solutions. I'm grateful that you have chosen to spend the time with us physically here or online to hear from us today, to hear from the members of the team, and I hope that you come away as excited as I am, as we are, about the future of LyondellBasell. We are a global industry leader that is growing sustainable value at scale and with focus.
We're poised to execute our new strategy, leveraging upon the foundational strengths and sharpening our focus on value creation. We're positioning our portfolio for the future through our technology leadership, innovative customer solutions, and favorable positions in growing global markets. We're strengthening our proven ability to achieve exceptional cash generation and deliver compelling returns to our shareholders. These are my core messages. We're gonna go more in depth now by handing over first of all to Dale. Thank you Dale.
Well thanks, Peter. Appreciate that. Welcome, everyone. It's really a pleasure to be with you today. As Peter mentioned, I'm responsible for operational excellence, and I also have the responsibility for healh, safety, and environment in the company. I've been in this industry for over 35 years. I've spent the last 28 years with LyondellBasell. I know a lot about this company.
Most of that time has been in our operations, I've had the responsibility to run some of our largest assets in the company. For the last three and a half years, I actually was responsible for people and culture.
All this experience has taught me that safe, reliable, efficient operations with an engaged and inspired workforce are keys to success in this industry. That's why I'm so excited to talk about the Value Enhancement Program. This is a new way of working for LyondellBasell, and it's igniting the passion in our workforce. Through this program, we're going to deliver $750 million, and this is new recurring EBITDA, by the end of 2025. On the surface, this may sound like a cost reduction initiative. It is not. Cost reduction, we've done this many times in the past. They deliver short-term benefits that generally are one time. This also is not a project that has a start and end date. This is a new way of working for us.
I'll tell you, in my 30 years with the company, I've never seen this approach taken. Across the organization, people are excited, and we're seeing the benefit and the results of that. As Peter mentioned multiple times, we're not taking our eye off the ball in terms of our foundational elements that are so critical to our value system. First and foremost, safety. We're gonna continue to be focused on the being the industry leader in safety and towards our true goal of zero injuries and incidents. That's really what we're after. We're going to continue to focus on being a very reliable and a cost-effective operator. These are part of our DNA that will continue. There is a difference between being a low-cost operator and having a culture of very strict cost control.
Peter made reference to this, and over a decade, that's who we've been. Which is good in some aspects, but the downside is you leave opportunities on the table to create additional value. That's exactly what we're seeing. Now we're shifting this culture to one that's more comprehensive and more focused on creating value for the long term. We're also shifting our culture to one that's more agile and entrepreneurial, and we're engaging our entire workforce, all the way down to the shop floor. We're talking to our operators, we're talking to our maintenance technicians, who frankly, often have the answer or have the best ideas on how we can get more out of our assets. We're coming up with those ideas, and we're acting on them. We're also engaging deeper with our customers and finding opportunities where we can grow together.
You're gonna hear a lot more about that from our business leaders. My focus is going to be more on our operational aspects. In LyondellBasell, we've had an operating model that we've used for a very long time. We've been successful, particularly around safety, reliability, operational efficiency. Part of that model included a very strict cost control filter. A lot of good projects didn't make it through the engine, through this operating model. We're loosening up on that a bit. It's not going away. We're loosening up on the cost, the strict cost control filter. What we're adding is an ideation step, where, again, we're engaging our whole workforce to come up with new and creative ideas to bring more value to the company. I can tell you they're starting to step up to the process.
We started this about, I think Peter said October of last year. Fall of last year, we started with just a few sites here in the U.S. Some of our larger sites, of course, we prioritize where we thought maybe there's the most value. They were skeptical. Again, it's been over a decade that we've had this strict cost control culture. They said, "Are you sure? This sounds like another cost control initiative." We said, "No, this is different. We want all of your ideas. First and foremost, bring all of your ideas to the table." They said, "Okay, we'll trust you. We'll see." We followed it up with resources to start implementing some of these great initiatives, and the word spread.
The next wave of sites was at the beginning of the year in Europe. People came with excitement. They started bringing new ideas forward. The last wave that we launched was just a month ago, back here in the U.S. One of our sites had already developed 1,100 new value-creating ideas before the kickoff of the meeting. The word's out, and people are excited. A lot of these ideas. There's thousands of ideas we're working through. Now that they're not all great. Okay. They're not all great ideas, and not all of them will move through our system. We have a very strict governance process. Again, this. We're still focused on being a very cost-effective operator. We have a governance process. Every project has to stand on its own merit, has to have a business case.
There's stage gate processes we go through before we implement, and any new capital has to be approved by our investment committee of the company. It is a rigorous process, but we are investing. We've added some additional resources, particularly in the technical areas, to advance some of these projects, as well as we have allocated some capital. These aren't big dollars, and I'll show you some examples in a minute what I'm talking about, but it's making a difference. For those who like baseball, you know, baseball season's kicking off. These are not home runs, right? These aren't big hits that are gonna win games with one swing of the bat. These are your singles and doubles. Singles and doubles win games consistently, and over time, they create a winning franchise. That's what we're after.
I will tell you, some of these projects, the returns are pretty compelling, and I would call them home runs. These are not huge ideas that people are coming up with. This is a continuous process that's going to continue to deliver for us in the long run. What am I talking about? We can bucket them generally into three categories. One is operational excellence and manufacturing, improving our assets and capabilities. The next is procurement and supply chain. The last bucket is customer and commercial excellence. When it comes to our operations, this is creep capacity, reliability improvement, low-cost debottlenecks, operational efficiency, how we optimize our asset in terms of energy efficiency or yields. These are the types of projects I'm talking about. When it comes to procurement, supply chain, it's what you would guess.
This is competitive sourcing, more strategic partnerships with our suppliers. On the supply chain side, it's around optimizing our logistics and our transportation system. With customer and commercial excellence, this is around understanding our end markets better. It's around investing in some tools and systems to improve our customer experience, and also a deeper level engagement with the customers to create value long term. Our business leads are gonna talk a lot more about this in their presentations coming up. I'd like to bring this to life for you with a few examples. What am I talking about? The first example is how we do turnarounds. As you know, turnarounds are planned maintenance activities in our assets to do repairs, to do maintenance, to do inspections, to make sure our plants can run safely and reliably for the long term.
In an olefins cracker, this can take 60 days to execute a turnaround. As you can appreciate, there's a lot of paperwork involved. There's permits. Hundreds of permits are written daily. There's work orders, thousands of work orders. There's inspections that have to be documented. Before we can turn it back over to operations, we have to have closure documents for all of that. Takes a lot of resources to manage that, and we're doing it manually today. This is about digitizing, lighting up our sites with Wi-Fi, providing tablets for our teams, and digitizing how we do all of this work. Think of DocuSign for turnaround execution. That's what I'm talking about. Through this simple change, we're able to cut up to two days off an average turnaround. That's significant value.
We're gonna invest about $1.5 million to deliver $6 million-$8 million in recurring value just through executing turnarounds faster. The next example I wanna talk about is at one of our sites, Olefins Crackers, this is about how we operate our furnaces and how we balance the combustion in a furnace. We use air and fuel mixture to heat our furnaces, a lot of that's done manual today. If there's too much air being fed into the furnace, it requires more fuel. Just like if you left your window open today in your house, your energy's gonna be a little higher 'cause you gotta have more energy to heat your home. Same concept. We're automating that.
We actually have the control system in place today to automate it. We didn't have the resources available to implement this. Now we're applying some resources, engineering control system resources, some minor equipment, to now automate this process so the control system actually does it for us. Of course, it's more precise. It never sleeps. It's 24/7, it's adjusting the furnaces. Through a modest investment of $200,000, we're able to save five and a half million dollars a year in energy usage, making the same amount of product. Also, we have the added benefits of lower CO2 emissions by about 50 kilotons per year, which helps us towards our climate ambitions. The last example is also an olefins cracker.
This is specifically at our Channelview plant. They came up with a way to add an additional feed point to the ethylene fractionator. In simple terms, we're adding a pipe to the column to produce material faster and more energy efficient. We're gonna get more production by adding a simple pipe to the process. At a cost of less than $2 million, we're gonna increase our pack capacity at this one site by 30,000 tons, worth about $6 million a year in recurring EBITDA. These are the kinds of projects that I'm talking about. I'd like to pause just a moment, and I'd like you to hear directly from our Channelview team about the VEP, how excited they are about it, and a little bit about this project.
The Value Enhancement Program is unlocking value and changing the way we run our company by shifting our focus from cost discipline to value creation.
It sounds simplistic in nature, but at the end of the day, there's a bit of energy that it's brought to Channelview. We have a lot of really good, highly competent, experienced people here.
They're seeing the company take real action to back this culture change.
In their past, they've had really good ideas, but those ideas, because of our rigor around cost management, have sometimes sat on the shelf and collected dust.
We took a large number of the employees here at the site and had value creation idea generation sessions with them.
This opportunity with the Value Enhancement Program, that feeds energy back into the organization, where they see their idea going from concept to concrete, and then more ideas start to come.
We were able to develop our bankable plan over the next 3 years that we'll implement. Here at Channelview, we will be optimizing the process distillation tower, increasing the throughput of ethylene production, and reducing the energy intensity.
There still continues to be new ideas coming into the queue. We're vetting those out, confirming the value creation opportunity is there into the future.
Well, hopefully you can see why we're so excited. You heard the enthusiasm on the video. Multiply this across the company. This is the kind of level of engagement and excitement I'm talking about. You heard the $750 million. We set a target for this year of $150 million in recurring EBITDA by the end of the year. I'll tell you, we're well on our way to exceeding that number. Through the level of engagement you just saw in that video and what we've seen across the company, more ideas are coming in than we ever anticipated. We're well on our way, and things are just accelerating, and they will continue to accelerate into next year. We are gonna hit the $750. To wrap it up, just share a few things.
We're going to continue our values around safety, reliability, operational efficiency, but we're shifting a bit around this very strict cost control culture to one focused on value. Also, maybe more importantly, we're igniting the passion in our teams to go out and find that value wherever it exists in our operations, and they're delivering. We will deliver on the $750. Because this is becoming a new way of working, and frankly, we still have more sites that we're rolling this out, I feel confident that there's more upside to this number. Thank you. Now I'd like to turn it over to Jim Seward, who heads our technology and innovation businesses.
Thanks Dale. I am Jim Seward, I'm our chief innovation officer. Peter, you said technology matters. It matters deeply. What I think is that the way that LyondellBasell manages technology is part of the secret sauce of this company. I'm going to show you why that is. In fact, I've been with LyondellBasell 30 years or so, and in my career, I've worked in our core product businesses, OMP, for example. I run our joint ventures. I've lived in 6 different countries around the world. For the last 15 years or so, I've run our technology business. I'm an example of the integration that we have between the different parts of the company. I'm an example of that synergy, which I think is part of our secret sauce.
In that time, 30 years with the company, we have never wavered in terms of R&D investment, and we have never wavered in terms of that core strategy of integration and synergy between our businesses. These are the key messages that I want to bring across. The role of technology in our company. Technology drives not just value, it drives growth. I think it does so in 3 different ways. The first, I will talk about our technology business. We have the leading franchise in the industry when it comes to polyolefins licensing and catalysts. It's core to our company. Secondly, I'll talk about the way that technology enables differentiation, enables leadership within our product businesses.
There's a very important point here, which is, as Peter Vanacker mentioned, our R&D, our technology starts at lab scale, so it's all the way through the chain. The fact that we can go from lab to pilot, to scale up, to industrial scale within our product businesses and then into the market and therefore have expertise on application, gives us that full range of development. That means we move very, very fast through development phases, and that's a competitive advantage. If you like, as Peter Vanacker said, we're monetizing investment in R&D twice. We monetize it through our technology business, and we monetize it through our catalyst business. The second part is the way that fits the technology business itself, the way it fits with the product businesses.
The third area is that in certain areas, we want to grow in advantage markets with access to advantage feedstock. Technology is the key to do that. Technology makes us a differentially attractive joint venture partner. Why? Because our joint venture partners may want to be able to de-risk the investment through known leading technology, in addition to operational and marketing expertise, which we also have. Technology drives this company in three different ways. First, I said I would say mention about technology business. Essentially, this is a licensing business and a catalyst business together. It's one of our six reported segments, so I think you all know it quite well. Last year, it made $360 million at EBITDA. Of course, it's a technology business, so absolutely fantastic cash conversion in this area as well.
We are the global leader in polyolefin licensing. We have been for a period of time, we still are. We develop our technologies that are used in our businesses, but we also develop technologies which are used for out-licensing. We are recognized as being the leader in this space. What I would say is, as you can see on this chart, we've built a very strong historical license base, but we are also developing technologies for the future as well. At the bottom of this chart, you can see just some examples of that. We have a very leading position in technologies for people or licensees that want to develop specialty polypropylenes, that want to develop infrastructure or pipe material with our leading world-renowned Hostalen process.
In fact, at the moment, it's very interesting, a number of our licenses that we are selling are for solar panels. We have a very, very strong market position at this point for photovoltaic cells in the solar panel market. Our licensing business, historically incredibly strong, very global, but it also, it maintains its leadership, and we are today as strong as we have been in terms of these important and growing segments. The sister to our licensing business is our catalyst business. We are the global leader in catalysis. We are the global leader in polypropylene catalysts as well. Here, the key for me is that we are able to combine a really deep and fundamental chemistry, which we have been working on for decades. You cannot do this stuff overnight.
We combine a deep and fundamental chemistry with a truly global approach, a world-class supply chain, because our customers, as you can see, are all over the world. We have to be able to supply them. We do. We have relationships built on long-term value partnership and trust. In a way, when you think about licensing and catalysis, it's kind of the old cliche about the razors and the razor blades, right? You sell a license, but that license then when your licensee builds the plant, the lifetime of that plant, they will require catalysis. They will require a catalyst. In a way, our relationships with these customers are very, very long-term, decades long-term. That catalyst business is in part built on our installed license base. Then, of course, we have those long-term relationships.
When a customer wants to come back to us and build another plant, we've got a fair shot. I think a good measure of success is in the past five years, we've increased our catalyst capacity by 30%. That, if you think about it, is simply a measure of the way that our catalyst business is growing, a great testament to our success in that field. That's our license. That's our technology business. Switching now a little bit to the way that we use technology also in other parts of our business. As Peter said, we've got a very strong heritage dating right back to the 1950s.
If you look at polypropylene, if you look at polyethylene, if you look at polypropylene oxide, we've basically written the history of those technologies in terms of the way those technologies have been developed. What's important, and my message here, is that that doesn't stop. We are continuing to be one of the few, I would almost say one of the only companies that really are making major innovations in process technologies and in catalyst technologies. A couple of good examples here would be a Hyperzone process, state-of-the-art leading high-density polyethylene process, redefining the balance between stiffness and impact performance, which has enormous impact for things like pipes, building materials, et cetera. A second one, and I think maybe one of interest in this room and one I will talk about is MoReTec.
MoReTec is our advanced chemical recycling process, and I'm going to talk about that in a moment. We are very excited about that. You know, in summary, what you can say is this industry has been and continues to be built on our technologies. I think the idea of synergy and the idea of integration of technology with our core businesses is fundamental to how we operate. These are just some examples of very unique technologies that drive value. My message here is simply that We think very deeply about how we want to bring these technologies to market, whether we want to do that ourselves, whether we want to do that via a joint venture, whether we do want to do that by out-licensing.
It's that integration which is critical to us and is one of the reasons why our technology business actually is core to the company, because it gives us a very wide playing field. If you like, a number of different options about how we do that. Here, we see some technologies that either have or will soon shape the industry. I'm going to talk about a couple of these. I'm going to talk about propylene oxide, and then, as I say, I'm going to talk about MoReTec. Propylene oxide, you're going to hear Kim talk a bit about that, this as well, because, of course, we've just started up the largest propylene oxide plant on the planet. 470 KT starting up now. Now this technology, we've been leader in this technology for 60 years.
This is not a completely new technology. Our ability, our integration of application, product, and technology means that we have continued. We have continued to develop this technology. This technology, as Peter referenced, we think has around 100 different improvements when this technology started. Why that is important is this continues to be the largest, lowest cost, the best environmental footprint technology in this space. Second example, I wanna talk a bit about advanced recycling. You've seen that recycling circularity is core to our strategy. You'll hear more about that later with Yvonne. Very, very important to us. For us, circularity is a major market opportunity as well, to be honest, as being a central element in the way we make the plastics economy more circular and therefore more sustainable.
Our MoReTec proprietary technology is complementary to our existing mechanical recycling business. We are already very strong in that area. We are already a leading play in circularity. This is complementary. This is building out on that. In this chart, you can just see how our advanced recycling process, how MoReTec fits into our value chain because we are, of course, not only the developer of the technology here, we are the user of the technology here. That actually in this space is quite unique, that you have the same company developing as you will have building, as you will have using. The polymers that MoReTec will make will be indistinguishable from those made from virgin fossil feedstock. MoReTec will allow the use of mixed post-consumer plastic waste that is not accessible, that is not usable by many other processes, including mechanical recycling.
It is, we believe, it will be a benchmark in this, in this area. I mean, if we look at, let's say, some of the key things which really differentiate us and what we've been thinking about as we develop this technology, why are we developing this technology in a way, right? We were looking at scale. That's very, very important to us. Scale allows meaningful impact. Scale is what we do quite well because we're able to, again, scale right from bench all the way up to pilot and through large scale unit. Scale is one thing that is driving this technology, and it will enable lowest cost delivery, which will be important in this space.
Secondly, we've been looking at environmental footprint, and we also think that's very important in this space as well, so that the high process yield that this will deliver, combined with the low energy consumption, will make this a leading technology, not only in scale and therefore cost and therefore profitability, but also in environmental footprint. We think that is also very, very important. What I'd like to do now is show a video where Gabriele Maio, our head of process and catalysis development down at Ferrara in Italy, explains a bit more on this process and how it will work. I would say that we've been doing a lot of this work, actually in Ferrara, in Italy, where we have an integrated R&D center.
At LyondellBasell, we have recognized that there are types of plastic wastes that are challenging to recycle. There are materials like flexible packaging or other mixed wastes that are unsuitable for mechanical recycling. This is one of the reasons why we have developed our chemical advanced recycling technology called MoReTec. This high yield differential technology will allow us to convert plastic waste into new feedstocks for the production of new plastic material, thus reducing the use of fossil-based virgin raw material. With MoReTec technology, solid process residues can be reused or consumed in other applications, making this technology an energy-efficient process for the recycling of plastic waste and creating a new valuable resource. This helps reduce the amount of plastic waste entering the environment.
After three years of successful operation of our industrial scale plant at our R&D facility in Ferrara, Italy, we paved the way to announce the construction of an industrial recycling plant at our facility in Wesseling, Germany. Innovation is firmly rooted in our DNA and developing sustainable solutions to solve global challenges.
We do a lot here in Ferrara, and that integration, that commitment to investment expertise is really one of the things which allows us to move very quick. When we started discussing this project, Gabriela and a couple of his colleagues that have essentially been integrating, building the polyolefin industry, their view was, "Look, we are the leader. We know how to convert monomers into polymers. We're the best on the planet at that. So why would we not be able to convert polymers into monomers better than anybody else as well?" That is, I'm very happy, is exactly the direction we're going.
Okay. Here we see a couple of very differential technologies. A couple I've talked about, also our Catalloy technology, which we're very proud of.
I think that these technologies also, we are starting to think more and more about in that third pillar I said originally, which is this concept of being a partner of choice, being a preferred partner for development around the world. Ken will talk a bit about this later, that, you know, we have this ability to look at how we want to play different technologies in the value proposition, if you like, in terms of being a developer with our partners in terms of joint ventures. We offer superior value, I think, to our partners that may want to develop with us through technology, which very often is the sort of sticker, the sort of standout point that people are very attracted to.
Of course, we also offer operational expertise, and we offer marketing expertise as well. This third part about, you know, being sort of partner of choice, if you like, this is also a very, very strong part of our value proposition. To summarize my key takeaway, we get sustainable competitive advantage through technology. That is really important to us. We have this model of rapid innovation, which can go from bench all the way through to scaled-up commercialization. We have consistent strategy. When we think about the way those joined up, you have a very powerful feedback loop, which goes all the way from the bench to the market and back to the bench. We have a very, very strong machine in the way we can develop and maintain leadership in technologies.
There's real synergy here in terms of that acceleration. We have a very efficient development model. We have a very efficient innovation model. We say we can innovate once to get paid twice, because we have both the technology segment, which is driving through out-licensing, as well as our own businesses. Finally, this technology is part of what makes us a partner of choice going forward in our joint ventures. Thank you very much for your time. I would now like to introduce my good friend and colleague, Tracy.
Good morning everybody. It's always great to be in New York City. I love this city. It's a very special place. Even being in this institution is incredibly humbling. Thanks for joining us today. Thanks for joining us online. As Jim mentioned, I'm Tracey Campbell. I am now in charge of Sustainability and Corporate Affairs for LyondellBasell. I'm here, I just wanna give a quick shout-out to some of my communications team who have been working tirelessly to help produce this event with David Kinney's team in Investor Relations. I also wanna introduce Andrea Brown. She's sitting over there in the corner. She's our Chief Sustainability Officer. I hope you get a chance to meet with her at lunchtime.
As Peter mentioned, I was appointed to this new position just last fall. It's a new position intended to synchronize and harmonize our messaging, our narratives for our company. It harmonizes our policy positions, makes sure we have a very consistent advocacy approach no matter where we're operating in the world, and also makes sure that our strategy and engagements are aligned with what we're trying to achieve as a company, and again, all through a business lens. What you're gonna hear now is I've spent three decades in the petrochemical business, you know, in different parts of the world, successfully leading different functions, leading different businesses. I bring a very unique perspective to sustainability in this company. One that I think is incredibly vital to the future success of not just this industry, but of also of LyondellBasell.
You know, as a global leader, we have sort of an outsized role to play in addressing the challenges that you hear every day, plastic waste, climate change. We have to do that with a very disciplined focus on value creation. Success for us requires very bold, differentiated solutions that not just benefit society, do generate that enterprise value. Formal sustainability reports, ESG ratings, some of you might think it's fairly new in our industry. It's even fairly new for somebody who has been in this industry for so long. When I think about LyondellBasell, we have been embedding the principles and the governance with respect to environmental and safety in our company for many, many, many years. We have top safety, as you heard from Dale. We have top environmental compliance.
We have incredibly strong governance, and we have people every single day that strive for new ideas and strive for excellence. That's one of the things that, you know, keeps me excited about working at this company. Our work to address the global challenges of plastic waste and climate change have positioned us to capture the value, that demand for circularity that our customers are looking for, the demand for low-carbon solutions that we're already seeing materialize in this business. We're doing this while making sure we've got the best talents, we're fostering a diverse workforce, and we're continuing those safe operations that we have globally. We are addressing, as you heard Peter Vanacker talk about, plastic waste through our ambition to produce at least 2 million metric tons a year by 2030, right? 2030, even more.
Yvonne's gonna talk a little bit about that. You know, every day we commit to having zero plastic pellet loss or nurdle loss from our operations around the world. That's also incredibly important to us. We are reducing our greenhouse gas emissions, we're developing lower carbon footprint materials, we're committed to having that footprint and that pathway to net zero by 2050. We're focused, at the same time, on the success of our talent, on the success of the communities where we operate, our commitments to diversity and gender parity with that relentless focus on operational excellence. You know, one of the big value drivers is our customers and their brand owners, big household names that you're all familiar with, they are committed to circularity. They've committed to recycled content mandates.
They've made commitments to being aligned with the science, the best of climate science-based targets, and they are now declaring Scope 3 reduction goals. This is incredibly important, especially in packaging and mobility. For those of you who follow us, you know that packaging and mobility are important market segments for this company. Our brand owners, our customers, that demand is for all the products that we're now mobilizing to produce and sell all around the world. As a solution provider, we're always well-positioned, as you just saw from Jim and some of the other technology plays. We're positioning to capture all of that historical demand and now all the new demand that's coming. It's really a massive shift in how the market is being shaped in a very short period of time. We're super excited about that.
You might have remembered we branded and we launched our Circulen suite of products in 2021. Another new position we announced last fall was this circular and low carbon solutions business segment to really mobilize and accelerate our progress toward meeting our goals. You know, in addition to being at the forefront of circularity, we are a leader among our peers with the most aggressive greenhouse gas emissions target in our industry. As Peter mentioned, in December, we announced 42% absolute Scope 1, Scope 2 reduction. We announced a 30% Scope 3 reduction by 2030. Those are pretty ambitious, and we're excited about that, and we've maintained our commitment to net zero by 2050. We've mapped a pathway for all of our assets to make sure that we can accomplish these goals.
We don't come out and announce these goals without first understanding what is it going to take, how are we gonna do this? we've mapped that pathway, and perhaps even more importantly, is we've assigned resources and an organization accountable to deliver, and they're very excited about delivering on these goals over the next couple of years. we've assigned resources to make sure that we can leverage the incentives that are being made available around the globe, such as here in the United States, the Inflation Reduction Act. A couple of proof points to note that we're serious about this. I personally had a recent engagement with the White House, with 20 other industrial leaders from this country. you might recall that it culminated in a $6 billion investment in reducing industrial emissions that the Biden administration announced just last week.
Very, very impactful and very exciting for certainly here in the United States. Another is our progress on renewable power. We have a goal to have at least 50% of our electricity sourced from renewable sources, and we're already more than halfway towards that progress against that goal. I'd also like to say that our progress with respect to these power purchase agreements, they're either at to better than the traditional alternatives, and we have strong governance over that to make sure that we're managing that going forward. Lastly, I talked about positioning for early mover advantages. We've already seen favorable market trends in industries like lithium and steel and aluminum, and we certainly are expecting and seeing signs of this in polymers as well. We are really getting ready to capture those advantages.
You know, I'm quite often asked, "What's the value of having these very ambitious sustainability objectives?" To be completely honest, I used to ask that myself not that long ago, right? You know, I can remember being all in charge of shale gas not so many years ago. What is the value proposition? They are accretive to earnings. I believe it, our executive team believes it, our board believes it, and I think the whole world is starting to see that as well. Again, they're accretive, but the longer answer is there's many, many drivers to having these aggressive ambitions. We can meet the demand of our customers. I just spoke about that. We can reduce costs by making our operations incredibly more efficient.
We increase our ability to attract, retain, and develop the best talent, the future leaders of our company. We deliver profitable growth and lower risk for ourselves and for our investors. We've continued to invest in talent and develop learning platforms, skill development programs, all during this crazy time of COVID and remote work, and it's really paid off for us. We continue to have some of the highest employee engagement above normatives in our space. It's very exciting. We also very recently have thousands of employees engaging in what we call employee networks around the world. These networks are designed to emphasize connecting with each other and growth of the people, the development in their career.
I like to think of it as connecting with people who are like you, but also building allies with maybe people you don't normally work with or you won't normally associate with. What we're finding is these relationships, these conversations are generating innovation. They're generating the thousands of ideas that Dale talked about in terms of tying that to the VEP program. Really, we're helping people see their future in their career and bring that value back to the company, all while focusing on DEI at the same time. It's fun. I personally enjoy my role as a mentor, as a coach. The older I get, the more I enjoy coaching others. Really now I'm excited to also be appointed to the executive sponsor of our Asian and Pacific Islander network.
Having lived there recently, have a lot of colleagues in the region, it's a great way to stay connected with them. Integrating ESG and sustainability into our everyday operations is only possible with a very strong Chief Sustainability Officer and strong governance, and really, the oversight of the entire executive committee, which enables us to manage our progress, be accountable for our progress against those ambitions, and make sure that we meet those stated commitments. We have already top-quartile ESG performance from MSCI. You know, we were awarded recently the EcoVadis gold medal. We're very proud of that. We're also part of the prestigious FTSE4Good index, and we received the best possible score from ISS with respect to our governance. We know this is important for you and for our investors.
We do appreciate the recognition, but we do believe that these rating agencies and reporting frameworks such as SASB, GRI, TCFD, these all give you a blueprint to make sure we're giving the best, what we call decision useful disclosures to our stakeholders. We're very committed to the transparency and to the accountability. Before I hand things back to Dave Kinney, he's gonna come up in a second, I just want to leave you with a couple of reminders on why we are a top pick. Sustainability and ESG is foundational. It's foundational in how we operate and grow, and that's an exciting evolution of our company. Our actions are aligned with demand, and they create value. I'm committed to making sure that that happens because, after all, I am a business person.
We are positioning to capture early mover advantages, and we are being recognized for our performance already. With that, David Kinney, why don't you come on back? Thank you very much for your time.
Now the moment you have all been waiting for, some questions and answers from the group here. We have two microphone runners in the back. We have three microphone runners in the back. Please, raise your hand. We can also take questions from online. If you send those in, the group will send them right to my iPad up here, and, we can get underway. Mike, first question there. Please state your name, your affiliation...
Cool.
Your question.
Great. Thanks, Mike Leithead from Barclays. Peter, just on the $1 billion of incremental circular EBITDA by 2030, I guess a couple things. One, what's the right baseline for that today? Two, I guess Michael will talk about a little bit, but how much capital do you need to spend to get there? And then third, it looks like, at least from some of your slides, that will be incorporated within the OMP segments. I guess how should we be able to benchmark you or grade you on that, given all the volatility in the segments?
Yeah.
Of course, I mean, very, very good questions, but I don't wanna steal the show of Yvonne. What I'm trying to do... I mean, let's keep the questions around the businesses, I mean, for the second session, because all the business unit leaders are gonna try to answer your questions during their presentations. Let me say just, I mean, the $1 billion is in addition, so it's accretive, I mean, to what we are talking about. Yeah? It's part of our transformation. I said it in my presentation, it's not cannibalizing. I know I need to be careful that I don't steal, I mean, the show of Yvonne, yeah? We see continuous growth above GDP for the total business in polyolefins. We believe that about 50% approximately of that growth will go into circular and low-carbon solutions.
Circular and renewable polyolefins, and the other 50% approximately will still be the classical technology type of products, gas, naphtha-based. I will keep it there, yeah, at this point, and then we'll discuss it then later when Ken talks and when Yvonne talks.
Great. Next question. Alex, right here in the front. Dave, your name and affiliation.
Thank you. David Begleiter Deutsche Bank. Thank you. Peter, on the Value Enhancement Program, how much capital is required to generate that $750 EBITDA? Is this incremental to your ongoing productivity efforts?
Mm-hmm.
I'll stop there.
Yeah. It's a very good question as well. As you heard, I mean, from Dale, lots of these projects are smaller projects, not necessarily they are very capital intensive. Lots of the projects eventually also in terms of OpEx, it requires that maybe you have one more engineer or more chemist, an operator, a maintenance guy that is working on it. In the first year, that's what I can say. I mean, if we talk about at least $150 million, that's what I heard. I mean, the commitment also from Dale already, at least, I mean, $150 million. That $150 million, if you look at it from a net-net, it will cost approximately, let's say, $150 million just to get the project up and running.
As we get more traction, then you will see that going to the $750 million. Eventually, again, you heard what Dale said, about to $750 million because it becomes part of the DNA. Of course, that will not go in line, the OpEx and CapEx, I mean, with what we expect, I mean, to get out of it in terms of recurring EBITDA. Productivity efforts as well. Sorry? Your ongoing productivity efforts is incremental in that? I mean, of course, the productivity efforts, I mean, they are incremental to that. We differentiate, and maybe I should hand over, I mean, to Dale here. You're-
Happy to.
Go ahead.
Yeah. Yeah, I'm happy to add in. As you know, our allocation, capital allocation is $1.6 billion for 2023. The $150 million that Peter referred to is what we have earmarked for this program for this year. That's within that $1.6 billion. It is included in our capital, current capital allocation. To date, we've earmarked about $60 million of that to specific projects. Again, we have a very rigorous governance process. Everyone has to stand on its own merit as a business case and has to be approved by the investment committee of the company. These are very good return projects, and so they're very compelling. We're only moving forward the ones that have the best returns.
You saw by my example, some have very little cost associated with them. Those are the ones obviously we love with 0 or very low cost to get benefit. We are willing to spend some capital where it's very compelling to do so.
I mean, this goes extremely fast. I mean, we have weekly steering meetings. I'm personally involved in those steering meetings. Weekly steering meetings where the entire teams are presenting then also their IDs, their projects, and, where we are looking at the prioritization, we call it sequencing. before it becomes part of a bankable plan, and when it's part of a bankable plan, that's where we're at that stage in the stage gate where it then can be executed. we track the execution then from L3 to L4, yeah, and then the L5 stage is where we see it and capture it at the bottom line. there will be also auditing that we have in place, I mean, to see that everything, what we are committing to, that we're also delivering that.
Michael is also very much involved in that, I mean, then also from making sure that the financials fits and the auditing.
Once again, those of you on the webcast, please submit your questions, and we'll get them in the room here. Question over there. Gentleman in the second row.
Hi, Josh Spector with UBS. Couple questions around the advanced plastic recycling initiatives. I'm just curious on the partnership or agreement you have with Nexus Circular, why partner if you have conviction in your technology? I guess what does that add? I mean, my knowledge of Nexus is that their scale is a bit smaller. They're not using catalysts in their process. What do you get with that agreement? It seems some other smaller firms are already starting to license their technologies, particularly within Europe. If you don't have your first commercial plant until 2025, are you behind the curve on that, or how do you catch up if so?
Mm-hmm. Jim, do you wanna take that one?
Yeah. Good question. Maybe I'll handle them in reverse order. I mean, it's, yes, there are a couple of plants now where they're either being licensed or partnered. I think in part, this reflects the sort of massive overhang between this huge demand and the emerging supply, right? It also partly reflects that different sorts of business models that sometimes people will look to partner in order to get their technology in the market when they're not capable of getting their technology in the market themselves. It's not a new space. There are plenty of players out there. What we think is that we will set a new benchmark in this space because a number of those technologies are very, very small.
The idea of being large, being focused on integrated hubs, we think will essentially set that benchmark. I don't think we're particularly behind. There are a couple out there now. As I say, I think the what's really important is, given the sort of the activity in this space, I think what we will see over the next few years is emerging, not many, we will be one of them, not many clear reference points, clear leaders. I think that's what to watch for over the next, the next couple years. In terms of the relationship with Neste, I mean, what Peter referred to, a lot of that is around renewable feedstock, where, to be honest, Neste are the best, right?
There's a great partnership there because it's using the renewable feedstocks and not necessarily the recycled, so the renewable feedstock on different raw materials, which we partnered in order to be able to put through our crackers. That was a very nice synergistic partnership.
I say, I mean, from time to time, I mean, that was a bit my impression. I mean you know, I was a CEO of Neste at the time. We looked, of course, so I've been busy with advanced recycling since many, many years. Looked at all the different technologies and start-up technologies. When we were looking at LyondellBasell , we had kind of heard about the MoReTec technology.
Mm-hmm.
It was kind of a bit hidden in my view. If I then did my visit to Ferrara, and I saw this semi-industrial plant, which is actually the biggest, if not one of the biggest semi-industrial scale running advanced recycling plants in the world. That is maybe something also, I mean, how we kept it very close to our vested line, though, Basell. That's where we said, "Okay, let's accelerate this, and let's talk about it," because it is one of the biggest running plants in advanced recycling with the flexibility, as Jim said, in terms of not being selective on one particular type of waste, polyethylene or polypropylene and so on. Scalability will be extremely important as well, not just having a plant which can do 20,000 tons or 50,000 tons, but we think big. I mean, we are used to that.
We know how to scale up. From the beginning, what convinced me was our technology and catalysis, knowing how we reduce, I mean, energy consumption, the automatic tar removal that we have involved in that. All these things are extremely important criteria to be able to scale it up and set the standards. That could be eventually 200,000 tons on a plant or 250,000 tons of a plant. That is going to make the difference. That's what you need, I mean, if you then have 2 million tons of aspirations and above. Pivan will also talk about apps and so on, so let's keep that for a bit later.
Thank you Peter. Sabrina, down here in the second row.
Thank you. Kevin McCarthy with Vertical Research Partners. Peter, you outlined an EPS goal of $19 for 2025. I think consensus today is below $13, so there's a rather massive disconnect, I think, between your internal expectations or projections and what investors might be expecting. Can you comment on that? How do we get there from here?
Mm-hmm.
you know, I think Dave mentioned at the outset, you would not like to get into too much detail on your cycle projections, but, you know, however you would like to bridge that in terms of your individual businesses base versus.
Mm-hmm.
future endeavors, I think it'd be helpful. I guess related to that, Is it fair to say that you would expect an up year in 2024 despite your exit from refining?
I'm inclined, I mean, to answer your question because it's a very good question. Of course, I mean, we have Michael that is going to talk about this in a while. Of course, we need to bring it into context. We're talking about mid-cycle margins. Yeah. Historic mid-cycle margins. Michael will outline that, I mean, what that means. You know, because we all know that a big part of our business is cyclical. Therefore, I mean, how to compare so that we're not comparing apples to pears. Based upon mid-cycle margins, and of course, I mean, as you hear, I mean, from today, we are quite ambitious, and we see that we have, I mean, opportunities to further create value in the company.
A big element of that is, of course, also making sure that we continue based upon mid-cycle margins to increase our EBITDA, Value Enhancement Programs, et cetera.
Okay. Just to clarify, those $19 and $23 earnings goals there, those are on a mid-cycle or fully normalized-
Absolutely.
-basis.
Yeah. Yeah.
Looking through whatever cyclical fluctuations there may be.
Like David said at the beginning, setting the stage in his opening comments, we always talk about historic mid-cycle margins, you know, because that's what we can compare to also later. All the numbers that I also mentioned this morning, also on the EBITDA side, mid-cycle margin.
Thank you for that.
Yeah. You're welcome.
Thanks for that Kevin. Alex, this gentleman in the back there.
Gentlemen, thank you. Frank Mitsch, Fermium Research. Clarification, Dale, and then a question for Peter. Dale, I think in response to David's question, you suggested that there's $60 million of capital already allocated for the $150 million that you plan to use in 2023. I'm not sure if I heard that correct or not. In that context, one would think that unleashing the creative juices within the organization, that there probably would be, call it $300 million of projects on the books and so forth. I'm wondering if you could expand upon, you know, where that stands. Peter, you indicated that you still intend to close the refinery. You were very clear on the fourth quarter conference call in that regard.
There's a press report suggesting that, you did get an offer, for the refinery, and I'm curious if you could expand upon, that.
Yeah. Dale, can you take the first one?
Sure.
Everything in the context, of course, as Dale already said. Yeah. $1.6 is the guidance in terms of CapEx for this year. Yeah. Everything what we talk about, I mean, these numbers are not on top of the $1.6 billion.
Right.
Yeah?
Yeah.
That's clear.
Correct. You did hear correctly. We've allocated approximately $60 million to projects to date. To be clear, you know, when you have to engineer and install a project, you may not see the benefits of that for, you know, six to 12 to maybe 18 months. It's not just a one-to-one that whatever we invest this year, we'll see the earn and the run rate number at the end of the year. As I mentioned, we're seeing no cost or very low cost opportunities. Those are the ones we're going after first. I wouldn't use a one-to-one comparison necessarily. But again, we're taking a very disciplined approach, maintaining our capital discipline and strict governance process. When we see a good idea, we're willing to fund it appropriately. I don't have a target for you moving forward.
Every project has to stand on its own merit, though.
You're 40% through what you plan on spending this year. You're 40% through what, on what you plan on spending this year. A lot of confidence that you're going to get to 100% by year-end?
We'll see. The other sites, as I mentioned, we're rolling out new sites, this program to new sites, as we speak. A lot of it just depends on what ideas are surfaced and how compelling they are and whether we're going to allocate capital or not. Those decisions are made at the executive level, which includes Peter and other members of the executive team. Again, they have to meet our return hurdles, and they have to be very compelling before we're willing to allocate the dollars.
The way how we have set it up is actually that Mike and myself, I mean, we have like, say, within that context of the $1.6 billion, yeah. We have made an estimation of eventually what could we spend. That's the numbers that we talked about, I mean, before. That's a separate bucket. We release that bucket based upon the proposals that have been made. So far, we've released, I mean, $60 million. Yeah. All in the context of this $1.6 billion. Just to make sure this is something we're starting up, so getting the right discipline in place is extremely important. Secondly, also taking into consideration, you need to start these projects somewhere. Yeah. You can't...
If you go, and you go through every site and every function, and you do your diagnostic and you gather your projects, then you miss opportunities because that takes time. We've said, "Okay, let's go sequential." The four largest sites that we have in United States, move, I mean, to the most important sites that we have in Europe. Now go back to the smaller sites. We've not waited until we have all the ideas and then start prioritizing. There may be certain ideas, yeah, that we have said, "Okay, we move forward with them because they're very important ideas," but you may have in some other sites, I mean, some better ideas, but that we haven't seen yet. Due to the fact that this becomes part of the DNA, it doesn't stop. It continues.
Those other ideas will come as well, but then in year two or year three as we speak, and they will be included then, of course, also in the overall estimation that we have in terms of CapEx. To your second question, everybody knows we have gone out in the markets. We have looked at getting offers on the table, but something also has changed than last year. What has changed was that we started to go deeper into how can we accelerate our Circular and Low Carbon Solutions business, leading to the fact that we have then set up this dedicated business unit. Our belief has also changed. I mean, from lots of discussions that we had, where I personally was also involved with the big brand owners.
I mean, you saw already a part of that in Tracey's presentation. You will hear more in Yvonne's presentation. That has really convinced us, in addition to what we already have seen, because we have the largest volumes of products that we so far have sold in circular and renewable, in polyolefins in the markets. We see that there is a market that has a huge amount of value, not premium, but value. Its own supply and demand. Let's go after that. If you look at the refinery, you have hydrotreaters, you have hydrocrackers. We have pipelines that are running to Channelview. Let's think into hub concepts so that we can eventually retrofit part of those assets, bring the next more tech technology. I'm stealing already, no more Yvonne's thunder.
Bring the next more tech, I mean, technology, yeah, to the Houston refinery. Produce these circular or renewable hydrocarbons, feed them in the pipeline in our steam cracker in Channelview. That value opportunity for our company is much more important than any offer that we have received. That's our attention. That's our span of attention, and you have a dedicated team under the leadership of Aaron that is really focusing on that.
Yeah. Well, thank you for all those questions. That's all that we have time for right now. We'll have a second question and answer session at the end of the second session. We're just gonna take a 5-minute break, and we'll start at 10, 25 minutes after the hour. Again, thank you.
Businesses here at LyondellBasell. It's great to see you all again. I joined the company almost four years ago now. It was actually just before our last Investor Day, back in 2019. Based on the weather, it was in Houston. I'm wondering if we shouldn't move back to Houston next time. We'll wait and see. Thank you for being here. I know the weather was a challenge. The snow seems to be just starting, but hopefully it's not gonna be too bad. Very quickly, I do wanna introduce two of my colleagues that are here today. First is Jim Guilfoyle. Jim runs our Olefins and Polyolefins business in Europe, Africa and Middle East. Also, Aaron Ledet, who runs our business here in the Americas.
You'll have an opportunity to get to know them more at lunch, please take advantage of that. Great to have them here. I'm really excited about our new strategy. I'm excited about the focus that we have and the direction that we have going forward. Being able to be part of the development of that with this team has really been a great time in the company and I'm looking forward to the future. Four areas that I wanna cover today. First is to reintroduce you to our leading positions in our core Olefins and Polyolefins businesses. Second, I wanna talk a little bit about how we're going to grow and shape our core businesses. We're gonna talk about how we're going to enable the growth in our new Circular and Low Carbon Solutions strategic business unit.
Finally, I wanna talk about how we're gonna drive value through focus on our customers and manufacturing efficiencies. Olefins and Polyolefins has historically been a major driver of the earnings of this company. We have two segments that we report externally, O&P-EAI, as we call it, and O&P-Americas. In 2022, we were a little less than half of the company's EBITDA. I wanna take just a second to acknowledge that 2022 was a very challenging year for us in Europe. I wanna acknowledge the great job that our team did in managing through a very challenging environment. We all know the background around the energy challenges and supply chain challenges that we faced as an industry there. Really, our teams in Europe did an outstanding job fighting through that and still delivering a positive result.
We are the largest polyolefin producer in Europe. We're the second largest polyolefin producer in North America, and we're the fifth largest olefins producer in the world. We have very broad reach, and we have got unparalleled channels to market. Not to mention, with that, we have a presence with offices in all of the major regional hubs. While we're gonna focus on the future today, I wanna reassure you that we are not gonna forget what got us here. We've got a very strong track record of operating our assets in a world-class way, both from a safety and cost efficiency standpoint. We've always been a very high cash conversion business. That's going to continue. We've talked before about the flexibility of our crackers.
With that flexibility, we're able to optimize our feedstock slates and our product slates to drive a lot of value in our company. We've demonstrated over time as well a differentiated utilization of our polymers assets. We have shown that we can operate our polymers assets at a 2% higher utilization rate than the industry in both Europe and in the Americas. In addition to that, differentiation in our polyethylene integrated margins come from two different things. One, in Europe is a broad portfolio of high-value polyolefin products. We're able to produce very specific products for industries such as construction, medical, automotive that have a high margin in that market. That's really important in Europe, where you don't have the feedstock advantage. Your competitiveness really needs to come from that innovation in your product portfolio.
In the U.S., the combination of that flexibility of feedstocks that I had talked about and the flexibility of the products that we can produce at our cracker sites gives us a significant advantage versus the industry in that integrated polyethylene margin. This is foundational to us as a company and as a business, and I promise you that foundation is what we're gonna build the future on. Now, I've got to say, Jim Seward did an outstanding job talking about our technology leadership. Every time I hear him talk, I learn something new. That technology leadership has led us to be a partner of choice in the industry. Joint ventures already represent a significant part of our portfolio.
Today, about 20% of our polyethylene and about 30% of our polypropylene capacities are based in joint ventures. It has provided us access to advantaged feedstocks and to growth markets, and that's been done in a capital-light approach. We haven't had to invest all of the capital to get access to that. When you combine our world-class operator status, our ability to operate these assets better than anyone, and our unparalleled global channels to market, that makes us a very attractive partner to people who want to be able to invest in this segment and move their products to markets for the highest value. The average contribution that our joint ventures have delivered to our business over the last 10 years has been about $400 million. It's meaningful, and it's something we're gonna continue to build on.
I also wanna talk for a few minutes just about our industry-leading polyolefins product portfolio. You know, these markets grow at or above global GDP with the circular and low carbon solutions markets growing at an even faster rate. We're very well-positioned to capture those growth opportunities. Why is that optionality important? Well, it's important because we have access to markets that are both durable and nondurable. With that broad portfolio, we're able to find the highest value applications and innovate with our customers to bring those products to market. Having that leading industry portfolio will give us even more options to grow, including our circular and low carbon solutions business. We're not just gonna focus on one segment, we're gonna be looking for options throughout our portfolio. What's driving that growth? You know, polyolefins has been around for a long time.
It has been growing at the same more than GDP rate for more than 30 years. It's going to continue to do that for more than the next 30 years. Virgin and circular mix, yes, that's going to change over time. What you're hearing with our new strategy today is we're going to be able to capture both of those because we're gonna be a leader in both the circular and the virgin markets. We have them both. Polyolefins are not going away. Just step back and think about it. The things that have driven the growth to date are gonna continue in the future. We've got a growing population, growing middle class, growing standards of living. That means that you're gonna have increasing need for food and reducing food waste. Polyolefins plays a major part in that. Availability of healthcare.
More people want access to quality healthcare. Polyolefins plays a huge part in that. Next time you go to the doctor's office, hopefully not the hospital, just look around and look at all of the polyolefins that you see, whether it's the syringes, the masks, the gowns, the tubes, the bags, all of that, and that's gonna continue to drive growth. The energy transition. Shifting to electric vehicles. There are many more options for us to put polyolefins into an electric vehicle than we can in a internal combustion engine just because of the temperature profile. We're gonna see that polyolefins growth is really driving the macro trends in the market. They go hand in hand. Peter had talked about our core criteria before, I just wanna talk a little bit about how we're going to apply that to our portfolio.
First, we're going to evaluate our portfolio with that criteria. We're going to be enabling the circular and low carbon solution strategic business unit that we have, and we're gonna over time, we're gonna upgrade that portfolio as we go. Couple of examples of that. We've already talked about the MoReTec investment in Wesseling, Germany. We're doing the engineering on that as we speak. Similarly, we took a look at our polypropylene business in Australia last year, and it didn't fit with our core criteria, so we decided to exit it. This is gonna be a continuous evaluation that we're gonna do. We're gonna be decisive, and we're gonna improve the quality of our core business. There'll be some things that are part of the business in the future, and there'll be others that aren't, and we'll be adding and subtracting as we go.
I do wanna emphasize that we're gonna do that in a highly disciplined and prudent way. I think just quickly to point out, in our plans, we are not including any new wholly owned integrated cracker. It's just not in the cards for us. We see other ways to be able to grow in a very capital efficient way. We're gonna continue to leverage M&A and joint ventures as we go forward. That's one way we're gonna drive profitable growth with attractive returns. We're gonna think about that through four lenses. These are very well aligned with the core criteria that we talked about. First, we're gonna look for assets that leverage our culture around safety and operational excellence, and that will build on our global channels to market and our global marketing capabilities.
We will prioritize integrated assets that have got advantaged feedstock, and of course, that's gonna be in regions like the Middle East, where we already have got joint ventures today, and here in the United States, where we just established recently a new joint venture with Sasol in Louisiana. We also are gonna prioritize access to growth markets. We've also done that over time. We've got joint ventures in Thailand and Korea and in China. Our partners value what we bring to the table because we market a lot of the products coming out of those joint ventures, and they just slide right into the channels of that we have today. We're also going to be enabling our strategy around sustainability, and you're gonna hear a lot more about that later today.
Jim Seward did a great job talking about our leadership and technologies and he showed a few technologies that we have historically made the conscious decision that we would not out-license those technologies. One of the things that we are going to do, and we've made the conscious decision on this as well, is that we will be offering these technologies like Catalloy, like Hyperzone, and potentially MoReTec, but only exclusively where we're a partner, only where we're going to join in an investment. These are not going to be technologies that we're going to be marketing through our normal licensing business. These will be leveraged for our benefit and to grow our company. Of course, underpinning that is always our capital allocation discipline and the financial principles that you're going to hear Michael McMurray talk about here later.
I also wanna highlight that enabling the circular and low carbon solutions business is really about our existing assets and leveraging them as well as our existing customer base and innovation that we've got. We don't have to build these crackers, we've got them. That flexible feedstock that I talked about before, that includes recycled and renewable feedstocks. We can buy third-party materials and we can feed them into our crackers. We can produce it ourselves with MoReTec. We've got a lot of optionality with that. Initially, we're gonna focus on two flagship hubs. The first one is in Cologne, Germany. The second one is in Houston, Texas. Both of these hubs have got ISCC PLUS certified assets. That's how we're gonna create the value and monetize these products. We'll be selling products that have the certification.
Both have produced circular and renewable products. We're expanding those capacities in both of these hubs. We've already talked about the investment in Wesseling for MoReTec. With the closure of the refinery, and we talked about this during the Q&A a little bit with Peter, we've got an opportunity here to also grow and expand the footprint of our circular and low carbon solutions business. The refinery is very well connected with pipelines to our Channelview crackers. It's very centrally located, great logistics access. We'll be able to reuse some of the equipment that is there today to be able to process some of these feedstocks that we would then supply directly to the cracker in Channelview.
The other thing you probably have heard is that we're members of a consortia that are looking at an investment in a hydrogen facility on the Gulf Coast. We've aligned with our partners in that consortia that the preferred location is going to be the Houston refinery. That's going to be a great opportunity for us to further develop that site. It's a very good location. No final decision has been made yet. We're excited about the opportunities that this site has for the future. Now I wanna switch and talk a little bit about Value Enhancement Program and the customer and commercial excellence and the value that we see there. We've created a new customer excellence team last year because we wanna recognize that probably more than any other time in the history of this industry, the markets are changing.
The demands of customers are changing. We have a history of being an innovator with our products in this marketplace, and we wanna continue that. We wanna be in the preferred supplier position. The way we're gonna do that is by focusing on a few different areas. Let me talk about what those are. First is the value in use pricing. When you think about all of the different applications that are out there, especially when you include Circular and Low Carbon Solutions, we wanna be the ones that are able to identify the best value, the best prices, and the trends that are happening there and capture them first. We're gonna use things, we're gonna use digital tools and new processes like AI to be able to identify those and then get after them and be the first one to capture them.
Segmentation is also going to be really important for us. How do we segment our market? How do we segment our customers? How do we couple up the best products with the best customers and get the highest value? Being able to see that first and move quickly is going to have a lot of value for us. Third is we move a lot of product. As a major player in this market, we move a lot of volume out of our producing regions into other regions. We're always trying to optimize where we produce a product and match that up with the best price. We do it today, but there's always room for us to be able to improve that. Optimizing that value pool is something that we're gonna continue to focus on.
You know, we sell 10 million tons a year of polymers around the world, more than 4,000 customers, 1,300 products in 100 countries. There's a lot of optimization potential that you can do there. With the tools that are available, digital tools today. We believe that we can leverage that into about 100 basis points improvement on our normalized margins between now and 2027. There's significant value here to be very externally focused on our customers and position LyondellBasell as a preferred supplier. What does all this mean? The net result of this means that we expect to be able to grow our normalized EBITDA from a level of $5 billion in 2022 to $7 billion in 2027. We're gonna do that thinking through the three pillars that Peter had discussed earlier.
We're gonna grow and upgrade the core. We've already talked about the Value Enhancement Program. A lot of that $750 million is going to come through the Olefins and Polyolefins assets. We've identified a lot of high-value, fast return projects that we're excited to get after and implement. We're also going to upgrade our portfolio of assets. I mentioned this earlier. We're gonna continuously evaluate the assets that we have, and we're gonna be adding, and we're gonna be subtracting, but we're gonna be decisive there. We will leverage technology to be able to access new high-return growth opportunities. We are going to enable the growth for Circular and Low Carbon Solutions. You can see that here shown in our bridge.
I'm not going to dive into details because I know Yvonne is gonna do a much better job than I could explaining that in just a few minutes. Finally, we're gonna be stepping up our performance around manufacturing efficiency and our focus on customer and commercial excellence. I am very confident that we're gonna be able to grow above our historical average earnings with the new strategy that we have. Just to wrap up, just to remind you, we have leading positions in the olefins and polyolefins market, and we're gonna continue to build on those things. We're gonna grow and upgrade our core by focusing on operational excellence, leveraging our global reach, and our leading technologies. Olefins and polyolefins is a key enabler for our new Circular and Low Carbon Solutions strategic business unit.
Finally, we are gonna be driving margin enhancement through customer focus and that manufacturing efficiency that we've talked about as part of the Value Enhancement Program. I am confident that our strategy and the actions that we're taking are gonna result in a significant increase in the normalized EBITDA, the $5 billion-$7 billion by 2027. A significant part of that is going to be this new circular and low-carbon solution strategic business unit that I mentioned. Now it is my great pleasure to introduce to you the leader of that, and that's Yvonne van der Laan.
Thank you Ken. Good morning. Wow, I've never heard my name and my new business unit referenced as frequently as this morning. This is my first Capital Markets Day with LyondellBasell. I'm not sure if this is the reference, but it feels good. It's a pleasure to be with you here this morning in the room and the people who are watching virtually. I've been with LyondellBasell just over three years. Before that, I was with the Port of Rotterdam, responsible for the industry cluster and the industry customers in the Port of Rotterdam. LyondellBasell was one of those customers. During that period, me and my team worked with the customers in the port to actually create the key enablers that gave our customers the optionality to create value from the energy transition, entering into circular and low-carbon solution space.
Today, I'm really excited and proud that I can do that by leading the new business unit, Circular and Low Carbon Solutions. As Ken already mentioned, and Peter has mentioned, and many of my colleagues before, it's for good reasons, to actually be able to deliver value to the bottom line of LyondellBasell. What is creating that great momentum? Tracy actually already, and Peter spoke about this. There is a massive demand opportunity out there. That is triggered by some of these trends that Tracy already spoke about. In society, people wanting to see to address plastic waste and greenhouse gas emissions. In consumer behaviors, consumers wanting to see that reflected in the products they buy and their willingness to pay for it. Last but not least, supporting policies and regulations that aim to accelerate that demand.
If we dive a little bit deeper into that, we see that actually the highest sense of urgency there is in supporting regulation that's actually addressing plastic waste. Announcements around introduction of extended producer responsibility schemes, like in Europe, we're already very familiar with. Announced plastic taxes, announced single-use plastic bans. That has resulted in demand coming from the global brand owners, the global consumer brand owners. If you look at the picture in this chart, you see an overview of the 10 largest global consumer brand owners and their commitments and their demand for recycled content to be addressed in their consumer packaging solutions by already 2025. Now 2025, that's tomorrow.
What you see here as well, these 10 global brand owners represent over 12% of that demand, are working very hard to find the solutions to supply actually to meet their commitments. What you can also see is that most of them still, despite their efforts, have a way to go. Let's dive a bit deeper into that demand supply situation. If we take a look at that and see what's going on outside and what is triggering that demand, first of all, we see that that demand is growing. Ken already spoke about this. He was referencing to overall polyolefin demand growing with GDP growth.
If you look at the mature markets like Europe and North America, where we as LyondellBasell are already market leaders today in polyethylene and polypropylene, you see that more than the half of that demand growth is actually coming from recycled and renewable polymers. This demand pool adds up to a material number of at least 15 million tons by 2030. If you think of it, diece mark, that's a big number. The vast majority of that demand will be driven, first of all, by packaging, as you've seen in the slide before, triggered by those brand owners. LyondellBasell, as Ken already alluded to, is well-positioned in these packaging markets. More than half of that packaging demand is coming from food packaging.
You've heard Jim Seward already talking about MoReTec, which is bringing a great drop-in solution for food packaging to address that demand. We also see the demand for recycled and renewable content solutions growing in other segments where we are active in, like automotive and consumer durables. Also, Torkel will talk more about that growth when he speaks about his Advanced Polymer Solutions business. Strong demand growth that is expected to continue given the trends out there. Let's look at the supply side, because you already heard today from Peter that there is quite big demand, but also a very limited supply base today. If you look at that supply base today, which is predominantly actually mechanical recycling, that needs to grow massively, and it will grow. This market for the foreseeable future will be supply constrained.
As LyondellBasell, we are very well positioned to take a leading market leadership position in that supply constrained market. As Tracy mentioned, we have made an ambition two years ago to supply and market 2 million tons of recycled and renewable polymers under our Circulen brand. That 2 million tons represents a 20% market share in that supply constrained market. That is a market share that we are very comfortable with because that's also a market share that we actually have today in our traditional business in these markets in Europe and North America. Strong demand growth, supply constraint, that is actually setting the boundary conditions for attractive economics and attractive value that actually motivate and give the business case for the investments needed to take a leading position in that market.
I hear you thinking, that's a nice picture, but what does that mean in terms of value, in terms of dollars? Let's take a look at that. You heard already Peter mentioning it at the beginning of his presentation and introduction. The answer to that big question is that we will be able to not just grow that half a billion to the bottom line that Ken was just referencing by 2027 to at least $1 billion incremental EBITDA to the bottom line by 2030. This is incremental to what Ken already has shown you. This is in a market, a total addressable market of at least $25 billion by 2030. We believe that that is still a view that is more, has more upward potential than downward potential.
What we have not yet included in this view is the fact that there is more regulation coming, but we have not yet translated the upcoming EU plastic tax into these numbers, or the announced, but not yet firm, additional EPR schemes to be enrolled in different states in North America. Also not included yet is the Scope 3 demand coming in as of 2030 and onwards as commitments made by our customers, by the brand owners and OEMs. The other piece of good news is, and you heard Ken already a little bit saying that, is that we can do this with a lot less capital intensity than building a new world-scale cracker. In that $1 billion number, there is foreseen that we can do that with roughly 15% of our total annual CapEx spend over the coming 8 years.
These recycling units are less capital intense, although advanced recycling more so than mechanical recycling, but it tells you something about the attractive margin and attractive returns of these investments. As has already been mentioned before by Peter and Ken, we will do that by leveraging our strong key success factors. We already today have a market-leading position with great market access, great customer base. We can do this with leveraging our strong asset base with two flagship sites that are very strategically located, the Cologne area and the Houston area. We will do this with leveraging our leading innovation technologies, like MoReTec, that Jim already spoke about, and where we are convinced that we will set the benchmark in terms of not just yield, but also scale and efficiency.
We will do this with a different operating model, a model that is based, first of all, on different feedstock, plastic waste and renewable feedstock. How will we do this? In order to dive into that, we need to look first of all a little bit deeper into how does this value chain look like based on plastic waste? Today's plastic circularity value chain starts with waste collection. In markets like Europe and North America, waste collection as such is already pretty well organized. It's also very localized. It's often organized by municipalities. It's fragmented. The majority of that waste, that includes plastic waste, today, even in Europe, where there is already legislation in place that member states need to collect and recycle 35% of that household waste, plastic waste, and that's gonna increase to 50% by 2025.
The vast majority today doesn't end up in high-quality recycling. It actually ends up in incineration, mostly in Europe and in North America, landfill and incineration. With this great demand opportunity, there is actually an incentive to get it out of incineration and landfill into plastics recycling value chain. In order to do that, it's not just about the recycling assets that need to be built, it's also about the infrastructure that needs to be built to actually sort it out, the primary sorting, or MRFs, as they are called here in North America, and what we call advanced sorted, or PRFs. That will actually make them into feedstocks that can go into these different recycling technologies and assets.
The good news is that for a part of this plastic waste turned into feedstock, it can actually be turned into liquids like pyrolysis oil or renewable bio-based feedstock that we can process in our existing asset base, the crackers that Ken mentioned in Germany and in the Houston area. This also shows you a complex and fragmented picture. It requires an integrated approach. That's how we will do it. Ken and Peter already spoke about the integrated hub model. What you see here is an infographic example of what we're trying now to build and already are building with proof points in place, our integrated hub model in the Cologne area. If you look into that infographic from left to right, it actually starts with our move upstream that we started to do last year.
We already announced a new joint venture called Source One Plastics, and we had the ground break of the first advanced sorting unit for that already in December last year. Secondly, and it was already mentioned by Peter and by Jim, this allows us to have additional feedstock to grow our existing mechanical recycling footprint that we have in place today through the QCP joint venture. It will enable us to grow that. With that mechanical recycling position, we can leverage our strength in compounding that actually is there in the core business of our colleagues of APS, and Torkel will talk more about that. On the other side, these advanced sorting units will provide the necessary feedstock coming out of the mixed plastic waste that today is hard to recycle to feed into advanced recycling.
I heard a question before about our Nexus partnership, which is a third-party example, different business model. We have already announced that we are working on progressing our decision to build the first commercial scale unit of MoReTec in Cologne at our Wesseling site integrated with our crackers over there. This allows us to process the advanced recycling feedstock, renewable-based feedstock, as we are already doing today, and Peter spoke about that, in our crackers, and optimize that and complementary to the mechanical recycling value chain we're building up there and other technologies like solution-based. Where we made an announcement in February to invest in new cycle technology of APK. This allows us, in this integrated hub model, to build scale, get the operating costs down, and take advantage of that integrated business model instead of individual assets only.
That's important because it has two important effects. It makes us the preferred partner for the companies today that are in waste management, or in waste to energy, or are EPR operating schemes that actually own the plastic waste in Europe today. We allow them to partner with us and co-invest, for example, in these advanced sorting units, and get access to this value chain that has all the solutions there. It's not just preferential to either advanced recycling or only mechanical recycling. It allows us to economically optimize the value of these streams at all times, and drive additional value over incineration and the landfill model.
The second part is, it allows us, and continues to be, the preferred partner of our customers, of the converters, the brand owners, the OEMs, because we provide them with an efficient, full solution, suite of solutions in that recycled and renewable space of polymers. A one-stop shop, if you like. You think, "Okay, that's a great story, but aren't your peers doing exactly the same?" That's why I'm really so excited about how uniquely LyondellBasell is positioned.
If we take a look at the next table, I'm not gonna take you through all the rows and the columns. If you have marked the tick boxes in the previous slide, you can actually see that LyondellBasell ticks all of these boxes needed to be successful in that integrated hub model, and actually be able to scale, reduce operating costs and logistic costs, and take the integrated value advantage of that model. The good news is also, that we can do that by leveraging also our existing asset base, first of all, in the Cologne and Houston areas. As Peter told you already, we don't have to start with these solutions. We already have them under the Circulen brand. We are already marketing and selling these products.
In fact, we have sold already over 175,000 tons of these products under the Circulen brand today, as we speak. We have CirculenRecover, which is the umbrella for all the mechanical-based and compounded-based solutions. We have CirculenRevive, addressing the solutions under the advanced recycling value chain. We have CirculenRenew, addressing the solutions under the renewable bio-based feedstocks. That makes us very confident that we can not just deliver on that 2 million tons ambition by 2030, but also deliver the additional incremental value with it. Just to summarize, demand is not the issue. It's growing, and it's sustained. This market will be supply-constrained for quite a while, and we are best positioned to take a leading position in that supply-constrained market.
We have a great plan, and we're actually already started to execute on it by leveraging our existing customer base, and solutions, and market positions, by leveraging our existing assets in flagship strategic sites that are in heavily populated areas where there's waste available. With this integrated hub model that allows us to scale and bring down operating costs and capture the integrated value. With that, I'm confident that with this new circular and low-carbon business unit, we will be able not just to deliver on that half a billion Kim was speaking about by 2027, but at least $1 billion additional EBITDA by 2030. Before I hand over to Torkel, I want to share with you a video of one of our customers, Samsonite, on CirculenRecover. Let's watch that video before Torkel comes on stage.
Sustainability has always been very important for Samsonite. We have set our vision to become the most sustainable lifestyle bag and travel luggage company in the world. Of course, we cannot reach our goals alone, so we need partners for that, such as LyondellBasell, who is a very strong partner for us in terms of innovation and also customer focus. We started the collaboration in 2019, the S'Cure ECO Limited Edition. This was the first suitcase produced from CirculenRecover, the recycled polypropylene coming from post-consumer household waste. We saw that the market was actually quite positive on this limited edition. We started working together with LyondellBasell on a new grade, because we also wanted to reduce the weight of the suitcase. For that, we needed a high performance grade to be able for us to use it in our lightest suitcase.
We were also interested in using more bright colors.
By offering ivory grade, we were able to offer recycled PP, but also in bright colors. We find that LyondellBasell really a reliable partner for us. I believe it's really the drive and the passion of the teams to make it a success. Looking at the future, it also looks very interesting. The collaboration continues. We will introduce this year 2 new collection. Essens, which is our newest three-point lock suitcase made using CirculenRecover, and also a Dream To Go suitcase for the youngest generation.
Thank you very much. I'll be looking forward to take questions later on and meet you during lunch. For now, I want to introduce Torkel Rhenman, who will talk about the Advanced Polymer Solutions business. Torkel.
Thank you Yvonne. Many of you know me as, maybe as Mr. I&D or Mr. Refining. That's not what I'm here to talk about today. That's in very good hands with Kim, who's gonna be next up. I'm gonna talk about the transformation that we embarked on for my AP-APS business, which I took over as of October 1. The APS business, we have 60 plants around the world. We are the global leader in compounding solutions. We service over 16,000 customers, and we have over 97,000 active formulations in our library. As you know, the APS business was formed after we acquired A. Schulman in 2018, and we combined it with our polypropylene compounding business. We have generated about $200 million in synergies, primarily on cost, as we integrated the two companies.
We have also transformed from having over 20 different enterprise systems to now being on basically 95% on one, which gives us complete different visibility around data and how to run this business on a global basis. We've also significantly improved the safety performance of this business to more the standards of what we wanna operate as LyondellBasell. We are not happy with the performance of this business. I wanna be very transparent about that. During my first couple of weeks, I went out and visited over a dozen customers. I'll share you a sort of summarize what I heard them tell me. "We love your products. We think you are a leader in innovation, and over the years, you have really helped to innovate and help us grow. It's been a really good partnership.
However, your service performance has really deteriorated, and for us, it's not acceptable. If we're gonna be able to grow together, you have to really change that. That's the transformation that I'm so excited about being able to lead. Let me share a little bit about my background in terms of my energy level to actually get this challenge to lead us through this transformation. I've been in the industry for 35 years. 25 years of those, I've been in specialty businesses. I've been the CEO of two companies about the same size and complexity as APS. I've even been an engineer early in my career working in a compounding facility, working on improvements, turnover improvements and color matching. Very, very similar to the kind of plants that we operate around the world. Both Basell and A.
Schulman were customers and partners of mine. We grew business together. We had a very, very good partnership. I see the potential that's in the business, that's in this space of what we can do and create from this business if we only go through and become really customer-focused and really perform to the service expectations that our customers have. That's what we're embarking on. Our portfolio has changed. We basically said we need to focus on what's the core of APS, which is the compounding business. We moved the Catalloy and polybutene, which are really polymer businesses, we moved them back to OMP, both the Europe and Americas regions, to really create us the focus and the tension of transforming the core of APS. PPC, we're the global leader. We're backwards integrated, and we have basically grew this business over the years.
If you go back and look at how a car looked 20, 30 years ago and how much more polymer there is and how they design them, they front the interior. We've worked with our customers to help them transform that and make that happen through the innovations that we've had. In engineering polymers, we have a portfolio of products. We're not backwards integrated, and we play where the big integrated players do not play, where they don't have the asset capability to service that market. We have nylons, we have styrenics, we have PBT, POM, and other polymers. So that is a focus area for us also in going after high performance applications where we get the good margins on it and the big players do not play. On masterbatch, we're a global leader.
Goes into many different applications, where you're looking for some sort of either performance or processing aid. In Colors, we have a strong regional footprint, and on Composites and the powders, we play more in specialty niches. I believe this business has significant higher earnings potential. I put the target out there with my team for $500 million by 2027. I think this is feasible. The three components that we are driving, I call them restoring the base, and I will go through that. I see this midterm over the next one or two years. The market recovery is partially underway, China reopening. We've had a lot of issues on supply chain, as well, as well as labor force issues in the Americas region, and those are also easing up.
The third one is our growth focus. I will go through the mega trends that we see that gives the potential for us to grow this business. I think there's actually upside on that. That growth comes from both our sales funnel as well as innovation funnel. The sales is basically selling more of, you know, tweaking existing products to existing or new customers. The innovation, those are really the new products, and I will focus on the innovation pipeline, what we're doing, what I see the opportunities there. We see that from that growth, we, over a $150 million opportunity, and I think there's upside. On restoring the base, this is already transformation that is underway. We've made both organizational changes in order to enable this complete different business model than how we operate in LyondellBasell.
Recognize this is a highly complex business with the number of customers that we serve, with the number of products that we offer, we need to be much more agile, lean, decentralized, quick in making decisions, and be excellent in operating. That's why we put a different business model in place. As Peter mentioned, we put manufacturing, customer service, procurement into those regional leaders in order to make it much more nimble and fast. We're also implementing underway what we call integrated business planning, which is like it's an enhanced S&OP process, and that's to become excellent in driving execution. I already start to hear customers are seeing an improvement in our performance. Our delivery performance is increasing, our lead times are decreasing. We're targeting to have us back to have that restored to where customers expected by middle of the year.
On the growth side, which we're now looking at how to accelerate, partly just by fixing the service issues, we're also freeing up the people that were doing firefighting to actually focus on growth, what they should be doing. Which I heard from customer that we are actually used to be really good at. We have good people, both on the innovation, but also on the business development. The three mega trends that I will focus on that we see unique opportunities are circularity, mobility, and modern living. I will go through those in terms of where we see the opportunities. It's all about leveraging the strength of APS and LyondellBasell, where we're really good at this, our customer relationship, our formulation know-how, our application know-how, and the breadth of our portfolio and market reach.
We have probably the largest formulation library in our industry with the 97,000 formulations in our library. We started to use artificial intelligence with project we started already three years ago. I think we're seeing already today that this increases the speed of development, it improves the performance of our compounds, actually has the opportunity to reduce the cost. We're rolling this out from having piloted in the Americas region and seeing the results from it. I think that's gonna be an important factor also for us to exceed and deliver on the upside by being differential versus our competitors in the speed and ability to enhance our performance.
As I look at this part, I also think realistically, we're probably gonna need to add back some resources on it when we were too much focused on the cost and the synergy side for us to be successful in driving the growth potential. I think if I compare it to the $200 million in cost out, this an area I look more of a $20 million-$30 million investment in order to accelerate the growth. On the mega trends, you already heard a lot from it, from Yvonne and from my colleagues there. The sustainability, it's happening in my business as well. We cover many of the big brand owners, and we hear it. They're all working. They made the commitments, as you heard.
They're all working on figuring out, "How am I gonna get to that commitment that I've made? Who's gonna help me?" We are their partner. We close the circularity loop by APS presence in that market and being the partner for how to innovate and how to get circular products into a car, into an appliance, and to still make it work. I want to show just a example, a testimonial from a customer that we have.
At LANXESS, we are committed to innovative material reuse across the value chain. In collaboration with our customer, the automotive manufacturer Audi, we are helping to transform old car parts into new recycled materials.
We want to use secondary material whenever it is technically possible, ecologically feasible, and of course, environmentally friendly. Recycling is not that easy because as you can imagine, if something's mixed up, it's not that easy to separate it again. We are recycling plastic, which was already in the hands of our customers, so it's called post-consumer. Chemical recycling is a good addition to the mechanical recycling. Chemical recycling is a process where we heat the plastic and then a pyrolysis oil will be created, and we can use it for the production of new polymer parts. We can use it for high quality demanding parts, like for example, safety relevant parts, and in a very specific case, for the Q8 e-tron seatbelt buckle.
By transforming recovered plastic-based materials with mechanical and complementary chemical recycling, we are helping to close the plastic loop, saving valuable resources and reducing waste.
Just to say that we have probably the most number of requests when it comes to intercircularity. The number of customers that are asking for, "Please help me design my parts with circular solutions." The next mega trend I wanted to talk about is mobility. This is where we, you know, the biggest part of our polypropylene compounding business, where we've been working on lightweighting the car. It's a trend that continues. We are working with many of the car companies, what we call, in being able to come with lightweighting formulations. We see 4% growth rate in this segment. The modern living is where we sell into appliances, sporting goods, electronics, et cetera. We cover global CPG companies to regional brands. These are typical smaller applications with higher margins. As...
If we ask the question, why do we think we can be successful here? It is our global scale, the market reach that we have, the breadth of our portfolio, what I heard from our customers. Now we're adding this circularity integration with the compounding capabilities that we have in recyclates. We just announced yesterday the acquisition that we made in Europe of a company called Mepol Group, which plays in exactly that space. It's this small Italian Polish company that's 30 years experience in the industry and primarily into compounding, but they play perfectly into what we're trying to accomplish in our circularity push. They have 30 years experience, plus our experience with our brand owners. We see significant synergy opportunities and accelerate the growth of that company.
The other success cases that we have is the Molded colors, where we have enabled customers to replace painted plastic, painted metallic to make it look like metals, where we basically do that through a formulation. We basically have just a compound that looks like metal, and you don't have to paint it. The 10 program, 10-kilogram program that we offer with automotive companies, we basically have a project to help a car company how to redesign the car to replace metals and formulate it in a way with new designs that enables you to put in plastic compounds to lightweight the car, both through lower density formulations, but also through new designs enabling it to happen. I see overall the enormous opportunity for us to transform APS.
You can hear my energy level in terms of I believe that this actually can realize a lot of value for us. We have a lot of the strengths already. We were really good, and our customers will say that we're really good when it comes to innovation and servicing our customers. What we realized is we need to reformulate and go back to look at how do we make this business successful with a different business model of being much more decentralized, with the speed and agility of customer focus in delivering what customers expect. There's a lot of the base that we already have, what we now need to make release and make it feasible. That's what we're driving. That's why the transformation is underway and what we're trying to accomplish with it.
I'm confident of the potential of delivering more than $500 million from this business through the transformation that we have underway. I want to share just one more testimonial from a customer.
Since its foundation by Carl Miele and his partner, Reinhard Zinkann, back in 1899, Miele has always been an independent family company. Today, we focus on products Miele stands for all over the globe, both in domestic and in the professional field.
The journey of LyondellBasell and Miele started decades ago in the 1960s when we began using Hostalen compounds made by Höchst. In LyondellBasell, we found a valued and long-standing supplier who also focuses on recycled materials such as CirculenRecover polymer. This perfectly meets our Miele-specific requirements. This polymer is successfully used in a variety of Miele appliances. For example, in structural parts for the dryer, salt funds in dishwashers, and dust bag for vacuum cleaners. We are very much looking forward to continue our collaboration with LyondellBasell even beyond Miele's 125th anniversary in 2024.
Well, there are actually three circular solutions for just one customer. That wants to be a leader in circularity. That's what I think is the exciting part of this business, is not just the opportunity to transform APS to be successful, but actually to be a leader in the industry to, together with our customers, transform the whole industry, and by doing so, creating a lot of value. That is what really makes me excited about this opportunity, and I see as the upside for how we can make this a really good business for LyondellBasell. With that, I'd like to introduce my partner, and I don't know, sure if I should say Mrs. I&D and Refining, but at least my partner, Kim Foley. Thank you.
Thank you Torkel. Welcome to our Capital Markets Day. It's a pleasure to be here with all of you. Some of you may have recognized my face from our 2019 Investor Day. At that time, I was the site manager at Channelview, so I was your tour guide on the bus, and many of you asked me about the RVs and the boats that were on the side because we had those there from the hurricane. I'm Kim Foley. I'm responsible for Intermediates and Derivatives and Refining. I've been with LyondellBasell or one of our predecessor companies for over 35 years. I love this company. I'm gonna retire from this company. This is a fantastic company. I've also been, during my career, a part of several very successful transformations that have led to our global leadership position in olefins, polyolefins, and propylene oxide.
Why do I also share that with you as my lead in? What we're doing right now is differential to all those things that we've done before. I'm excited today to talk to you about how Intermediates and Derivatives is uniquely advantaged and how we will contribute to LyondellBasell's strategy and transformation going forward. As you've heard from others, our focus is on growing and upgrading the core, stepping up our performance and culture, and advancing sustainability to grow our businesses and to do so profitably. This is also the focus in Intermediates and Derivatives. We are a global business with a broad array of applications, serving markets in 65 countries around the world. We have propylene oxide assets or participate in propylene oxide assets in the U.S., Europe, and China, where we are the number two global producer, but more importantly, number one with the lowest-cost technologies.
We also operate Ethylene Oxides and EO sites here in the U.S. This broad portfolio across I&D enjoys stable cash flow through the cycles. We support our customers and our end products, or end markets, excuse me, by focusing on four key areas. First, process innovation with our industry-leading propylene oxide technologies. You heard from Jim earlier today, over 100 improvements in our new plant. Unparalleled operational excellence exemplified by our industry-leading safety performance and our 97% asset reliability across our propylene oxide assets. Global portfolio optimization. We can leverage our feedstock advantage here in the U.S. across all of the other regions of the world that we participate. This is really important as we ramp up our new PO-TBA plant as well as the joint venture that I'll talk about later. We are advancing sustainability.
We are out there offering renewable products to our customers and reducing greenhouse gas emissions to meet the needs of the future. Let's start by talking about how we are connected to the core olefins and polyolefins business. As you can see here, we are the critical link between olefins and other petrochemicals. The chemical chains are much more complicated. It's not just olefins to a polyolefins, you need to go through these intermediates to get to the products. As the world becomes more and more circular and sustainable, we're gonna be a critical link. I'm gonna talk about that a little bit. First, we get our ethylene and our propylene at almost all of our PO plants from our LyondellBasell crackers.
Not only is this an integration and a feedstock advantage, this also enables us to run circular or renewable feedstocks through those same crackers and provide that upgrade to our customers. Excuse me. I apologize. How do our markets grow? Ken talked about the mega trends that influence his markets. For me, the mega trends are urbanization, energy efficiency, and clean air. We'll talk quite a bit about oxy fuels, but on the energy efficiency side, we're into a lot of products that help enable energy efficiency. Insulation is one of the big ones that we'll talk about. We differentiate through three unique characteristics: process innovation, diverse markets that create strong and stable cash flow, and we are developing our low carbon and circular capabilities and product offerings.
I just talked about this example where we get our feedstocks from our olefins plants, and we have this ability to process renewable feedstocks. Earlier this year, we took renewable feedstocks through our olefins crackers and then through our POSM plant or one of our propylene oxide styrene monomer plant to make our first shipment of renewable styrene. We believe this is an untapped growth opportunity for the Intermediates and Derivatives chemicals. For the Intermediates and Derivatives segment. This is different than what Yvonne has talked about. Now let us take a look at our portfolio and end markets. Propylene oxide is our core or our growth driver. Historically, this has represented about half of our EBITDA. The advantage of our propylene oxide technologies are that both of them have a co-product, and these co-products provide a tremendous cost benefit.
Our propylene oxide or PO TBA process, the co-product is TBA. TBA is converted into oxy fuels. Oxy fuels are a high octane premium gasoline component. It enables better combustion in your engine. It reduces air emissions. It supports clean air standards, especially in emerging markets. It is also a great counter-cyclical hedge to the other chemicals that are in the IND portfolio. Last year and this year, we are seeing strong demand for gasoline. Oxy fuels will represent more like 40% of this segment's EBITDA. The other technology for propylene oxide is POSM or propylene oxide styrene monomer. Through this technology, we produce styrene that goes into the polystyrene, rubber, and polyester resins. To round out intermediate chemicals, we also produce acetyls and ethylene oxide. We define acetyls as methanol, acetic acid, and vinyl acetate monomer.
These chemicals go into a broad array of products, but think of it as predominantly adhesive coatings and solar panels. Ethylene oxide is produced in our Houston area. We captively convert most of it into glycols and solvents, similar to what we do in our propylene oxide business, and that is used in the textiles, detergents, and automotive industries. This broad array in IND gives us a balanced exposure to automotive, housing, durables, and consumables and fuels. Again, this diversity of this portfolio provides a stable cash flow. Let's talk about our pillars. We talk about upgrading and growing the core. Propylene oxide is our core. It and its end markets grow at GDP plus rates driven by strong market fundamentals and mega trends.
As I mentioned earlier, we're the number 2 producer in the world, but more importantly, we have the lowest cost technologies with both PO-TBA and POSM. Our new PO-TBA plant exemplifies the attractive returns that we've historically delivered with these technologies. Why are they so advantaged? I mentioned a moment ago, TBA goes into oxy fuels. Oxy fuels are, again, a high octane premium component in gasoline. They're made in our process through butane and methanol, which are traditionally discounted significantly to crude, which is the other component that typically makes gasoline. Gasoline, excuse me. This built-in margin provides significant benefit to the PO-TBA process. The remaining third of our propylene oxide is produced through our POSM or propylene oxide styrene monomer.
You can also see that this is advantaged. I want you to look at that curve so when you ask me questions later today at the tail of that curve. That when you say later, "Boy, you're bringing a lot of capacity online, do you have any concerns?" Look at that tail. Those people, they're gonna have things they're gonna have to think about in the next couple years. In addition to these two wonderful, highly advantaged technologies, we have world-class safety culture, operational excellence with our high reliability, and we have a very experienced sales team. What did I mean by capacity? With the startup of our new PO-TBA plant and the joint venture that we started up in China last year, we are increasing our propylene oxide capacity by almost 50%.
This new plant that everybody already has alluded to is our largest, lowest cost asset in the world. I do wanna take a moment to not only share with you again that this plant became operational yesterday with on-spec product, but I would also like all of you to join me in congratulating the hundreds of employees that we have in LyondellBasell who have been working on this for many, many years in our engineering, manufacturing, project, planning, and business organizations. Thank you for your tremendous effort. In the near term, we're focused on ramping up the capacity of this new asset and filling the sales funnel. We're also implementing a VEP program, Dale talked about reliability, and most importantly, an amazing team.
We are announcing today that we are exploring strategic alternatives for this business. We believe that this asset could provide even more value to a different owner. The last thing that I wanna tell you on this slide is this process does not change who we are and how we serve our customers, how we operate or maintain this facility. Those are core values to us around commercial and operational excellence. Now let's talk about sustainability. We believe our focus on sustainability can add value to our customers. Our customers are eager to provide low carbon solutions to brand owners, just like you heard earlier in polymers. As I mentioned earlier, it's much more complicated in the chemical chain. I also wanna remind everybody, Intermediates and Derivatives has always been advancing sustainability.
For over 15 years, we have been providing certified bio oxy fuels into the gasoline pools in Europe and in Japan. In 2022, we sold over 2 million metric tons. We wanna leverage this expertise around renewable and renewable products into our chemical products. We want to get very focused on the carbon footprint of our assets and how we work with others to reduce that carbon footprint. Remember, there's three scopes, one, two, and three. We wanna look at that full value chain. We've just completed getting our assets ISCC PLUS certified. As I mentioned earlier, that's enabled our ability to start selling renewable products. We made our first shipment of renewable styrene earlier this year. We make our second one tomorrow.
We've done this life cycle analysis on our propylene assets or propylene oxide assets, as well as our acetyls plants. We're all excited to get ready to go to AFPM next week or the week after. There's actually two weeks of AFPM. To sit down and talk with our customers and to share this data and say, "Here's our carbon intensity. We're committed to reducing our carbon intensity. How can we count on you so that this full value chain can deliver low carbon and circular solutions to brand owners?" Now let's talk about how we put all this together and how the financials show you the numbers, so to speak, of the clear value that we are poised to deliver. We expect to achieve a 40% EBITDA improvement over the next five years.
This is built off our average EBITDA for the last 10 years of $1.6 billion. Many of you know, in 2022, we made $1.9 billion. We had an extraordinary first half with some very discrete events and a very sombering second half. In total, I hope you can see the clear picture of how we step up performance to $2.2 billion by 2027. The largest and biggest bucket is our new PO-TBA plant. The second is our contributions on the volume side of growing and upgrading the core that we get from our VEP program. Those are the bottlenecks, the reliability gains. You're probably thinking, "That looks lower than the number on the other slide." We have backed out the EBITDA for the sale of the ethylene oxide and derivatives business.
That third bucket is stepping up our performance on the margin side. We've identified over $100 million of recurring opportunities on product or commercial improvements, as well as variable cost savings. This is all very exciting and clearly a step change in performance. In summary, I hope you see the clear value that Intermediates and Derivatives brings to LyondellBasell. We are laser-focused on advancing our strategy to grow and upgrade the core, step up our performance and culture, and advance sustainability to grow our businesses and do so profitably. I leave you with four final points. Propylene oxide is core to our strategy. We are a clear leader in propylene oxide with industry-leading technology, global scale, advantaged feedstocks, and commercial and operational excellence. Third, the Intermediates and Derivatives segment serves a broad or diversified end markets.
We are evenly exposed or balanced between automotive, housing, durables, consumables, and fuels. This provides strong, stable cash flow with moderate cyclicality. Fourth, our goal is to deliver a 40% EBITDA increase by 2027. Thank you very much. With that, I would like to introduce Michael McMurray.
Thank you Kim. Good morning. Good morning. It's great to be with you all this morning. I'm Michael McMurray. I'm the Chief Financial Officer of LyondellBasell, and I'm responsible for the financial management of the company, among other things. It is good to be here with you today. I do want to thank the support staff and also thank the communications team and put a thanks to my investor relations team big time. While these events are lots of fun to get ready for, they are tedious and painful, rest assured. I've been with the company for a little bit more than three years. Prior to joining LyondellBasell, I spent roughly 11 years at a company in Toledo, Ohio, called Owens Corning, where I was CFO for almost eight years.
Prior to Owens Corning, I spent roughly 20 years at Royal Dutch Shell. While at Shell, I spent time in all Shell businesses, including chemicals. Again, I'm excited to be here with you today to share my perspective on our new strategy and the implication for the long-term potential of the company, which all is enabled by the company's financial strength and our disciplined financial policies. All right, this is a good chart. LyondellBasell has a reputation for delivering strong free cash flow. A reputation for delivering strong free cash flow and converting earnings into cash. We have a long and strong history as well. Looking back over the last 10 years, on average, we've generated $5.5 billion of cash from operations, $5.5 billion, and converting 80% of EBITDA into cash.
Going back to 2020, so during the pandemic, the company successfully navigated the pandemic and covered not only our capital program, but also our recurring dividend with cash from operations. For me, I think it's a testament to our resilient portfolio, but also the ability of our businesses to successfully navigate cyclical markets. We have really good teams across all of our businesses. In 2021, we delivered record performance in 2021, and we took the opportunity that year to actually strengthen our balance sheet. In 2021, we reduced long-term debt by $4 billion, while at the same time buying in 5 million shares. As we sit here today, our balance sheet is in great shape, and there's no need to further delever. No need to further lever. Now, last year was an interesting year.
The first half of the year was pretty good. The second half became quite challenging, quite challenging very, very quickly. We experienced weaker demand. At the same time, we had incremental new supply coming on across the industry. We also had significant inflation, in particular energy inflation. Energy inflation year-over-year for LyondellBasell last year was almost $2 billion. We faced into other challenges as well, like supply chain, like many other participants in our industry. Despite that, despite that, we generated cash well above our historic average. In fact, we generated $6.1 billion of cash last year, 96% conversion. We took the opportunity to return $3.7 billion of our cash to our shareholders.
We have a strong investment-grade balance sheet, as you heard me say, our balance sheet is in great shape. A strong investment-grade balance sheet underpins our corporate strategy. Quite frankly, it's a key enabler to our strategy. It also improves our ability to act upon opportunities when others can't. A great example is the Sasol joint venture that we closed in late 2020, the year of the pandemic. That was enabled by our strong balance sheet, and it was a great transaction. It also enables us to weather market challenges relative to our competition as well. We ended 2022 with $11 billion of long-term debt and about $9.2 billion of net debt. During 2022, we actually reduced net debt by about $900 million.
For those of you who have been following the company for a while, you know that in 2020 and 2021, we took decisive actions around refinancing our balance sheet. The financing markets were very attractive, and we took advantage of that by refinancing a significant portion of our permanent or long-term debt. Our maturity profile, as we sit here today, is in fabulous shape. Average maturity profile of 18 years. 18 years. Our interest cost last year, just under 4%. We're phasing into very few maturities as you look forward over the next couple of years. Again, our balance sheet is in great shape. We ended the year with a net debt to EBITDA of about 1.4 times, which is the low end of our range.
That gives us plenty of flexibility as we think about the future. The strength of our balance sheet and the company's cash generation profile actually plays very, very well to our strategy of providing meaningful returns of capital to our shareholders. Let me put this into perspective for you. Since 2011, the company has returned $44 billion to our shareholders. $44 billion to our shareholders. That's both dividends and repurchases. From a dividend perspective, that represents 12 consecutive years of dividend growth. On a CAGR perspective, when our dividend was initiated back over a decade ago, that's a 22% growth CAGR. Now our new corporate strategy supports the continuation of our balanced and disciplined capital allocation strategy. Nothing's really changing what we've done historically looking forward.
That's from a dividend perspective, but also share repurchases, which will both play a central role going forward. Therefore, it's my expectation, it's our expectation to continue returning meaningful amounts of cash to our shareholders, including growing our recurring dividend. All right, talk a little bit about capital allocation. We've had, and we will have a disciplined and balanced approach to capital allocation. The pie chart on the left shows kind of our overall balanced approach over the last five years, I'm not gonna go through it in detail. You can see it there. Our confidence and our ability to pursue our focused growth strategy is driven by best-in-class cash generation and the strength of our balance sheet. Let me go into a little bit more detail just about the priorities themselves.
Our first priority is around maintaining safe and reliable operations of our assets. For me, this is table stakes. Secondly, it's about rewarding our shareholders by growing and protecting our strong dividend. Third, it's about pursuing a focused, pursuing focused organic growth opportunities, which is shaped by our strategy. Let me be clear, I think you heard Ken. We have no plans to build a wholly owned cracker. Hopefully, that's clear. The last priority is around funding additional growth through strategic and disciplined M&A and/or returning excess cash to our shareholders. Let me say one more thing, one last important point. As we look forward in pursuit of our strategic initiatives, our commitments to shareholder returns remain intact.
We demonstrated this last year in 2022 when Peter Vanacker joined the company by declaring a pretty significant one-time dividend. Today, we're communicating a target payout ratio of 70% of free cash flow. That's a new commitment. Now I'm going to talk a little bit about our strategy from the perspective of the CFO. From my perspective, our new strategy is driving focus. It is driving focus, and I am confident that it's going to drive differential growth and value creation. The first pillar is around growing and upgrading the core. I'm confident that our actions are going to build greater resiliency and performance through the cycle. We are in action, you heard today, around pruning the portfolio, and we've narrowed the aperture in regards to inorganic growth.
We're pruning the portfolio, and we've narrowed the aperture in regards to inorganic growth. Second pillar. You heard a lot about this today as well. We are building a profitable, circularity and low-carbon solutions business. For me, it's all about meeting the rapid demand growth for sustainable solutions and becoming a critical partner in helping our customer achieve their sustainability goals. You've heard Vaughn. The demand out there is immense, and we're gonna service it. I am confident in our ability to grow this business at scale and generate attractive returns. Lastly, the last pillar is around stepping up our performance and our culture. If you know the company, you know that we have a history that's steeped in best-in-class operators, evidenced by our cost discipline, but also our safety results as well.
Now we put a focus on enabling a value creation mindset, as you heard from Dale, we've identified and we are acting upon a portfolio of improvement opportunities, a big portfolio of improvement opportunities. Taken altogether, these pillars will unlock $3 billion of incremental EBITDA. $3 billion of incremental EBITDA. Roughly $1.8 billion coming from growing and upgrading the core, and then $500 million and $700 million coming from our circularity and low-carbon solutions business and performance and culture, respectively. We have a disciplined framework to evaluate our existing portfolio and future growth opportunities. You saw this with Peter, you saw this with Ken. We're using this across the enterprise. Playing to our core strengths and in growth and advantage businesses is core to our strategy.
Aligning future growth and other portfolio actions with this strategic criteria to define our core. The principles are centered around businesses with market-leading positions, focusing on end markets and businesses with attractive growth rates, businesses that consistently deliver attractive returns, and obviously expanding access to advantaged, renewable, and circular feedstocks. Lastly, we're putting a big strategic focus on growing our circularity and low-carbon solutions business. Hopefully, this is clear. A couple examples. From a buy-side perspective, I think a fabulous example is the Sasol joint venture that we closed in late 2020. It checks most of these boxes. That was a great transaction that was done, you know, for deep value, and that has created significant value for the company and our shareholders.
We are in action on pruning the portfolio where appropriate as well. The decision on the refinery is quite clear. Kim made another announcement today in regards to the strategic review of our EO&D business. We are in action from a portfolio perspective, and we will be disciplined around future growth opportunities. Let me talk a little bit more about our approach to growth around M&A and joint ventures. We're gonna generate growth through differentiated M&A and a joint venture strategy that not only leverages our balance sheet but also our global network and capabilities and our long history of operational and commercial excellence.
Our approach to M&A and our approach to joint ventures closely aligns with our new corporate strategy, and we'll build on core businesses, and we'll increase positions utilizing advantage feedstocks. We'll leverage O.I.B.'s operational strengths and our global commercial reach to capture synergies from acquisitions. We'll leverage our strength in technologies and global marketing capabilities, which will, quite frankly, enable us to be a partner of choice and enable us to access and facilitate access to advantage feedstock concessions in locations like the Middle East. Recently, as you've seen the various press releases and what Yvonne highlighted in her materials, we have been very active in building out our supply chain for our circularity and low-carbon solutions business. Lastly, let me share the financial criteria that we have when it comes to inorganic growth.
The first screen is that we would expect to generate earnings that are accretive within the first year, and then we're targeting IRRs in excess of 12%, all while maintaining a disciplined investment-grade balance sheet. In regards to inorganic growth, Peter and I are at the hip. We will be extremely disciplined. Let me put everything into perspective from a long-term financial goal perspective. I'm gonna spend a few minutes going deeper into our long-term financial goals and expected outcomes over the next three slides. Let me be clear on kind of how these financials are based, because we had a question earlier in the room.
We, what we did is we looked back basically 10 years, and we calculated our average margin profile for the enterprise, and also, you know, the utilization rate as well. We're using that margin profile for our forward view that goes out to 2027. You know, as a company, we normally don't give guidance, and we're not giving any guidance from a, from a market or from a cycle perspective, right? Basically, we're using the average margins from the last 10 years. What we are guiding to is what we're actually gonna accomplish and deliver around our new strategy and those three pillars. Over the immediate term, we expect to achieve $9 billion of, in mid-cycle EBITDA by 2025 and by 2027, $10 billion.
We expect cash conversion should remain at that historical average of 80%. All this translates into normalized EPS of $19 a share in 2025 and $23 a share in 2027. We will achieve these results by evolving our portfolio to generate higher returns by focusing on growing and upgrading the core, building a leading and accretive circular and low carbon solutions business, and transforming our culture, along with the delivery of our $750 million Value Enhancement Program. Let me highlight a few of the financial principles and assumptions that go into this modeling effort and that also support our strategy. There were a couple of questions around capital expenditures. For 2023, you know, we're kind of at the low end of our expectations.
$1.6 billion is what we've guided to for the year. you know, that's lower than what we had guided historically, but that's because of the completion of PO-TBA. Also we're in a difficult operating environment right now, so we've constrained our capital a little bit. you know, what we guided to on the fourth quarter call still holds, so it's $1.6 billion for this year. Looking forward over the next three years. Looking forward over the next three years, including our current year, the average should be about $2 billion, which is consistent with what we had given before around over the next couple of years. $2 billion over the next three years with sustaining CapEx of about $1.2 billion over that period of time. $1.2 billion is sustaining CapEx.
Through 2027, we would expect to be below our historical high in any given year of $2.9 billion. For Yvonne's business, Circular and Low Carbon Solutions, you know, the capital intensity of that business is actually relatively low, and it'll consume about 15% of our capital budget looking out to 2027. Again, as you heard me say, we expect to return approximately 70% of our free cash flow to our shareholders, including extending our track record of growing our dividend. Again, returning 70% of free cash flow has been modeled as well.
I'd say that we remain comfortable in managing the company with about $1 billion-$1.5 billion of cash on sheet, and I'm confident in our ability to maintain our investment-grade credit rating looking forward, with a goal to keep net debt to EBITDA below 2.5x through the cycle. I think all of these principles support our drive to reach $10 billion of EBITDA on a normalized basis by 2027. Here's the bridge. This is the EBITDA bridge. This shows our 2025 and 2027 normalized EBITDA targets driven by the impacts of the three pillars of our new strategy. The first pillar, or the orange pillar, is growing and upgrading the core. This includes POTBA, which has just started up. That's fabulous news. It includes incremental volume from our Value Enhancement Program, like creep capacity.
It also includes our growth CapEx or non-sustaining CapEx. Then net M&A. When I say net M&A, net of divestments. All told, this totals $1.8 billion through 2027. The second pillar, or the green pillar, includes our circularity and low-carbon solutions business and emission savings coming from various investments that we're making to reduce CO2. This contributes roughly $500 million through 2027 in total. Then looking out to 2030, I'm confident as the CFO, that Yvonne's business has the potential or will, excuse me, not potential, it will generate $1 billion or more of EBITDA. Then thirdly, or the pink pillar, I think that's pink, is stepping up performance and culture. This includes our Value Enhancement Program related to cost and margin projects.
It includes our customer and commercial excellence program and the APS improvements that Torkel took us through earlier this morning. Again, this represents about $700 million of improvement through 2027. Taken together, this represents a 30% uplift in cash from operations, EPS improvement of over 80% or $23 a share in 2027. Again, all modeled on historical margins and historical operating rates. In closing, I'm confident in our strategy and our ability to drive differential growth and value creation. I'm confident in our continued delivery of strong cash generation and maintaining our investment-grade balance sheet. Make no mistake, this new strategy will continue to be grounded in continued disciplined financial principles and policies and capital allocation priorities that will drive significant shareholder returns.
Finally, all of this is supported by an evolving culture focused on unlocking significant opportunities across the portfolio with a focus on value creation. Really great to spend time with you all today. Thank you for your interest in LyondellBasell. With that, I'm gonna bring Peter back to the stage for a few closing comments and then Q&A.
Thank you, Michael. Before we go to a Q&A, again, let me wrap it up. I'm very confident that, as you have seen, this team has developed a strategy. This is not a strategy that has been developed by one person. The team that has developed the strategy has asked continuously, "Now what's different? How will we as a company outperform our peers? How will we deliver superior results?" Of course, you may say, "Yeah, but you're not the first management team to ask all those questions." I'm extremely confident that based upon the three pillars that we have, the focus that we have, the framework that we have set ourselves, that we will be able to execute this strategy and deliver that $3 billion improvement in terms of our normalized EBITDA by 2027. Remember, growing and upgrading our core.
Be clear about what our core is. Grow it, upgrade it, deliver nearly $2 billion in normalized EBITDA. Secondly, the initial contributions, because we have just started on building up the circular and low-carbon solutions business with a bit more than half a billion dollars. Third, stepping up our performance and culture. That initiative, again, starting part of our DNA, $700 million in that timeframe. All of that will be enabled by our Value Enhancement Program, where we have our people, as you heard, that are very excited about the opportunities that we have. Initiatives that are not just there in the next year or the year after the next year. Initiatives, they are actively working on them as we speak, and that will deliver $750 million already exit run rate 2025.
We concluded what sets our strategy apart are three things. First is our focus. We know and we grow our strengths. We reallocate resources, you heard a couple of examples, to where we believe we have leading positions in the market, that we will strengthen those positions in the market. Our focus, number one. Number two, our scale. Impactful moves that are enabled by our global reach. We're one of the top chemical companies. We have the people that can do it. They've proven it in the past. You see our PO-TBA plants up and running. We said it's gonna be up and running by the end of this month. It's up and running. Leading positions that we have and our advanced technology position.
I hope you're convinced about the fact, I mean, how important that technology position is to continue to create value not once, but twice, and I would add three times. Urgently moving forward simultaneously, we can do this. We flattened the organization. You've seen the executive committee. There's clear accountability, clear PNL responsibilities, ownership. We've reduced, I mean, the delegation of authorities in such a way that people have more line of sight management. Actually, it's increased the delegation of authority. We're urgently moving forward simultaneously and globally. We're not waiting to build up the future. We are building up the future. You've heard, I mean, from our experienced and diverse team that is empowered and accountable also to win in these markets. Cost position, global scale, investment-grade balance sheets, they will all help, I mean, to meet our goals.
Let there be no doubt, what we have as our heritage, we will treasure and continue to work on it. We will transform our industry. We will be a value-creating ESG leader in our industry. We will maintain a very disciplined... We're at the hip, Michael, on this. A very disciplined capital allocation to position LyondellBasell for the future and for great shareholder returns. With this, I think we're ready for a second Q&A. Thank you very much.
Before we get underway, I just want to acknowledge the extended IR team. First of all, Alex Gumpert, who we borrowed from our communications group. She did everything from the video, the webcast, the M&Ms, and did a fantastic job. We have Anna Chang over on the side from the investor relations group. We were able to borrow Jennifer Clark from our strategy group, and Nikki Hubach is again a part of the core investor relations group. I just want to prove that we are getting questions from the web, from the webcast. I'll take one from Arun Viswanathan at RBC. He actually has a five-part question, but I'll take one of them.
Can you discuss why the plastics industry has not yet developed material scale in molecular and advanced recycling in the past, and why the industry and LyondellBasell will be successful in the future?
Well, that's a very good question, of course. Who wants to give it a chance? Ken? Yvonne? Yvonne?
Sure. Indeed, advanced recycling or pyrolysis is always not a new technology in the past. I think what has been driving the momentum for this market is really the demand. Before, it wasn't there. It wasn't there based on plastic waste. If at all, 10 years ago, it was there for renewable fuels.
Let's go to the audience. Alex, how about this gentleman in front? Dave.
Thank you. Dave Begleiter, Deutsche Bank. Just on the Circulen portfolio, what are the price premiums you're getting today? What types of premiums are we expecting or forecasting going forward?
Let me be clear, David. We're not talking about price premium. What we are talking about, that's the reason why we have also set up a strategic business unit with a full PNL responsibility. This is a separate market. It's a market that will have its own supply and demand. It will have its own price point. It's value-based pricing. This is not what you can compare to a classical OMP business. You hear other people talk about price premiums. I know. Yeah, we sincerely disagree with that. We believe this market is setting its own benchmark. It's setting its own, I mean, value creation. As Yvonne said, I mean, it is substantial.
Yeah.
Actually, if you look at her numbers that she had in her business plan, she also said it. I mean, it's rather conservative, the way how we look at it. I personally believe, I mean, that the opportunity that is there because it's all gonna be about who brings the supply to the market and who can ramp it up fast. Therefore, that scale. I think, I mean, the opportunity is huge that we have.
If I may add, it's really a different operating model.
Mm-hmm.
It's not based on naphtha or LPGs. It's based on waste, plastic waste. It has its own dynamics. It's completely different price.
Yep.
Thank you.
Go back to the first. Yeah, go ahead, Michael. Yeah.
Attractive, attractive margins, lower capital intensity.
Mm-hmm.
Capital, and then therefore, very attractive returns.
I go back, I mean, to the first question there as well. I've been also in this industry, yeah, since more than 30 years. I've never seen an inflection point that the willingness to pay was there. I've mentioned it as well, and you heard some examples and testimonies and so on. I've met so many customers, brand owners, OEMs. One of the biggest converters, and we had a meeting together.
Mm-hmm
...with biggest converter in the world. It was not about price. It was about, can you get me the products? Can you get me the entire family of products, depending on the different demands that I have? This broadness of the Circulen family. In addition to that, can you get it quality? Can you guarantee me the supply so it's not in and out and in and out? Can you scale it up? It was about the value. It was not, the discussions are not about a premium or about a price. It's about the value.
Can we please accelerate urgently?
Yes, definitely.
Alex, the gentleman right in front of you there.
Chris Willis from Exothermic Global. I have two quick questions. One, pretty straightforward. Can you just comment on what the operating rates are of your three major divisions currently, just sort of the average operating rate in North America, EAI, and I&D? Second, realize it's a complex world, but if you look at your normalized EBITDA over the last six, seven, 10 years, there's about $1.2 billion coming out of Europe. Can you just walk us through some sort of path of how we're gonna get back there? I realize it's a highly volatile, unusual situation, but just any thoughts about the European situation looking forward. Thank you.
Yeah, you know that we have been very disciplined. I mean, for example, like, Q4 last year, yeah. I mean, because of that sudden move, I mean, in the market with all the different things that were happening. We reused, I mean, the operating rates. In the earnings calls, we gave guidance on that for that quarter. We said the same also when we closed them in the year 2022. Also we talk about on average, approximately, I mean, 80% of operating rates, but happy, I mean... Ken?
Specifically for North America, we're operating our assets around the mid-80s right now. Just for Europe, interestingly, we're actually operating around that same level because we've got the Berre, France cracker back online. You know, we are short of ethylene in the European market. You know, there's margin in the cracker, so we like to run our crackers differential. Today in China, we're still operating at 80%. That's really the minimum that we can run that asset at. I would say you're looking at operating rates in the industry in China that's in that same range. Still quite challenging there.
Kim?
I would say for Intermediates and Derivatives, it's between 75 and 80%. It's really the difference is not so much regional as co-product.
Obviously, we're running our POTBA assets to produce oxyfuels at very high rates, almost 100%. We've got our POSM assets at a slightly lower rate, because we really don't need a lot of styrene right now.
Michael, on the second question, do you wanna answer that?
Yeah. Remind me what it was.
Could you-
Europe.
Mm-hmm.
Europe.
Europe.
My point of view on Europe. Sure, I'm happy to give the finance perspective. I mean, listen, last year, Europe was kinda dealt a double whammy, both from a demand perspective and then massive energy inflation. I think systemically going forward, energy costs in Europe is probably gonna be higher for longer. Nothing like we experienced last year. I'll let my business people give a few comments as well. I mean, generally speaking, you know, our European portfolio is pretty well-placed from a competitive point of view. You know, we see that business, both from an OMP perspective and IND and APS as having, you know, good earnings potential going forward.
I'll just add that, I mean, it was the perfect storm for Europe last year.
Mm-hmm.
Between lower demand, higher energy costs, higher feedstock costs, supply chain issues, you name it. It was the lowest result that we've seen in over a decade. Like I said earlier, you know, the team did a really good job managing through that and passing through a lot of those costs to the market. You know, frankly, we're seeing improvement this year because we're getting some tailwinds with the reduction in, especially in the energy costs.
Another question from the web, from Alyssa Braun at [uncertain]. Could you provide more color around the change in your leverage target from 1.5-2x gross debt to EBITDA to less than 2.5 net?
Yeah. There's no big mystery. I think it's just a simpler and more effective way to communicate what our targets are.
Great. Stella, I think there were some questions in the front row on this side.
Mm-hmm.
A few of you mentioned there will be additions and subtractions from the current Lyondell portfolio. What guides your thought process when disposing of an asset? Do you look at supply-demand, feedstock advantage or lack thereof, CO2 footprint or something else?
Well we go back, I mean to the criteria that I mentioned. Remember this morning in my presentation, the set of criteria, and then we gave a couple of examples. I mean, you know, the obvious one, I mean, on the refinery in Houston, PP in Australia, and actually also what Kim mentioned, the decision that we have taken to look for strategic opportunities for the ethylene oxide and derivatives business. Our guiding principle is looking at those criteria.
Sabrina, I think there's a question in the back corner there.
Thank you. It's Vincent Andrews from Morgan Stanley. Peter, I wonder if you can talk a little bit more about within the circular aspect of the portfolio, do you think there's an opportunity to have contract-type structures with customers or co-investment, long-term take or pay, automatic cost pass-through, something that will really crystallize what you're saying about it being a different market with value-based pricing versus, you know, just a premium or a discount? Is that opportunity available to you?
Yeah. I mean, of course, we don't exclude, I mean, these opportunities. On the other hand side, I must say, I mean, this is a market where actually the demand is there. It's about bringing the supply, I mean, to the market. As it is normally, I mean, in value-based pricing, you need to be extremely careful that you don't lock in, I mean, a business where the price point can still move as demands is huge. I never say no, yeah. I mean, Yvonne is running the business, of course. I never say no, but I think it is very, very important that we are, first of all, focusing our attention on building up our hubs, the big hubs that Yvonne was talking about.
What we did not talk about so much today is, of course, apart from the big hubs, we are looking at also building up some smaller hubs. That's the focus. We need to bring that supply to the market.
Okay. Just as a follow-up, is there any M&A you need to do within the circularity platform or anything you need to bring in from the outside?
Well, yeah, I've seen that our operating model is, that's another reason, I mean, that we have built up a separate business unit. You have heard, I mean, from the examples that Yvonne gave, is we are extremely agile. There is no one concept fits all. It's not just, I mean, we invest in organically and build this all up on our own. We look at where do we find partnerships that can actually accelerate how we bring these products, I mean, the range of products, I mean, to the marketplace.
Thank you.
Yeah.
Correct. It will be a mix. Yeah.
Mm-hmm.
Stella, I think we had some more questions in the front row here.
Matthew Blair from Tudor Pickering. Peter, you know, my experience covering you when you were at Neste really showed that you were able to unlock new markets, and as a result, Neste traded at pretty considerable valuation premiums. Is that part of your value creation for Lyondell? Do you think about that expanding the multiple is part of the long-term value creation here?
Well, I personally, I mean, always believe of line of sight management, looking outside in. You know, first of all, what are the requirements that the customers, the value chains, but not just your immediate customer, but also the different players along the value chain have? What kind of value proposition do we need to offer them? If you're clear about your value propositions, then as a consequence, you're gonna develop your operating model. That's where we made big changes also. Look at the APS business. If you look at what our customers are requiring from us, well, that's a different value proposition than in Ken's business or in Kim's business.
We articulated those value propositions and said, "Look, our operating model needs to be different." That's why we run this business now, I would say, very much at arm's length compared to the integrated way, because that's how you start structuring then your end-to-end processes in the company. The same is also when we looked at the Circular and Low Carbon Solutions business. We looked at the outside in and not say, "You know what, we're gonna do it the same way like we have run, I mean, an O&P business or an I&D business." It is a different market. That's why I'm continuously reinforcing that message. It's not a premium, yeah? It's a separate market that is being developed, and it will be a separate market for a long, long, long time.
I'm probably gonna be retired until we gonna see that change. It's a huge opportunity. Those value propositions leading to business models that we have to our operating model, that's why we have a separate line of sight management, clear accountability, own team. We're hiring people that know the value chain in Yvonne's area.
Different competencies.
They come, I mean, out of the white goods business, out of the automotive industry, out of the packaging industry, I mean, different positions they had along the value chain, yeah? That's what make a difference. Talk the language of the value chain of our customers and capture value by doing so.
Stel, another question from our very shy front row here.
BMO, Question around accountability and management compensation and the incentives. Do you need to change anything that's in place currently with regard to how people hit their targets, both on the financial ones, but also on the circularity and ESG? Can you walk us through that?
Yeah, I mean, we did already do a change. One change is, on the short-term incentive. We used to have costs, yeah, as part of the criteria in the short-term incentive. We already had sustainability before I came on board, in the short-term incentive, based upon sustainability, based upon clear targets, which is more project driven because it's the beginning. In terms of the change that we made from last year on the STI to this year, we agreed with the board that we would move, I mean, from cost to value. What we have seen, I mean, is... I explained that, all the years where we had that cost targets in the STI, I mean, we over-delivered on the cost targets. Yeah. This is an extremely disciplined organization.
You put the STI in place, I mean, you make sure, I mean, that people are gonna make sure that you don't reach, I mean, 100% on the cost target, but you reach 180% or even above that with, of course, I mean, what we explained, eventually value that is staying there and is not being captured. That is important change that we have made. Then, of course, during the course of 2023, we will then further evaluate how the short-term and long-term incentives do fit, because it needs to be fit to purpose, I mean, how we are implementing, I mean, our strategy.
Can I just add to that? The another change that we made is with the organizational change. The award units now are aligned, so the manufacturing and business are in the same award unit. We used to be functionally organized.
Right.
Now we're all on the same team, and we're gonna deliver the $750 together, right?
Mm-hmm.
That is within the company.
Mm-hmm
that's probably gonna drive that culture change pretty significantly.
Yeah. That's a very important point, I mean, what you highlight. This is in all the businesses because it's line of sight management, clear accountability, PNL responsibility, manufacturing, reporting into the businesses. As such, of course, the consequence is the award units. The targets are clearly set and are much more business targets that we have now compared to the past.
Mm-hmm. Alex, we have a question here in the middle. Get your phone.
All right, thanks. Matthew DeYoe from Bank of America. I guess, you know, two separate questions. One, how would you think about the guidepost decisions on the pace at which you roll out MoReTec? Does a underperforming European business accelerate it? Is it all demand pull? Is it commitment to annual CapEx spend? Like, you know, what, how should we think about the way you-.
Mm-hmm
... the pace you're gonna roll it out? Secondarily, you paid a special dividend last year and you haven't done it in some time, but it's not your first. When you look at the CapEx, or I should say the return of cash, I mean, what's the opinion of the board and the management on the efficacy of buyback versus special dividend going forward?
First question, as fast as we can. Yeah. That's, I mean, the business case is there. You heard it from Yvonne. The discussions that we had, I mean, intensively in the executive committee was, I mean, how fast can we bring MoReTec and scale it up?
Have it in two integrated hubs.
We talked about, I mean, MoReTec in the context of the Cologne hub, but we alluded also in the context of the Houston hub, so two regions. That's important. Secondly, I mean, Michael talked about it last year, I mean, that we took the decision, apart from continuing to do certain buybacks, that we also leveraged upon continue to increase our dividends. We had the extra dividend. The way we look at it is, we're not now saying, "Okay, this is gonna be always the case," I mean, that we have a special dividend. Definitely, I mean, we wanna no, I would be the last one to say, I mean, I'm gonna discontinue that very impressive track record of 12 consecutive years in increasing, I mean, dividends.
I think that message, we're also close at the hip there, Michael, isn't it?
Yeah, I mean, I mean, want me to make a couple of comments?
Yeah.
I mean, I'd say, you know, when it comes to, when it comes to capital allocation, you know, and specifically kind of thinking through buybacks versus specials and the like, you know, it's as much art as it is science. I think going back last year, I think the timing of that special was almost perfect, kind of given the broader market backdrop and kind of where our share price was. And so it's kinda hard to give you a predictive model as to, you know, when we're gonna do specials, versus when we're gonna do buybacks. I mean, obviously the amount of cash we have and where our share price is and our point of view on long-term value matters.
Now, from a modeling perspective, what we've showed you today was, you know, growing our recurring dividend and as part of that 70% and the balance all going to repurchase activities. That's from a modeling perspective. It could be different, so we could do a special. But again, it's as much art as it is science and will be very dependent upon kind of what the overall market backdrop looks like on our share price. We had vigorous debate at the board.
Absolutely. Special is special, no? It's not a dividend.
I think we have time for one more one-part question from the gentleman with the microphone.
Nothing like pressure, Dave. Kevin McCarthy, Vertical Research Partners. My sole question is on propylene. You're very clear today that you don't intend to build another ethylene cracker. However, in the past, I think LyondellBasell has talked about some on-purpose propylene of perhaps 400 kilotons a year with a final investment decision by the end of this year. My one question would be, is that still on the table? If not, how would you plan to manage your short position in propylene that seems to be growing with the PO-TBA startup and the future refinery exit?
That's a good question. I mean, I'm gonna give short answer, and then I give it to Ken. We talked about, no, not building on our own steam cracker, yeah. The project that we have and that we are continuously progressing upon is of course, not off the table. That doesn't fit into that box. I mean, grow and upgrade the core. Ken.
Yeah, look, we've got technology, flex technology to be able to produce propylene from ethylene. Aaron, who's sitting right in front of you, That's part of his portfolio, and we're gonna continue to progress that project. We've got a lot of, you know, knowledge about how to do this in the past and create a lot of value, and it's gonna continue to progress, and we'll make a decision at the end of the year.
We're long ethylene.
Mm-hmm.
We're long ethylene.
Yeah.
In the U.S.
Great. Well, thank you all for joining us. We appreciate the folks on the webcast for sitting with us. For those in the room, I think there's several of you, or most of you have table numbers on your tags. We're gonna go upstairs to the seventh floor for some brief lunch, you'll have more opportunity to talk with the management team. Thank you again.