Jim Fitterling
Chairman and Chief Executive Officer at DOW
Thank you, Howard. Moving to Slide 7. While we expect near-term conditions to remain challenging through the year, we continue to see positive underlying demand trends driving above GDP growth across our attractive market verticals over the next few years. Packaging is vital to delivering a lower carbon footprint. Through our 3 million metric ton transform the waste commitment, we will capture demand growth for recycled polyethylene, which is accelerating as brand owners and customers increasingly seek more circular products.
In infrastructure, more than $3 trillion in investments will be needed to meet global infrastructure plans. Green buildings are driving demand for Dow products including low-carbon footprint silicone sealants for high-rise buildings, reflective roof coatings and lower carbon emissions cement additives.
An expanding middle class will support growth in consumer spending where our products help deliver a lower carbon footprint and enable more sustainable materials through technologies such as biodegradable polymers or bio-based surfactants for home care and thermal conductive silicone gels and adhesives for electronics and batteries. And in mobility, stable global vehicle production growth is expected. With increasing demand for electric vehicles, which contain 3 times to 4 times more silicone content than internal combustion engine vehicles. Lighter weight vehicles are also aided by our high-value polyurethane systems and EPDM technologies. Further, we continue to execute our targeted suite of higher-return, lower-risk projects which are expected to add $2 billion in underlying EBITDA by the middle of the decade. These investments put us in an advantaged position to capture demand as economies recover and raise our underlying earnings profile.
Turning to Slide 8. With growing consumer and brand owner demand for more sustainable and circular products leading in the transition to a more sustainable future remains critical to our strategy to drive growth and shareholder value creation. In collaboration with X-energy, in the second quarter, we expect to select and announce a site in the U.S. Gulf Coast to develop a small modular nuclear energy facility by 2030. Nuclear technology will be key in generating safe and reliable power and steam at our sites while enabling zero CO2 emissions manufacturing.
In Alberta, we recently awarded Fluor with a contract to provide front-end engineering and design services for our Path2Zero project. Today, we achieved another key milestone by selecting Linde as our industrial gas supplier to supply nitrogen and clean hydrogen for the site. Securing partner agreements and subsidies is our next step. All of these actions are critical to reaching a final investment decision this year. As a reminder, this investment for the world's first net zero CO2 emissions ethylene and derivatives complex will decarbonize 20% of our global ethylene capacity. At the same time, it will grow our global polyethylene supply by 15% and triple our Alberta site polyethylene capacity. We're also taking a capital-efficient approach to meet increasing demand from our circular solutions as we scale up production for both advanced and mechanical recycling with strategic partners like Valoregen, Mura Technology and WM among others. Valoregen's 15-kiloton mechanical recycling facility in France will start up during the second half of this year. This hybrid recycling plant is expected to process up to 70 kilotons of plastic waste per year by 2025. And Mura remains on track to start up the first of its kind, 20-kiloton per year advanced recycling plant in Teesside in the United Kingdom in the second half of this year. This is the first step in our strategic partnership with Mura to launch as much as 600 kilotons per year of advanced recycling capacity by 2030.
As the key offtaker of post-consumer and advanced recycled feed from both of these partnerships, Dow will commercialize circular polymers and high demand from global brands. Altogether by 2030, we are on track to deliver an additional $1 billion in underlying EBITDA improvement through our Alberta project, commercialized 3 million metric tons per year of circular and renewable solutions and reduce Scope 1 and 2 CO2 emissions by 5 million metric tons compared to our 2020 levels.
Turning to Slide 9. We remain focused on delivering on our commitments with transparency, accountability and a culture of benchmarking. Today, we published our annual benchmarking update as we have every year since spin, which can be found in the appendix of this presentation and is posted on our website. The results once again demonstrate our strong performance relative to peers. In particular, Dow delivered best-in-class free cash flow yield and net debt reduction since spin. We also achieved above peer median return on invested capital and returns to shareholders.
Taking a closer look at the results on Slide 10. Our free cash flow yield on a three-year average is nearly 2 times the peer average and 3 times the sector and market averages. Our differentiated portfolio, cost-advantaged assets and operating discipline have resulted in three-year EBITDA margins and return on invested capital well above the peer median. This includes our 15% return on invested capital, which is above our 13% target across the economic cycle.
Our focus on cash flow generation has supported strong shareholder returns and our strengthened balance sheet has resulted in improved credit ratings and outlooks. Additionally, all operating segments achieved best-in-class or top quartile, free cash conversion and cost performance. Notably, Packaging and Specialty Plastics further expanded its outperformance over the next best peer on an EBITDA per pound of polyolefin basis by $0.05 per pound. It also delivered five-year average EBITDA margins 500 basis points above the peer median. Looking forward, our growth investments throughout the decade will further enhance our competitive advantages and shareholder value creation.
Closing on Slide 11, Dow continues to execute with consistency and discipline to deliver resilient performance in the near term and sustainable growth and cash flow generation over the long term. We're implementing targeted actions across the enterprise to reduce costs and maximize cash. Our strong balance sheet provides financial flexibility as we continue to deliver against our capital allocation priorities, and our decarbonize and grow and transform the waste strategies will raise our underlying earnings profile while reducing our carbon footprint and increasing recycled content. All combined, we are confident in our ability to continue delivering against our financial targets across the economic cycle.
With that, I'll turn it back to Pankaj to open up the Q&A.
