OCI NV
AEX:OCI
Earnings Call Analysis
Q4-2023 Analysis
OCI NV
As we reflect on recent company performance and look to the future, one aspect that stands out is the robust potential for growth. The mid-cycle scenario for the company is particularly promising, indicating a significant upside when considering factors such as improved operating efficiency, expansion in high-value and low-carbon product lines, and recently restructured operational costs.
A pivotal point to note from our financial outlook is the unrealized earnings before interest, taxes, depreciation, and amortization (EBITDA). The estimated $500 million in EBITDA has not yet factored in contributions from the Texas Blue project or potential plant restarts, nor does it account for the effects of our existing natural gas hedges, hinting at further financial strength not currently reflected in published figures.
Our methanol production capacity is substantial, with OCI owning the majority of the Methanol Group. Our facilities are not only strategically positioned but also provide competitive advantages due to their efficiency and lower costs. Notably, the OCI Beaumont facility has seen recent utilization rates soar into the high 90% range, signaling that efforts to maximize reliability and safety are bearing fruit and setting the stage for exceptional production potential moving forward.
Investors may have noticed that 2023 was somewhat of an unusual year for our European nitrogen operations. However, this period is viewed as more of an anomaly, not a trend-setter for the business's potential. The European operations have historically shown strong margins and cash conversion, a testament to the system's productivity and efficiency.
The 1.1 million ton Blue Ammonia project in Texas is a testament to our commitment to innovation and sustainability. Nearing completion, this large-scale blue ammonia plant exemplifies the company's pioneering spirit and foresight, with over $500 million already invested into the project and promising commercial interest indicated by advanced discussions for product offtakes and equity investments.
The methanol market experienced some volatility in 2023, which was flagged as a weak year. However, a recovery in spot prices in the fourth quarter has seemingly set the stage for improvement in demand, particularly driven by China. The future of methanol looks optimistic, spurred by growing demand, especially as a marine fuel, and relatively limited new supply additions anticipated beyond China. The market dynamics suggest that our methanol production is poised to meet the accelerating demand from sectors transitioning to greener fuel options.
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Hello, everyone, and welcome to the OCI Global Fourth Quarter 2023 Results. My name is [indiscernible] and I'll be operating your call today. [Operator Instructions]
I'll now hand over to your host, [indiscernible], Vice President of Investor Relations. Please go ahead.
Thank you. Good afternoon and good morning to our audience in the Americas. Thank you for joining the OCI Global Fourth Quarter 2023 Conference Call. With me today are Ahmed El-Hoshy, our Chief Executive Officer; and Hassan Badrawi, our Chief Financial Officer. On this call, we will review OCI's key operational events and financial highlights for the quarter, followed by a discussion of OCI's outlook and an update on the strategic review. As usual, at the end of the call, we will wrap up with Q&A. The results, press release and presentation are available on our website at otiglobal.com. We will be referring to slides in the results presentation during this call. I would like to remind you that any forward-looking statements made on this call involve risks and the actual results could differ materially from those statements. Let me hand over to Ahmed.
Thank you, [ Sarah ], and thank you all for joining us today. On today's call, we'll give a brief recap of the fourth quarter before providing an update on the strategic review and the transactions announced in the end of last year, December 2023. We will walk you through our continuing business and its exciting prospects before finishing with an update on the markets. Starting with our top priority, however, safety. Our 12-month rolling recordable incident rate was 0.24 incidents per 200,000 man hours at the end of December 2023. This continues to be well below industry averages and represents a small decrease from the previous quarter. We continue to work tirelessly on operational and process safety and strive for 0 injuries throughout the organization, which we believe is a key indication for overall manufacturing excellence. As stated, I'd like to now hand it over to Hassan for our Q4 2023 update.
Thanks, Ahmed. Turning to Slide 6. On a total basis, which includes our discontinued assets. OCI reported revenues of [ $1.209 ] billion and adjusted EBITDA of [ $310 ] million. representing year-on-year decline of 45% and 54%, respectively. These declines were driven by lower nitrogen pricing globally compared to the record year we reported last year, partially offset by a reduction in natural gas prices in Europe and the United States, which, in our case, was impacted by our existing gas hedges as well. OCI benefited in the fourth quarter from positive momentum in nitrogen pricing globally driven by supply disruptions, which helped offset lower volumes from the extended turnaround at IFCo compared to the previous quarter. Higher natural gas prices later in the quarter led to reduced sales volumes as customers [indiscernible] purchases for the spring application season. We expect the demand to catch up or materialize through the course of the first half of 2024. And indeed, we have seen evidence of this in recent weeks on the back of positive farm economics, particularly for nitrate-based products like CAN and UAN and Ahmed will comment more on that later. In contrast, methanol saw a more challenging fourth quarter with down cycle pricing. Some outages on account of adverse weather conditions and operational issues at [indiscernible] and some uncertainty around key macroeconomic drivers. Overall, however, we expect 2024 to be a healthier market than 2023. With prices expected to improve, albeit likely remaining below midcycle. For reference, the methanol business segment and our results includes the production and sale of conventional or green methanol -- green biomass methanol and around 350,000 tonnes of conventional ammonia capacity as well as results from our trading activities. Turning to Slide 7. This slide shows the net debt bridge from our total net debt as at 30th of September 2023 to year-end, which, of course, includes the divested assets on 100% consolidated basis. We further show the adjustments from our year-end total net debt to that of the continuing operations as at year end, which mainly reflects the deconsolidation of IFCo and Fertiglobe as they become classified as discontinued operations. The $2 billion includes our outstanding bond at OCI N.V. and utilized revolving credit facilities. Worth mentioning that looking forward all of IFCo's cash flows until closing are attributable to OCI, and Fertiglobe has now formalized the dividend distribution plan for the second half of -- the second half of 2023 of $200 million, of which OCI share is $100 million. This is typically paid in the month of April, therefore, April 2024. Moving to Slide 9. On the strategic review of the transaction update, maybe I'll begin with a few remarks before I hand it over to Ahmed to provide more insights. We have given some guidance today on a couple of important parameters. Firstly, from a capital structure standpoint, we expect to deliver for the company to be in a net cash position at year-end 2024, subject to completion of the transactions in that time frame. We expect significant gross debt repayment at [ MVE ] and will further calibrate the individual components of our debt structure in parade with the strategic review. This will result in a robust financial position with ample capacity to complete our investment plans in line 1 of the clean ammonia projects. Secondly, whilst we are closing the regular dividend, we have announced an extraordinary shareholder return of at least $3 billion following the completion of the transaction, which, of course, will be based on the [ receipt ] of proceeds. The financial resources afforded to the company finance transactions provide us with the flexibility to potentially deliver a higher dividend quantum. I will now hand back to Ahmed to continue commentary on the strategic review and other aspects of our performance. Ahmed?
Thanks, Hassan. Sticking with Slide 9. As you'll recall, we launched our strategic review last year to unlock value for shareholders and address the steep market discount to fair value as which we are trading. In December, we announced the divestment of our 50% equity holding in Fertiglobe and 100% of our Iowa Fertilizer asset to ADNOC and Coke Industries, respectively. Both transactions remain on track to close during the course of this year, subject to legal and regulatory conditions and relevant antitrust approvals. The combined transactions mark a transformational juncture for OCI with crystallization of $7.2 billion of gross cash proceeds were an expected approximately $6.2 billion of cash proceeds on a net basis, which equates to approximately EUR 27 a share, subject to closing adjustments. This crystallization of cash has helped bridge the gap between the sum of the parts or SOTP of OCI's assets and the holding company discount at which we were trading, reinforcing the company's value creation heritage and testament to the company's ability to identify, create and unlock value over time. At [indiscernible] was clear to us that the asset's inherent strategic value was not recognized. Whilst for Fertiglobe, this was a natural evolution for listed entity that was persistently and profoundly underappreciated within OCI's SOTP in the Dutch trading markets. The philosophy of the company remains one of value creation. Following these divestments, OCI has received considerable inbound inquiry and interest in the continuing business. As such, OCI is exploring further value-creative strategic actions across the portfolio, including the previously announced equity participation potential in its Texas blue clean ammonia project. Moving to OCI Today on Slide 11. OCI Today is optimally positioned to execute its efforts in the energy transition space and serve growing demand for methanol and ammonia across the shipping, power, agricultural and industrial sectors. Our business is strategically differentiated well capitalized and includes our market-leading low-carbon ammonia and methanol complex in Texas, our uniquely positioned European fertilizer and integrated nitrates business in the center of Europe's agricultural Heartland our growing AdBlue/DEF capacity in Europe and our unique import and distribution capacity at the Port of Rotterdam. Moving on to Slide 12, we see highlighting here the various low-carbon initiatives across the portfolio from which we are targeting a material increase in earnings from our green and low-carbon ammonia and methanol offerings in the portfolio in the coming years. This includes our complex in Texas, the home of our existing methanol and ammonia business with access to low-cost gas and a distribution platform to sell locally and export. Further, while our Dutch methanol business plant has been shut down for over 2 years now, it has considerable option value with approximately 900,000 tonnes of methanol production for green and/or gray upside potential. Our European nitrogen complex in Helen Netherlands remains uniquely positioned and competitively differentiated with access to our proprietary Rotterdam storage and throughput facility to efficiently access Western European markets for ammonia consumption. OCI nitrogen today produces 1.2 million tonnes of CAN with the capacity to produce 700,000 tonnes of UAN and we're the second largest melamine producer outside of China and as mentioned, are adding AdBlue or DEF for the first time here in a few months in April 2024. On the fertilizer side, we recently, just a couple of months ago, added CAN sulfur to broaden the product mix, which is a higher value and higher margin product. I'll now hand it back to Hassan to give some commentary on the mid-cycle potential that we see for the remaining business on Slide 13. Hassan?
Thank you, Ahmed. This slide builds upon our comments from 18th of December and provides some framing around our mid-cycle assumptions. Compared to our 2023 performance, a mid-cycle scenario supported by improved operating performance, growth of our high [indiscernible] business and low carbon products and the completed restructuring of our holding company costs demonstrates significant upside going forward. We have shared some basic assumptions, including the mid-cycle bench track prices that we use and target utilization rates. Worth mentioning here that these rates have been achieved historically, and we hope to achieve more consistently. And they are below the targets that we have set for ourselves for the manufacturing improvement plan. The $500 million EBITDA figure does not include Texas Blue contribution or any restart to [indiscernible] which Ahmed just described in his remarks. It also does not capture our existing natural gas hedges. With that, I'll hand back Ahmed for additional commentary on our continuing operations outlook.
Thanks, Hassan. The next few slides provide a snapshot of our continuing operations and highlight the competitive differentiation and some historical insights to frame positioning of the business going forward. Although 2023 was not a noteworthy year due to the extended IFCo turnaround, various other planned and unplanned outages, the impact of natural gas hedges and the volatility in gas prices in Europe, historic performance demonstrates that these assets have been able to generate and sustain a healthy level of EBITDA and free cash flow conversion before taking into account our multiyear manufacturing improvement program. As such, we expect these businesses to refer to towards better performance over the coming years. On Slide 15, starting with the Methanol Group. This business is today 85% owned by OCI, with the remaining 15% owned by 2 strategic investors in Abu Dhabi since late 2021. As the largest green methanol producer globally with assets at the lower end of the cost curve, OCI has some of the most competitive methanol assets in the world. As a reminder, the Methanol Group includes our OCI Beaumont facility, which has a 1 million-tonne methanol plant and 365,000 tonnes per year ammonia facility. And currently, approximately 200,000 of the 1 million tonnes of methanol is a green methanol, a figure which we're in the process of increasing. That gasoline is a 50% JV with [ Froman ], another methanol and nitrogen producer, and it has a capacity of 1.8 million tonnes per year and is located within a couple of miles of OCI Beaumont. And lastly, BioMCN in the Netherlands is a shutdown plant that has been shut down for over 2 years and offers over 900,000 tonnes of additional upside capacity partly green going forward. Moving on to Slide 16. This slide demonstrates the upside in driving production efficiencies across the complex historical long-term asset utilization rates to reach new heights. More recently, OCI Beaumont is seeing utilization rates in the high 90s and our manufacturing improvement plan is fully focused on maximizing reliability going forward with a focus on process safety and having the right leadership across the senior management team. Going to Slide 18 and 19. Here, we'll walk you through our European nitrogen operations, and we have some of the most efficient plants in Europe as the slide demonstrates. Energy consumption at just over 30 MMBtus [indiscernible] ammonia produces one of the lowest in the world and compares favorably to highly efficient plant the newer facilities, even including Iowa Fertilizer and [indiscernible] We have maximum production flexibility on both the input side where we make or import ammonia and on the product mix for the downstream production. During periods of elevated gas, we import ammonia to partially replace our own ammonia production to optimize margins. And on the downstream side, we can choose to produce certain products to optimize margin depending on pricing in the market. Recently, we have introduced our higher-margin products such as CAN plus sulfur, which will start contributing positively this year. Further in Q2 production of our [ AdBlue/DEF ] commences, another higher-margin product that is not correlated to agricultural cycles and is used every day for diesel consumption, not just in the trucking and industrial markets, but also in the passenger vehicle market, a market that continues to grow over the next few years. Last month, we delivered first shipments of bio melamine produced using biomethane from waste and residues of biological origin and resulting in a [ GHG ] reduction of up to 40% compared to conventional melamine. If you move on to Slide 20, you can see that performance-wise, European nitrogen business has been a consistent performer with robust margins and strong cash conversion. Our 2023 has been somewhat of an anomaly and should not be extrapolated as definition of the business potential given the historic drop in TTF pricing in late 2022 and early 2023 from over $60 of MBtu to the low double-digit levels that we saw in the beginning of last year. These assets have significant upside potential from both higher utilization rates as well as a more diversified portfolio with potential of higher margins. We'd now like to spend a few minutes talking about our growth projects and specifically Texas Blue clean ammonia, our main investment and largest one globally. Turning to Slide 22. Our 1.1 million ton Blue Ammonia project in Texas, the world's first large-scale greenfield blue ammonia plant remains on track for commissioning in the first half of next year. Construction is well underway with about $500 million spent to date of a total investment cost of over $1 billion. The plant is more than 90% engineered, piling is complete and the first steel structures have been erected. The plant benefits from significant first-mover advantages, leveraging deep expertise from the industrial technological leaders utilizing world-leading KBR money technology and has supported material operating synergies and substantial cost savings given its proximity to our existing operating plants at OCI Beaumont in the area. In addition, it will be connected to multiple hydrogen and nitrogen pipelines for redundancy of stock supply. Commercial discussions for long-term product offtakes and equity investments in the projects are at advanced stages with multiple parties. This reflects a very strong commercial interest and increasing appetite for the strategics to pay a price premium to secure long-term low-carbon ammonia driven by regulatory support as well as in an effort to decarbonize heavy and hard to decarbonize industries. OCI's clean ammonia design philosophy offers highly synergistic future expansion and growth optionality. As mentioned before, space for a second identical expansion has been [ ring-fenced ] with utilities and supporting infrastructure oversized to facilitate potential future expansion. A second line would be a simpler and smaller project than the first with cost benefits deriving from early mover advantage requiring materially less CapEx scope and critically providing the opportunity to capitalize on additional clean ammonia demand at low development costs. I'd now like to spend a few minutes giving some updates on the markets to close out. Starting with methanol on Page 34. 2023 was a weak year for methanol, but spot methanol prices recovered during the fourth quarter and have continued to improve more recently in the last few weeks. This has been driven by improving demand, particularly in China, as rising crude oil prices have supported Chinese MTO affordability and MTO operating rates continue to go up quarter-over-quarter. MTO rates averaged above 80% in Q4, up from below 70% average in Q3. MTO rates have softened in Q1 but remain elevated. And as a result of these tightening supply and demand balances, inventories have also come down recently. Prices have rebounded considerably over the last few weeks with Houston spot rates now at above $350 a tonne. Medium and long-term methanol market fundamentals remain favorable, driven by 3 key factors. Most importantly, demand from methanols and marine fuel is accelerating exponentially. We are seeing more and more retrofits resulting in more than 200 dual-fueled engine ships on the water by the mid-2020s. As you can see on Slide 36 in the presentation, incremental demand from the maritime sector today is expected to be in excess of 7 million tonnes per year by the end of 2028. Based on current orders of more than 275 new and retrofit vessels. And that's not actually Page 36. That was a page, the page we were on earlier yes, Page 33. In addition to marine fuels, we also see increasing demand from ethanol as a road fuel in several European countries, our current core end market for green methanol, to decarbonize transportation fuel and move away from fossil fuels. Outside of [ Methanex' ] [indiscernible] 3 plant and another plant starting up later this year in Malaysia, we see no major supply additions outside China over the next few years. New supply will not be sufficient to meet the needs of these new growth segments, especially with the offering with the ongoing rationalization of existing supply and the growth of traditional methanol demand with GDP. Going to the outlook for our nitrogen fertilizer and ammonia markets, which you can see from Slide 38 onwards. Nitrogen markets were relatively quiet during the fourth quarter of 2023 with urea and CAN prices falling during the quarter, impacted by demand deferrals into 2024. However, year-to-date, we've seen urea prices recover by around 20% as deferred demand has started to materialize ahead of the spring application season in the Northern Hemisphere. Restrictions on Chinese exports, which are forecasted to be in the 3 million to 4 million tonnes range this year, similar to 2023, low operating rates in Iran due to gas shortages and unfortunately, the recent explosion we heard of this morning and supply chain disruptions in the Red Sea are also giving further support to urea prices in the near term. Moving to ammonia. Prices increased in Q4 2023 compared to the previous quarter, underpinned by widespread supply disruptions, more recently, we've seen prices retreating from the recent highs, albeit still at supportive levels and above trough levels reached in 2023. A rebound in industrial demand would tighten the market substantially when it happens, given that global ammonia trade has still not recovered to the 19-plus million tonnes or a level where it has historically traded. However, importantly, potential incremental money demand from the new green energy applications continues to gain traction, and our teams are continually in discussions with many potential customers across power, shipping and downstream chemicals. For power, the Japanese and Korean markets alone could generate incremental ammonia demand of 6 million to 9 million tonnes by 2030 as we are seeing co-firing regulations come into effect over the next several quarters. Finally, pivoting from methanol as a marine fuel, which we discussed earlier, we're seeing increasing interest of ammonia dual-fuel ships, particularly in the last 6 months. As of today, there are 11 new ammonia dual-fuel ships currently on order awaiting engines and more than 250 ammonia ready ships are either already operational or on order. This market is expected to accelerate exponentially in 2026 and could generate incremental demand of around 5 million tonnes by 2030 and significant regulatory value for blue ammonia. Let me conclude with extending my thanks to the entire OCI and Fertiglobe teams for their contributions and achievements this quarter and over the last several years. With that, we'll open the line for questions.
[Operator Instructions] We do have our first question comes from Lisa De Neve from Morgan Stanley.
I'll start with two. For the capital distribution, can you please share how the capital distribution at least will be structured, for example, in terms of dividends, buyback, partial tender? And also accordingly, how we should think about the tax implications? And then secondly, on the strategic review. So you stated that you're pursuing further strategic options for the business? I mean what are the possible avenues that you see as potentially interesting and in particularly referencing to the [indiscernible] this morning, I mean, how would you think about a cash out structure for OCI. Overall, what is the long-term end game for OCI and the key shareholders?
Yes. I think I'll answer the first question and the first half or the second question. On the first question in regards to the at least $3 billion of distributions that we've guided to today. As you know, of course, the -- we've noted in earlier calls that both transactions are tax-free. In regard to the mode by which we will make the distributions, that is something that we are currently considering. It is highly likely that we'll be looking at the -- what we have done before in the past for most of our $2 billion -- over $2 billion of distributions over the past 2 years, which is through capital reductions that we believe are tax efficient for the vast majority of our existing shareholders. However, we will firm up the approach in due course as we get closer to the distribution events. Ahmed on the second question.
Yes. Lisa, on the second question, it's not much more than what we shared in the press release that there has been multiple inbound inquiries on the remaining business. And as such, we've decided and in discussions with the Board to reopen the strategic review and all options are on the table. And the strategy continues to focus on manufacturing improvement on increasing low-carbon volumes on bringing our blue ammonia plant to fruition and extending that value chain with Europe. But as you know, as part of our DNA, our focus is on maximizing value creation. And to the extent that there is an opportunity to create value that's not being recognized in the market, that's something that we have to explore and look at. So maybe I'll leave it at that.
Our next question comes from Christian Faitz from Kepler Cheuvreux.
Just one question remaining for now. You mentioned you also want to reduce leverage into a net cash position by year-end. Just from a finance theory point of view, why not keep some leverage on the balance sheet?
No, it's a good question. And we've been obviously doing a lot of thinking around our balance sheet management and capital structure calibration as we move forward. But as we mentioned in the press release and the call, there are a multitude of variables that are now in play, including the strategic review. So for the time being, we are committed to an extremely conservative financial profile that provides us with the ample buffer to complete our projects and land as [indiscernible] position at year-end. And this is, of course, combined with the retirement of significant amounts of gross debt. And like we mentioned earlier, we're also suspending our regular dividend. After the closing of the transactions, and -- we will recalibrate our capital structure and communicate more in due course.
Our next question comes from Aron Ceccarelli from Berenberg.
I have two. The first one, where are you in the regulatory approval process of IFCo? Have you and [indiscernible] filed the HSR for the IFCo transaction yet? And my second question is how much of UAN and urea demand is currently satisfied by imports in Iowa and the [indiscernible]
Thanks for your questions. So yes, we have filed for the HSR approval process. So that process has initiated already since signing the transaction. And to your second question, I mean, I think just stepping back and thinking about U.S. markets, the U.S. markets have been one where over half of the nitrogen in any form have come in the form of imports in the 2015 and prior period. What's happened is there's been new production that's come online, including Iowa Fertilizer other producer brownfield expansions in Iowa and Louisiana and Texas and Ohio, a few other areas. And so the infrastructure for imports still exists, whether it's warehouses for urea, whether it's tanks for UAN, whether it's tanks for ammonia and the railcars pipelines and Mississippi, Illinois Rivers are all still there in place to be able to bring in product and [indiscernible] Off the top of my head, I don't have the number for you in terms of how much is imported, it fluctuates. How much gets brought into the United States, when the pricing is attractive for foreign producers, they will send more product into the United States, even at times as we know, they send them in as we've seen a lot of Russian product come in over the last couple of years into the United States and being sold on and around the Iowa plant and in the Midwest. And obviously, the other element on the UAN and urea side is the farmers will tend to look at nitrogen values, whether it's ammonia, urea, UAN values and could change preferences in a given season and put more UAN, more ammonia, more urea in the ground, depending on relative value and pricing. But all products continue to be imported into the Midwest and into the United States as it is a global commodity.
Our next question comes from [indiscernible] from [ Invesco ].
I was just wondering in terms of the actual Texas Blue project, given the scale and the kind of first-mover aspects of this project, have you encountered any sort of issues with the actual engineering given it's more of a proof-of-concept type project? That's my first question. And my second question would be that given the strength of the balance sheet, going forward as an ongoing concern. Do you have any guidance at all in terms of M&A expectations for investors?
Yes. Thanks for those questions. So starting with the first question on the Texas Blue ammonia project, this is a blue ammonia project. So it's unique that this early mover advantage we see is not just an advantage because construction costs have continued to go up, equipment costs and availability has continued to be more challenging over the last several quarters, and we signed this project back in 2022. But also it's an early mover into an existing proven technology. This design that we have for 3000 tonne per day or over 1.1 million tonne per year ammonia line is a KBR proven existing technology off the shelf. It has production that's operated in other parts of the world. And then as OCI, we've had experience with KBR technology. Purifier and the Iowa plant that we brought online in 2017 and plants in Egypt in EBIC, which is part of Fertiglobe as well as in our OCI nitrogen plant. So very familiar with KBR technology. This design is not a new size. It's been produced and proven in terms of design, nothing complex on that front. And I'll just further add that this is a simpler project from an OCI perspective than one we've ever done because it's only a back-end ammonia line. So you're literally talking about 2 compressors, a converter and some heat exchangers in terms of production relative to, for example, the Iowa plant, which I think had over 7 -- I think it was 7 or 8 compressors on that site. So very straightforward to produce. We're going to be buying over-the-fence hydrogen and nitrogen from [indiscernible]. And as I stated during the prepared remarks, we will have redundancy on to U.S. Gulf Coast nitrogen and hydrogen supply points. So that's where we stand on that, and we feel confident in terms of the design with KBR, which is one of the largest market share ammonia producers globally. On your second question, and I think as we stated, we've reopened a strategic review due to inbound inquiry on our remaining business from a purchase perspective. Our balance sheet does stand in a good position. I think Hassan walked through our plans in terms of continuing to fund our existing and announced growth projects, and we'll continue to conduct the strategic review.
Our next question comes from Charlie Bentley from Jefferies.
Could I just confirm, I get something like [ $500 million ] of incremental cash on balance sheet post the divestments. Can you kind of confirm that, that sort of number by the end of the year should be reasonable? That's question one.
Likewise, we just did not guide specifically on what the exact position will be. I think the direction of travel, which we've shared is that in the short term, we're going to be taking a bit of a conservative and prudent financial position. And we look -- as we look also into all the individual pieces of our debt instruments in the context of the strategic review that's ongoing. However, of course, I would add to that, that in a more longer-term basis, obviously, we would take on a healthy level of leverage that still puts us within a healthy financial profile that fit for purpose for our business, noting that we do have some growth projects that could take on some debt in the future. But in terms of specific cash figure guidance, I think will differ in the composition to later end of the year.
Can I just add one thing as well. As we -- in Q3, we announced the stake sale of Texas Blue. I mean, for example, if that were to go through in the next few months, that could have an effect on how much cash is in the business, especially since we've already spent $0.5 billion on that plan. And as we just announced this morning, that we've had inbound in Korea and over continuing strategic review. All of these are variables that would affect what that number could look like at offset.
Yes, and hence, the decision to defer some of these discussions later on, but we wanted to give some parameters to the market in terms of how the rest of the year is panning out as we evaluate the extended strategic review.
Okay. Great. And so, just the second one was on -- specifically on the remaining CapEx of Texas Blue. I know you flagged something like $600 million of incremental growth CapEx. Is that all for Texas Blue. I'm just checking, there's not kind of any overruns that we should be expecting from the initial $1 billion number.
So we've said that it's an approximately $1 billion CapEx number, the $600 million for this year was one that did include a bit of growth CapEx associated, for example, with bringing on the DEF storage tank in [indiscernible] and the Netherlands, which will offer the distribution in the next 2 months of -- sorry, 2 to 3 months of AdBlue or DES in Europe. And yes, I think, Hassan?
No, correct. It's a total number, which captures a big part of it, obviously, is the majority of this Texas Blue, but it captures some of the other ongoing preannounced initiatives. And we mentioned earlier that a project is north of $1 billion, but we haven't given exact numbers yet. Obviously, we have live discussions happening with potential co-investors on the project. So in due course, we'll be able to share more information. But the product is progressing quite well. progressing relatively on track, and we are really feeling the benefit of having done early movers, made early moves to secure various aspects of the project, which would have been subject to significant inflationary pressures as we've not done so. So even on a replacement cost basis, we're doing quite well with this project.
I see. And then sorry, just my final one was on that point. I mean, I guess, if I look at the MOUs that your competitors, [indiscernible] and [indiscernible] signed with [indiscernible] at the beginning of 2023. And I know they are a lot earlier in terms of their projects. But I guess I wonder, you being a lot further along with your -- these projects and maybe it would have been a bit quicker to sign some of these agreements. I guess did you look at kind of that type of collaboration with [indiscernible] at the time? And if so, what -- I guess, what was the -- I guess, what was -- were there any sticking points? And I guess just thinking about that, I mean, should we be thinking about Japan and Korea as the kind of primary avenue for selling down an equity stake?
I think it's a good question. But first off, we are the only plant that is under construction today. We are the only plant that's FID. We are commissioning and starting up in the first half of next year. So we're well ahead of other plants coming to fruition. And I think one of the benefits to [indiscernible] which Hassan said, is that we had the benefit of buying the equipment and securing construction contracts over -- ahead of the inflation reduction even being approved. So we were able to fight some of that inflationary pressure that you've seen has affected other projects that are under study right now. I won't go into specifics on specific counterparts that we would look to potentially have offtakes with Japan and Korea is definitely one of those destinations where they would look at equity stakes as well as offtakes to qualify for the incentives to be able to bring in low carbon ammonia to decarbonize their fossil fuel-related power sector. But also, we do have the benefit of the ability to sell into our European distribution network as well. We -- from an OCI perspective, we're generally not in favor of announcing too many MOUs. We're focusing on sharing with the market, binding agreements when and such they're available.
Our next question comes from Faisal Azmeh from Goldman Sachs.
Maybe just a few from my side. Just on the Texas Blue, when we think about the first projects you've mentioned that you've managed to secure the cost at a relatively good level. Does that mean that thinking of a second project makes it a bit more difficult in light of the inflationary environment? And at this stage, you will only be completing one and that places any potential for another one out of, let's say, out of hand at this stage. That's my first question. And my second question relates to M&A. You've mentioned as well that you could be looking at inorganic activity. Should we assume that it's mostly in the U.S.? Or does Europe also fall within the spectrum of the areas that you're looking at? And then finally, maybe if you can share some color on the free cash flow conversion relating to that mid-cycle EBITDA that you've highlighted. Part of that is obviously [indiscernible], which is a dividend. But if you strip that out and you look at the [indiscernible] excluding [indiscernible] gasoline, what kind of free cash flow conversion should we think about, given that there is a corporate aspect of the business, which has a lot of eliminations. So if you can just share some color on how we should think about the free cash flow conversion.
Thanks, Faisal. So with regards to the Texas Blue project, part of our CapEx that we spent was still oversize, as I mentioned, utilities, things like interconnecting pipe racks, [indiscernible], water treatment, substations, even the connection to hydrogen and nitrogen networks. So that, among others, and we have a bit of an illustration of that in the presentation, which we just posted allows us to build this next plant. I mean if we've gone with Line 2, 2 years ago, it'd be a lot cheaper than doing it today. But we didn't go with line 2, 2 years ago, and we're not FID-ing in line 2 today. What we're communicating to the market is that if there would be another plant to be built, Line 2 probably has the biggest advantage, we think, in North America in terms of building a plant in the U.S. or in Canada, where a lot of the existing outside battery limit items and utilities are already in place, right? The construction market is moving every day. Like I said, on the first line, we've done unit rate contracts not to take productivity, risk and not to take labor market risk -- labor price risk on the first line. But on the second line, that will be a moving target just with what we're seeing, and that's why replacement values are going up, as Hassan mentioned, as well. We think it's future optionality, and we think that we're in full position with Texas Blue to be a plant that can come online. But we're focused. Based on this last question on our offtake and our ability to place that, whether it's in Japan and Korea, whether it's in Europe with the advent of [indiscernible] in 2026, the ability to produce low carbon fertilizers in both par carbon chemicals and get into the ammonia as an energy usage we think is another big potential destination. And also, we're really tracking the marine fuel side, which I said in the prepared remarks at the end, where we think that blue ammonia could have very strong regulatory value, and we're looking to arbitrage between Japan and Korea in that market. The European market is an end market with CBAM and the marine fuels market where blue ammonia can fetch particularly if it's a lower carbon blue ammonia, quite a high premium and generate good returns for this project. The second question, can you repeat it again? The M&A question was right, Faisal? So on the second question, I mean, we can't provide any further detail on the nature of the inbound for the strategic review. On the third question, maybe I'll hand it over to Hassan on the free cash flow conversion.
Yes. It's a good question. I think we provided some insight into that in our -- in the call pursuant to the announcement of the 2 divestments, and we guided for circa 50% free cash flow conversion. Obviously, there's some assumptions associated with that. I mean these are relatively young assets. Of course, OCI [indiscernible] a little bit different although it's a [ gold-based ] facility as we have described this in the past, so it also has slightly higher maintenance CapEx. But looking at maintenance CapEx, looking at -- assuming some reasonable leverage going forward and very low cash effective tax rate, you get to comfortably around or above the 50% free cash flow conversion Mark.
And that is also including minorities in the free cash conversion, right, for the methanol business?
Well, the minority, the remaining minorities right now is only limited to the 15% stake. That's in the methanol group.
Got it. Maybe just a follow-up on the first question Ahmed. So when we think about, let's say, another line, do you think in the current cost environment, I know you would have -- like, let's say, if you [indiscernible] this 2 years back, probably it would cost you less than $1 billion. If you FID another one today, do you think it will cost you $1 billion given that you've already spent a lot on the infrastructure related to the project?
I think I'd prefer not to share kind of estimates on what that looks like because it changes every few weeks here in the United States with what we're seeing in the market. But if you think about -- when you think about construction, what needs to be done, the quantities of steel, the quantities of equipment, the quantities of concrete, all the quantities of piping and welding are all materially lower in the second project and it would need to get repriced with construction to see what it looks like. All I'm saying is that it would be advantaged, and directionally, the quantities are materially lower and can allow [indiscernible] relative to others built today. But it is an interesting market in the United States right now from a construction perspective, to say the least.
Our next question comes from Sashank Lanka from BofA. Bank of Bank of America.
I have two questions on my side. Just looking at Slide 13 and mid-cycle EBITDA bridge. I think you've highlighted an increase in about 70% production. So just wanted to understand how you expect to see that ramp-up of the production? 70% production increase, that's the first question. And sorry, that's the first part of the first question. The second part is, if I had to put a split between price versus volumes, obviously, volume is around 70% increase. But what upside would you need to see in prices from the current spot price to get to your mid-cycle EBITDA guidance? That's the first question. And the second question is basically on the north mechanism that you spoke about on the last call from Fertiglobe. I think we were waiting for details there. So anything -- any guidance you can provide there, especially given you did mention that you benefit from the nitrogen market upside. And you seem quite bullish on nitrogen pricing trajectory in the next -- over the next few quarters.
Sure. No, I mean just to answer the two questions, I think one you're asking about where do you -- timing of the volumes increase. And the second part of the first question was on prices. So maybe I'll start with the second part of the first question. In the footnote, and also in the fine print there, you can see the benchmark mid-cycle prices assumed and you can extrapolate based on those what that looks like. So for example, methanol U.S. Gulf spot is [ 375 ], assumed in that mid-cycle number today, we said the numbers just above [ 350 ] for just today's price, right? And you can look and see some of those other numbers in there and make a comparison. I think [indiscernible] ammonia is not far from what is there, so you can kind of compare and contrast both that as well as the gas and the TTF side, obviously, without taking into account the hedges excluded. With regards to the volumes, these levels are levels that have been achieved in the past and our focus over the next few years to continue to work towards achieving and exceeding these historic levels. One of the benefits of being a smaller company now, following the announced transactions in December is the continued focus on [indiscernible] now just 2 industrial sites, [indiscernible] and the Texas Beaumont complex in terms of the leadership. So from that perspective, you have a large increase in the manufacturing improvement initiatives to focus on bad actors, to address equipment issues. And some of those that could be a little bit lumpy and be post turnarounds as they get scheduled to see improvements on the manufacturing improvement side. The other side is obviously on the blue ammonia, which is the largest part of that 70% production increase. That's one -- it's a little over 1.1 million tonnes, like I said, it probably one of the easiest plants we bring on from a relative complexity perspective because it is just the back-end ammonia plant without a reformer. And obviously, that is scheduled to come online in the first half of next year. So I think [indiscernible] your questions with regards to the sensitivity right?
Yes. So just is my understanding correct that this -- the move towards the mid-cycle from the current level is more volume-driven than pricing-driven given most prices are not very far from more spot price are not ready for the main cycle?
Yes. So I was saying versus spot price today, yes. But think about last year 2023, we saw methanol prices, ammonia price is much lower. So when you look on the trailing results and what we have there with much lower methanol prices, we had much lower ammonia prices towards the middle of the year, they improved in the end of the year. And then you can look at, for example, CAN, melamine was a bit weaker with the industrial side. So I think it's definitely price as well as volume with some of the issues that we faced last year with the net gasoline outage being one of the major ones despite OCI [indiscernible] performing relatively well. And I think you also had a turnaround sorry, in urea and melamine, in the middle of the year in [indiscernible]
Got it. And then the earn-out mechanism from the Fertiglobe sale?
Yes, sorry. The second question relates to the earn-out in the Fertiglobe transaction?
Yes, correct.
Yes. No. I mean, as we mentioned before, we haven't -- we are unable to provide any specific disclosure around the mechanism. But like we mentioned in an earlier call, the earnout is designed to capture upside volatility in the market, which we have seen happen in numerous occasions in the last 5 to 7 years. And should that take place, we want to be in a position to benefit from such upside volatility and capture it in the purchase price. But it is not designed to find -- to target an incremental premium per se on a sort of -- on a normalized basis. It's more to capture meaningful movements in the markets.
Got it. So more like supernormal -- abnormal prices, yes?
I wouldn't say that either. But let's just say it's to capture upside when there's significant -- when there is meaningful movement because of the price in the market, yes.
Our next question comes from Lisa De Neve from Morgan Stanley.
I have a couple. So one, can I just confirm that you'll look to redeem multicompany debt with your target for net cash pro forma position at time of completion of the transaction? Just to confirm that, that would be helpful. And secondly, I mean, how should we think about OCI continued business network and capital requirements and the seasonality of that? And especially, how will this compare to actually OCI group previously, because you always had very limited net working capital outflows and quite limited seasonality in comparison to some of your peers. And then maybe on BioMCN. So how do you think about potentially at one point, restarting by MCN. I mean what would really to be in place? Because -- if I look at your direct margins right now, I mean, based on gas prices and contracts, methanol price at a certain discount, it seems that at least you're currently back in the black. So what would you need to see for actually feeling comfortable bringing that back online? And is there any sort of time line or safe window for that to be in place for you to do so?
I was saying that in regard to your first question, we haven't given explicit guidance on how we're going to be approaching the individual components of the balance sheet. But like I mentioned, directionally, we are committed to achieving -- and that cap position at the end of 2024. That, of course, does not mean that that's going to be the [indiscernible] medium to long term. However, during this period of strategic review and as we calibrate our capital structure, this makes sense for us. And we do intend to repay substantial amount of gross debt as part of the exercise, but it's too early to finalize on individual components. So I can't really give you the exact answer to your question except the directional guidance that we've shared so far. Maybe can you repeat the second question Lisa because there were a lot of questions.
Yes. So yes, sorry for that. So on net working capital, so how should we think about OCI, the continued business, networking capital requirements and seasonality of that, especially how this compared to OCI pre-announcement of these transactions because you've always had quite a balanced net working capital structure versus maybe some of your peers where the swings for the quarters can be quite pronounced? And just to understand how we should think about it in terms of remain [indiscernible] methanol business and OCI Nitrogen.
Yes. I mean, I think it will be -- like the business before even the deconsolidation we don't think there's going to be significant swings in net working capital per se, except insofar as it relates to commercial decisions that we make at times during certain parts of the year or during certain years to hold back inventory or be more aggressive at times. but the business in itself does not require significant working capital or does not experience significant working capital fluctuations per se. And we also have built into the mechanisms that we've deployed in the past that even in the case where we do have commercially driven fluctuations, we have mechanisms to smoothen it out. Your next question?
Yes. So the last one was on by BioMCN. So just about how you would think potentially about restarting that unit at some point. What would need to be a place for that? And the reason I'm asking this is because if you look direct cash margins for like running a direct margin spread on methanol. If you base that from the current gas prices in Europe and contract national prices, I mean, you would actually currently be back in positive territory. And I'm just asking you, what would you need to see just a little comfortable bringing that back online?
Yes, Lisa. So obviously, it's a relevant question. We brought it up today, just given where the gas environment has been and it kind of maybe it creates a bit of a [indiscernible] a few years ago when at times, this is the diversity that having methanol allows for. As being one of the only on-purpose natural gas-based methanol production facilities in Europe. And I think I recently read that there have been a couple of permanent shutdowns of off-gas produced methanol in Europe, think we're getting into that neighborhood where it's something to be considered. As you know, we have 900-plus thousand tonnes of production capacity. We can restart our second line, which is 450,000 tonnes. And it's something that we're monitoring right now, and we see as a good potential upside where we can also generate not just gray methanol but also some bio methanol and make a margin into that market. So it's something that we're definitely considering. I won't go into specifics on exactly what gas price is and exactly what CO2 level because that's also a relevant metric, what that looks like. But we did, as you recall, refurbished this plant in 2019 have had a lot of good CapEx that went into it and we considered a good swing that could be an operational when we're close to the mid-cycle pricing and have that optionality to where it's going great.
Nothing that the -- we provided does not include BioMCN. It does not assume the [indiscernible] back in operation.
Exactly. The $500 million assumes nothing from BioMCN. So it's -- we put that as optionality. You had another question, I believe?
Just one moment, Lisa has dropped from queue. Lisa, if you do have another question please rejoin the queue. Our next question comes from [indiscernible] from Credit [indiscernible].
Yes, I appreciate the color today. I was just wondering what about your commitment to an investment-grade rating, unless I missed it in your report, but it's something that you usually refer to. And I think that -- yes, maybe you could provide some more color on that?
Yes. No, it's a relevant question. In the context of the ongoing strategic review and sort of all the variables in play, we are still committed to an extremely conservative financial profile, as I mentioned earlier. The -- we believe that the financial profile that we are constructing going forward will be IG like, but there are other considerations that we need to -- that will be taken into account by the rating agencies, and that's something that's going to be worked through and of course, get impacted by the strategic review that's ongoing. However, we are committed to maintaining the appropriate financial profile accordingly. Hope that answers your question.
Our next question comes from [indiscernible] from Invesco.
I think I just -- you just answered the IG question I had in mind. But just for a little bit more color perhaps. You mentioned that you were already negotiating offtake contracts for Texas Blue. I mean just to give us an idea, given that you framed the picture where there was quite a strong demand backdrop to that. In terms of the proportion of the output that's currently being negotiated. Can you give us any color on how much of the [ 1.1 million ] capacity is kind of currently under negotiation in terms of offtake, please?
Yes. We won't be able to go into detail on the level and/or percentage, which we could potentially offtake. But I will just reiterate what I said earlier, that we look at Japan and Korea as being interesting markets, which is highly competitive in terms of who could be procuring our Blue Ammonia production capacity, but also there are several European buyers that want [indiscernible] with Cbonds onset in 2026 and seeing a path to be able to arbitrage for example, nitrate fertilizer produced with blue ammonia relative to urea, which might have [indiscernible] implications coming in 2026. Plus I think in the next few quarters, we're going to see and that's what we're weighing against, the continued regulatory support on fully [indiscernible] IMO focus on CO2, where blue ammonia ends up being one that commands quite a big premium into that market. So we're balancing all of the above, and we're looking at where we can have a good predictable cash flow stream from that blue ammonia project while retaining upside optionality given we're looking to maximize value at that asset.
Our next question comes from Aron Ceccarelli from Berenberg.
Maybe can I ask you first question, can you give some color around maintenance CapEx for [ RemainCo ], please? The second question is -- sorry for going back to the antitrust for [ ESCO ]. But -- and I understand this a long time ago, but in 2009, one of the reason why the CF agreement deal didn't go ahead was because the regulator look at it not from a regional perspective only, but from a date perspective only. So maybe can you give us a little bit more color why this should be different? And final question is, maybe can you confirm that you had more than a single bidder for the [indiscernible] plant?
Yes. Thanks for your questions. On the maintenance CapEx, I believe we included in the presentation that was used concurrently with this call. I hope you can locate it. And in the presentation, we gave guidance for 2024 of $125 million for maintenance CapEx. We haven't given guidance in the beyond years as we have typically focused on the year ahead, but that's the figure -- and that's obviously built into the free cash flow conversion sort of the guidance that we shared earlier. [indiscernible] Ahmed?
Yes, sir. I mean, I can't comment on 2009 actually predates me in the fertilizer industry, but what I can say based on kind of experiences that we've had is that -- as you may recall, 2015 with CF, OCI and CF entered into a merger [indiscernible] that was ultimately canceled due to tax -- due to the reversal of tax inversions, but it was approved an antitrust in the first round after 59 days, where CF went from, I think, a 60%, 65% market share to -- with the addition of IFCo closer to 80% market share on UAN. And CF did have an existing UAN plant in Iowa at the time, and OCI was adding with IO fertilizer UAN capacity, and there's that was approved in that first round. But probably more relevant in this administration last year, CF bought the ammonia plant at [indiscernible] Wagon in Louisiana, which I think is within 100 miles of the [ Donaldsonville ] plant that has over, I think, 6 ammonia lines and one of the largest single-site ammonia production facilities. So both in the state of Louisiana approved within 8 months, I think treating it as global commodity. And as I said earlier, we continue to have import capacity throughout and around our [ Iowa ] fertilizer plant. So I think from that perspective, and given that Coke is a much smaller entity, as a #3 player, I think it puts us in a good position with regards to that and obviously, the ability to swing between products from a supply and demand perspective depending on changes in prices.
And maybe can you just confirm that [indiscernible] was not the only bidder for [indiscernible] plant, please?
Now you're getting into trade secrets. But yes, there were more than one bidder, and [indiscernible] was the winning bidder on this plant.
We currently have no further questions. So I'd like to hand the call back to Sara Rajani to continue. Sara, over to you.
We have a couple of questions on the webcast. Firstly, from Andrew Kash. When do you expect to realize the mid-cycle EBITDA? Or said differently, EBITDA from continuing operations a loss of [ $23 million ] in 2023. Can you help us to bridge to the $500 million mid-cycle figure? And how much progress should we expect in 2024?
So that's a good question. It was part of the reason why we wanted to also provide some of these insights into how we view the business and its potential. So the information provided is sort of part of that bridge thinking. But retrospectively looking at 2023, which was a challenging year, there was a combination of factors, which include natural gas hedge losses. And of course, we continue to have a hedge book for the continued operations that have -- that at year-end had unrealized losses, excluding net gasoline in the neighborhood of $125 million. There was some production issues that Ahmed mentioned earlier in the net gasoline facilities. We -- of course, in the wake of the transaction, we had not yet launched or began to execute the restructuring required for what was a global platform with holding company costs that associated with that, and that will take us some time to recalibrate. We're targeting that by next year, we bring down our holding company costs to a more reasonable range of $30 million to $40 million, although we are targeting the lower end of the range. Then also as described earlier in the call, even though spot prices is closer to mid-cycle for methanol, we are coming out from trough conditions for methanol that on an average basis for the year. And similarly, ammonia prices were also lower. And of course, natural gas prices, although there was a sort of a historic drop in natural gas in Europe, the year was not consistently be experiencing lower gas prices. When you combine all these factors and you combine it with the sort of the mid-cycle with the explanation that we provided, you begin to see how -- what that bridge could look like.
And just to add one last point on this drop in natural gas in Europe, which is very significant, right? We had a situation, which I can say the most easy corollary or the most easy parallel is mid-2018 [indiscernible] had natural gas go from over $60 MMBtu to -- I mean, today at $8 MMBtu, but it dropped into kind of that $11, $12. So you've had production during a period where gas prices were high, and we saw this with a lot of the European peers at a historic high. And to repeat that kind of drop is just not something that is possible unless gas goes back up to $60. So that was kind of the historical element of it, and it became a bit of the self-fulfilling property in the people didn't want to catch [indiscernible] on the buy side. They see gas prices going down. They don't want to buy, they want to wait till absolutely the last minute to buy. And that's what hit a lot of European nitrates and nitrogen producers in the first half of last year. And we did have the benefit of ability in port ammonia and do other things. But that, coupled with the melamine slowdown in these lower prices explain a big part of that.
We have a second question from [indiscernible] Can you quantify the adverse impact of the gas hedges in the coming years in relation to the mid-cycle EBITDA of $500 million. These are a one-off impact to the GAAP hedge in relation to the [indiscernible] and I think the other question has been answered.
Yes, as I mentioned earlier, at the end of 2023, excluding nat gasoline, our sort of unrealized gas hedges stood at a negative $125 million. We do have the hedges associated with IFCo for both physical and financial are being treated as part of discontinued operations. As for the hedges associated with the continued operations, we do have a book, like I mentioned, I quantified the figure at year-end. And that little bit, again, front heavy, as we mentioned in earlier calls, on the overall total gas hedge book, the pre divestments in terms of 2024 and 2025, and it trails off in the outer years. And I would say that we've also shared that it's in the ZIP code of the sort of $4 per MMBtu, that's where the cost of that hedge book stands.
We have a question from [indiscernible] who's asking, can you talk us through the expected price profile premiums of blue ammonia that will be produced by Texas for next year? And how [indiscernible] this state of the art plant [indiscernible]
No, I mean I think that's the billion dollar question here with regards to that. In terms of the blue premium, right? We think that the fact that we'll be the first blue ammonia plant and there's the scarcity value there, where nobody else is under construction in the United States. And [indiscernible] will have started implementation and be incrementally kind of implemented from 2026 to 2032, '34. That gradually will increase the value of a low-carbon product relative to those that need to produce carbon-intensive products for fertilizer use. The other area is on the industrial new energy use. That area, as I mentioned previously, we could see blue ammonia having a regulatory value, given how we capture over 95% of the CO2, we could see a regulatory value of blue ammonia in the order of $1,000 a ton of blue ammonia, right? So that's something that we're monitoring closely over the next few quarters. The third avenue is obviously in the Japanese and Korean markets, depending on the incentives that are brought into place and what the Japanese and Korean utilities would want to buy to be able to reduce their emissions. And reach their CO2 emission targets. And that's going to depend, obviously, on the regulatory side. So whether it's CBAM, whether it's the Japanese green regulations or whether it's the gas directive under maritime and -- those are all elements that will be driving that blue ammonia premium relative to gray. But as Hassan stated, and as you could see in the slide, when we showed mid-cycle, we assumed great pricing or historical kind of repricing rather than the addition of that blue premium.
Okay. We have another question that's coming from Sam Norman. Are there any covenants included in OCI's bond debt in ventures that will require certain pieces of debt to be retired upon the sale of the IFCO vertical assets?
The answer is no.
Okay. The final question from [indiscernible]. [indiscernible] was interviewed in the FT today stating OCI may become a cash cow and becomes a machine for further investments. We are quite open-minded. Can you clarify or expand on this and perhaps give us some reassurance over your cash pile?
It's -- the -- we're aware of the piece that was published today in the Financial Times. I mean, frankly, the -- what is described and also in the Financial Times piece is fairly consistent with everything that we have done in the past and everything we are seeing today as part of the strategic review that's been ongoing and by OCI. It's as Ahmed mentioned earlier in the call, in our DNA to look at value maximization and look at opportunities that unlock value for shareholders. And we see that as part of our fiduciary duty to evaluate all options as they become available. And that's something that we will continue to do, hopefully success.
Bringing in $6.2 billion of net cash proceeds, it doesn't mean that it has to be spent. We're going to look at it as if every dollar counts, and that's how we focus on how we run our business and hence our continued focus on the strategic review.
There is one final question from [indiscernible] Understanding that you remain in communication with rating agencies while you undergo another strategic review, have they communicated any parameters or requirements needed to maintain IG ratings based on recent discussions?
We appreciate the question, of course. But our conversations at this time with the rating agencies are confidential. And obviously, we will update the market on our targets on appropriate. Part of that, of course, is driven by -- like we mentioned earlier, several variables in play that we will evaluate. And as we move forward, I'm sure the picture will become clearer.
There are no further questions at this time.
All right. Thank you all for joining this quarter's conference call. Looking forward to the next.
Thank you.
Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.