Jim Fitterling
Chair and Chief Executive Officer at DOW
Thank you, Howard. Moving to Slide 8, we continue to make progress on both our Decarbonize and Grow and Transform the Waste strategies, which by 2030 position us to deliver more than $3 billion in underlying earnings while reducing greenhouse gas emissions by 5 million metric tons and commercializing 3 million metric tons of circular and renewable solutions annually.
Starting with Decarbonize and Grow. In September, we achieved start-up of a new MDI distillation and prepolymers facility at our manufacturing site in Freeport, Texas. This new facility replaces Dow's existing capacity in LaPorte, Texas and expands supply by an additional 30% at the site to support high-value demand growth in polyurethane systems while also reducing our greenhouse gas emissions by more than 45% compared to the LaPorte asset.
Our Path2Zero project in Alberta remains on track. We expect a final investment decision by year end pending completion of our subsidies and incentives with the Canadian federal government. Additionally, we recently announced a solar power purchase agreement with MSU Green Energy in Bahia Blanca, Argentina, which will drive the site to source 75% of its electric power supply from renewable sources by 2025.
In Terneuzen, the Dutch government informed us that they need more time for adjustments to certain rules and regulations critical to enabling carbon capture and clean hydrogen. The public-private partnership is a crucial element of our Path2Zero effort at Terneuzen. Dow investment and timing will depend on the level of collaboration, subsidies available, and a clear regulatory framework. We will continue to engage with the Dutch government to advance these efforts.
And we continue to advance our Transform the Waste strategy. In the third quarter, we successfully leveraged our US Gulf Coast assets for bio and circular feedstock processing, accomplishing a key milestone to utilize existing assets to quickly scale production of recycled and bio-based products. This was a direct enabler to the commercial launch of our sustainable SURLYN ionomers, which support high-end applications like perfume and cosmetics packaging. In addition, Valoregen in France and Mura Technology in the UK remain on track to start up their respective mechanical and advanced recycling facilities by year-end.
All in, we expect that our initiatives to develop a circular ecosystem will generate more than $500 million of incremental run rate EBITDA by 2030. Altogether, we remain confident in our long-term growth with continued focus on a more sustainable future while maintaining a disciplined and balanced approach to capital allocation.
Next, an update on our Path2Zero project in Fort Saskatchewan, Alberta, on Slide 9. The project will enable Dow to capture sustainable growth opportunity while also delivering on our 2030 greenhouse gas emissions reduction targets and advancing our long-term goal of carbon neutrality by 2050. Construction is planned to begin next year with Phase 1 start-up expected in 2027 and Phase 2 expected in 2029. We expect to spend an average of $1 billion of capex annually on this key growth project with total enterprise capex ramping above depreciation and amortization levels in the 2025 to 2027 time period as we implement the first phase. We remain fully committed to keeping our capex within D&A across the economic cycle and expect to return to those levels as we complete the project. We are expecting bottom-line returns on our Alberta Path2Zero project equal to or better than our Texas-9 investment.
Turning to Slide 10, we are partnering with brand owners and leaders across the value chain to strategically enable and scale waste management transformation through mechanical recycling, advanced recycling, and bio-based solutions. This allows us to lead the way to a more circular economy and become a major off-taker of circular feedstock while also minimizing capital outlay for Dow. Robust industry demand for these solutions is expected to outpace supply through the end of this decade. We expect Dow's differentiated innovation portfolio to create opportunities that will result in more than $500 million in incremental earnings by 2030.
Continuing on Slide 11, our actions to commercialize 3 million metric tons of circular and renewable solutions annually are driven by a robust pipeline of strategic partnerships. These collaborations enable us to deliver innovative solutions to meet increasing brand owner demand. For example, our partnership with P&G China to enable recyclability of air capsule e-commerce packaging delivers an effective and efficient way to protect products while avoiding excessive packaging. Dow's SPECFLEX CIR foam system uses recycled waste from the automotive industry to produce circular polyurethane-based materials matching the performance of existing products as seen in the recent launch of the Mercedes-Benz E-Class. And our collaboration with LVMH Beauty is pioneering circular feedstocks for sustainable packaging in the cosmetics industry. This has enabled Dow's first sales of bio-based and advanced recycling polymers in the third quarter.
Closing on Slide 12, since spin we have executed against our strategic priorities and consistently demonstrated financial and operational discipline. As a result of our proactive actions, our underlying earnings and cash flow generations are well above pre-COVID levels and our balance sheet is the strongest it's ever been, especially in this part of the cycle. Our global scale and leading positions across key value chain paired with our cost-advantaged assets and industry-leading feedstock flexibility positioned Dow well to respond quickly to evolving market trends and capture above GDP demand growth across our attractive market verticals. These distinct competitive advantages will continue to enable us to execute our capital allocation priorities while also driving long-term value growth for our shareholders.
Finally before we move to Q&A, I would like to speak to the announcement this morning that Howard has elected to retire from the company following 33 years of dedicated service. I want to personally thank Howard for his significant contributions to Dow over the last three decades. He's been an incredible business and strategic partner, created a financial and leadership team that guided our company through numerous challenges and accomplishments, and most importantly, he's been a tremendous colleague and friend. In addition to recognizing and thanking Howard, we're pleased to share that the Board has elected Jeff Tate to the role of CFO effective November 1, 2023.
As we thank Howard for his years of service, and there will be time to honor and recognize him for that, we're excited to welcome Jeff back to Dow. Many of you will remember Jeff, who also previously led Dow's Investor Relations team. He returns to us following a four-year stint as the CFO of Leggett & Platt. Prior to that, Jeff had 27 years with Dow in various finance roles, including VP of Finance for Packaging & Specialty Plastics, and was our lead auditor. Jeff is joining us here today and we'll look forward to him joining our next earnings call in his formal role. In the meantime, more to follow as we all work together through this transition. As I noted, this change will become effective November 1 and Howard will stay on to support the handover through early January when he'll formally retire from Dow.
Howard, I'll now turn the mic over to you for a few comments.
