In 2021, the combined effects of the ongoing COVID-19 pandemic, the global supply chain crisis and record energy prices made doing business more complex than ever. Thomas Gangl, what will you remember most about this challenging year, your first as Borealis CEO?
TG I will remember this year as being transformational on many different levels. The pandemic has forced us to change the way we live and work – we are transitioning to a “new normal”. For me personally, this year has marked the apex of a transformative journey: from my career start as a process engineer at OMV, to becoming an OMV Executive Board and Borealis Supervisory Board member, and now Borealis CEO. From a company perspective, however, increasing the stake in Borealis to 75% was not only the biggest acquisition in OMV history: it is also a transformational step for both companies. We are using our value creation strategy to become stronger together. In 2021, Borealis passed several major milestones in the expansion of its global footprint by way of major growth projects. Most importantly, 2021 has been a crucial transformative year as we become producers of renewable and sustainable polyolefins and accelerate the shift to a circular economy of plastics.
Mark Tonkens, as Borealis CFO, what do your recall most when you reflect back on 2021?
MT What stands out most for me is the resilience and commitment of our people after over 20 months of volatility and unpredictability due to the pandemic. Thanks to all of their efforts, Borealis was able to produce an outstanding year-end result, with a net profit of EUR 1,396 million. Our people showed great flexibility in adapting to the difficult circumstances of 2021, in particular the ups and downs in energy prices and market demand, the supply chain disruptions and the on-again, off-again lockdowns in many countries. We admire their resilience in making 2021 our best year ever, from a financial perspective.
Yet one caveat is that we have not yet made good on our Goal Zero aim to eliminate safety incidents and injuries in process and personal safety. As of year-end, our TRI rate of 2.3 is a significant improvement compared to 2020, but is still not good enough. From my point of view as CFO, even the best financial result is marred by safety incidents, so we need to do more to achieve even better safety performance.
The coronavirus pandemic has put a damper on expansion plans for many multinational companies. Has Borealis been able to proceed as planned with its global growth projects?
TG Indeed, we have – full steam ahead, in fact. At the ADIPEC (Abu Dhabi International Petroleum Exhibition and Conference) in November we signed a USD 6.2 billion final investment agreement with our partners ADNOC to build the fourth Borouge facility in Ruwais, UAE. Extending and expanding our joint venture with ADNOC will help us better serve markets in Asia and the Middle East. Borouge 4 will be the world’s largest single-site polyolefin complex, with an ethane cracker, two polyethylene (PE) plants using our proprietary Borstar® 3G technology platform, a cross-linked polyethylene (XLPE) plant and a 1-Hexene unit. We are conducting an in-depth study to determine whether installing a carbon capture unit would reduce the facility’s emissions on a truly massive scale – by up to 80%. Overall, Borouge 4 will have a lower environmental impact thanks to its energy efficiency and the elimination of continuous flaring. Its own energy supply will be decarbonised by drawing on renewable energy sources.
MT In the meantime, the fifth Borstar polypropylene (PP) plant in Borouge, the so-called PP5, has now started up. It will increase the current Borouge production capacity to five million tonnes. This project was delivered on time and within budget, despite COVID-related disruptions.
Another project that is progressing well, despite the pandemic, is our new world-scale propane dehydrogenation (PDH) plant in Kallo, Belgium, which is being built next to our existing PDH facility. This is a project full of superlatives: the largest Borealis investment ever in a European plant, and one of the largest in the petrochemical sphere in Europe. A top-notch safety record, with next to no safety incidents in both 2020 and 2021, despite the large number of subcontractors onsite. And one of the largest pieces of equipment ever shipped to the Port of Antwerp in one piece was our facility’s new propylene splitter. Also spectacular is the amount of steel we have installed: a total of around 10,000 tonnes, which is the rough equivalent of two entire Eiffel Towers! Excellent project management has ensured that we are still on track for start-up in 2023 .
TG Our joint venture with TOTAL in Texas, Baystar™, will help us transform our currently non-integrated business into an integrated one with more than 600 kilotonnes annual polyethylene capacity. Building a new Borstar 3G plant to use our proprietary technology is truly a milestone moment in expanding our North American footprint. The new cracker, which we are also building with TOTAL, is to start up in 2022. Like most operations in the area, we experienced some delays due to the disastrous winter freeze that hit the region in 2021, as well as COVID-related disruptions, but overall, good progress has been made.
Have other important acquisitions or partnerships come about in the course of 2021?
MT To be precise, our acquisition of DYM Solution Co., Ltd. in South Korea was finalised in 2020, but the organisational integration process was completed in 2021. Welcoming this compounder into the Borealis family is an important step for our own compounding business. It gives us a stronger foothold in Wire & Cable so as to meet growing demand on the one hand, and support the energy transition on the other.
TG A key component of transformation involves circular economy solutions (CES). As a company, we have the responsibility – to both people and the planet – to become a producer of sustainable and renewable polyolefins. We see circularity as an enormous opportunity, and are using a combination of organic growth and acquisitions to develop our CES offer. This year, for example, after signing an offtake agreement to purchase 20 kilotonnes / year of chemically recycled feedstocks from Belgium-based Renasci, we then acquired a minority stake in this innovative provider of recycling solutions.
This collaboration will enable Borealis to bring more circular base chemicals and polyolefins to the market. And because renewable feedstocks form the foundation of the Bornewables™, our portfolio of premium circular polyolefins, we can also help our customers maintain the high quality of products and applications, while at the same time meet their own sustainability goals. These efforts are complemented by those in advanced mechanical recycling, where we have consolidated our industry leadership by becoming the first virgin polyolefins producers to become plastics recyclers. This is thanks in part to our previous acquisitions of mechanical recyclers mtm and Ecoplast, but also to our own transformative Borcycle™ technology, which gives polyolefin-based, post-consumer waste a new life.
How is the divestment of the Fertilizer, Melamine and Technical Nitrogen Products business proceeding?
MT Even though regulatory approvals are still pending, we are pleased to have identified an excellent new home for our nitrogen-based business, one in which fertilizers and melamine form the core. The confluence of energy price shocks, market fluctuation and the pandemic’s effects have made this a challenging time to close a divestment project successfully, but our team has done a terrific job throughout the year mitigating all related risks in Borealis key activities.
The dramatic effects of climate change are becoming more and more visible. Governments, industries and companies have formulated strategies and presented measures aimed at reducing CO2 emissions. What has Borealis undertaken to this end? Is Borealis living up to its mission of “re-inventing for more sustainable living”?
TG The answer is a resounding “yes”! Borealis has pledged to source 50% of the electricity used in our own production operations from renewable resources by the year 2030 and during 2021 developed a comprehensive Climate Strategy that we will launch publicly during the first quarter of 2022. One clear proof is the number of power purchase agreements (PPAs) we have signed which will help us reach this goal. These long-term contracts to buy clean electricity from renewable sources like wind and solar guarantee that the energy thus supplied to power our own operations is 50% renewable. For example, our PPA with Axpo of Switzerland, which we signed in September, will use wind to power our facilities in Belgium; another with Gasum of Finland – our largest to date – is supplying onshore wind power to our plant in Stenungsund, Sweden. When combined, the energy supplied by our PPAs could power 160,000 European households for an entire year!
We are also putting our own innovative technologies like Quentys™ to work to increase the share of clean energy in our overall energy mix. In June, we installed the first of several planned solar photovoltaic (PV) rooftop arrays to generate electricity for our own production operations, in this instance in Monza, Italy. This installation features modules with encapsulant materials made of Quentys, which improve long-term PV module performance and reliability.
MT The list of measures taken in 2021 to achieve more environmentally efficient operations is long, indeed! We invested in an RTO (Regenerative Thermal Oxidiser) for our polyolefins plant in Porvoo, Finland, which will save around 60 gigawatt hours of energy and reduce flaring. We are engaging in open-innovation collaboration with Qpinch, the creators of a revolutionary and patented heat recovery technology. In May this year we became the first in the world to apply this unique technology at commercial scale – at our own low-density polyethylene (LDPE) production site in Antwerp. This project is especially exciting because it enables us to significantly lower our own CO2 emissions, while at the same time increasing production efficiency and maintaining cost competitiveness.
We appreciate that in times like these, predicting the future has become harder than ever. Yet how would you formulate your own outlook for 2022 and beyond?
MT Continued uncertainty is probably the only thing we can be sure of! There’s no crystal ball to tell us if new COVID variants will arrive. The “new normal” requires us to be nimble and flexible, and to be prepared for every eventuality. If we adapt to changing circumstances, continue to prioritise and manage our resources wisely and stay true to our mission, I am confident that we will continue to produce excellent results and deliver on our growth projects.
TG As an industry leader, Borealis is ideally positioned to capitalise on the momentum towards plastics circularity and greater sustainability. We will maintain focus on circular economy solutions. We shall expand our Bornewables portfolio of premium and circular polyolefins along with our Borcycle portfolio of transformational recycling technology solutions. Decarbonising our own operations will continue to be an important area of focus in 2022. The launch of our new Climate Strategy in 2022 will be a key enabler for reaching these goals.
MT A further boost to becoming stronger together with OMV will be in the first months of 2022, as Borealis employees in Vienna move to refurbished offices at the OMV head office nearby. Regardless of what 2022 brings, one thing will never waver: our commitment to safety first, and reaching our Goal Zero destination of zero accidents and incidents.
TG In my first year as Borealis CEO, I have seen up close, again and again, that our people have what it takes to follow through on goals and succeed in any business environment. Thus I look to the year 2022 with optimism and confidence that our joint efforts will once again produce outstanding results.