How would you evaluate Braskem Idesa’s performance in 2021?

2021 was a fantastic year for Braskem Idesa. We continued to operate the Etileno XXI complex, even in a Covid scenario, thanks to excellent collaboration between team members, communities, clients and providers. On the production side, we have expanded our capacity to import ethane through our fast-track facility. Safety and environmental aspects in our plants has been a big focus, and we reinforced the company’s circular economy commitment by tripling the sales of our PCR (Post-Consumed Resin) project. Finally, the new deal signed with Pemex in September and sale of sustainability-linked bonds were important milestones that set the company up for the years ahead.

On September 28^th, 2021, Braskem Idesa announced an agreement with Pemex for ethane supply and the development of an import terminal. What led to this deal and what will it mean for the company?

In December 2020, there was a complete shutdown of our complex due to a lack of natural gas supply. In January 2021, we were able to restart the plants using ethane instead of natural gas, and it was at this time that we reopened the dialogue with Pemex. In September, an amendment of the ethane supply contract between Braskem Idesa and Pemex was signed to guarantee supply until 2025.

Furthermore, the deal secured the commitment of Pemex and other government entities to support Braskem Idesa in the implementation of an ethane import terminal. A combination of our fast-track program, Pemex’s commitment to supply volumes of ethane, and the import terminal project, shows a clear vision that by 2024 Braskem Idesa will achieve greater flexibility in feedstock supply. A critical issue for the continuity of our business has been solved, and our relationship with Pemex has evolved.

What is the development timeline of the ethane import terminal and how will it improve capacity?

The terminal is a US$400 million investment that will start up in the second half of 2024. It will allow us to import 100% of our needs to operate the Etileno XXI complex at full capacity. Moreover, it will allow for a future expansion of the complex. We are already in the process of ramping up production based on Pemex supply and fast-track imports, which will be expanded in H2 2022.

We designed the Etileno XXI complex for potential expansion with low investments. The idea is to expand cracker production (the cracker is the plant which transforms the ethane into ethylene), and the heart of the cracker is the furnace area, so we will add an extra furnace. With some minor adjustments in other equipment and in the polyethylene plants, we believe we can expand capacity by 20%, and this can be done by 2025 onwards once we have the  new ethane import Terminal operating.

The new addendum sets supply of 30,000 b/d of ethane from Pemex to Braskem Idesa until 2024, compared with 66,000 b/d in the initial 2010 agreement. This mirrors a downward trend in domestic feedstock supply in Mexico. In the future, how could this trend be reversed?

A lack of investment in E&P in the last decade in Mexico has resulted in a decline in oil and gas production, resulting in a decline in raw material supply. Everything is connected, and this impacts the whole petrochemical industry in the country, causing tension between the government and private sector. It is important to have a strong Pemex, CFE and CENAGAS, because the petrochemical sector in Mexico was created based on feedstock from these national companies. However, it is an important discussion to involve the private sector in the development of feedstock supply, and we hope to have an improvement in the dialogue surrounding this to find a better long-term solution. Collaboration is crucial to recover the potential of the petrochemical sector we have in this country.

Last year Braskem Idesa sold US$1.2 billion worth of 10-year sustainability-linked bonds (SLB). What are SLBs and what greenhouse gas reduction targets do they set?

Braskem Idesa was recently awarded the GlobalCapital deal of the year in Latin America for the size, complexity and importance of the sale of 10-year sustainability-linked bonds (SLB) in 2021. The Etileno XXI complex was implemented through a project finance scheme, which was very relevant during the construction phase. After the start-up of the operation, we gradually moved from a project finance scheme to corporate debt. We issued a US$900 million bond in 2019, and last year we issued the SLB for US$1.2 billion, which is important for the company to be able to maintain its capital structure.

The SLB means we have commitments in terms of environmental performance, including reducing our greenhouse gas emissions by 15% from a baseline of 2017 until 2028. We already have a lot of initiatives in place in order to increase the efficiency of internal processes and capture CO² we produce. This aligns with Braskem and Braskem Idesa’s global commitments to achieve greenhouse emission neutrality by 2050. The reaction of the market was extremely positive: we received offers worth over US$4 billion for the SLBs, which is a clear demonstration in the trust of our company and the belief that Mexico can deliver.