OMV/Adnoc advance towards Borouge/Borealis merger; start-up of Borouge 4 plant

Austrian chemical firm OMV and UAE firm Adnoc recently updated on the progress towards the formation of Borouge Group International AG, including the signing of an agreement for the Borouge 4 production complex. The formation of Borouge Group, through the combination of Borouge Plc and Borealis, and acquisition of Nova Chemicals, is progressing according to plan, with the transactions close expected by the end of March 2026, subject to customary conditions. Borouge Group will eventually be a 50/50 partnership between Adnoc and OMV.

Meanwhile, Borouge 4 (B4) is a new integrated polyolefins production complex with 1.5 million tonnes ethane cracker and 1.4 million tonnes of PE capacity, with the first plant expected to start up this quarter. Boasting the latest, proprietary Borstar technology to produce PE, B4 is 70% owned by Adnoc and 30% by OMV, and forms part of the Borouge production site, set to become the world’s largest single-site polyolefins complex.

The agreement enables Borouge Plc, and subsequently Borouge Group, to operate and market the volumes of B4 in return for an at-cost asset utilisation fee. It will provide both entities with financial flexibility while delivering an estimated US$400 million in cumulative net profit over the next three years and representing approximately 10% annual accretion to earnings to Borouge Plc post ramp up.

It is anticipated that the agreement for B4 will be maintained until Borouge Group acquires the asset from its current owners, which is currently not expected before 2029, thereby providing flexibility on the timing of future capital outlays.

B4 operations are expected to ramp up progressively throughout 2026 and with the signing of the agreement, Borouge Group will have access to 13.6 million tonnes of nameplate production capacity across Europe, the Middle East and North America, positioning the company as the world’s fourth largest polyolefins producer.

Borouge Group will also benefit from one of the most geographically diversified platforms in the polyolefins sector, integrating production across three continents and serving customers internationally.

OMV and Adnoc have also reaffirmed the importance of the previously announced planned tender offer to create a simplified structure that will enable value creation from the new global growth platform.

The timing of the proposed tender offer, which will convert Borouge Plc shares to Borouge Group shares, will align with the new company’s future equity raise and maximize value for all shareholders. The tender offer is expected to take place in 2027, subject to market conditions.

Until then, Borouge Group will be privately held, and Borouge Plc shares will remain listed on the Abu Dhabi Securities Exchange (ADX). The expected credit ratings factor in the impact and flexibility on timing of both the future equity raise and the planned acquisition of B4 by Borouge Group.

Considering the current market environment, OMV and Adnoc have agreed to strengthen the balance sheet of Borouge Group as a precautionary measure. This will entail a temporary adjustment of the dividend payments for the financial year 2026, including limiting the payment to the second dividend tranche in 2026 amounting to 50% of the previously estimated dividend.

The expected impact on the OMV dividend would be around EUR0.6-0.7 per OMV share for the year 2026, based on a contribution to OMV’s dividend distribution of US$250 million by Borouge Group International, instead of the previously estimated US$500 million.

Upon completion, Adnoc’s stake in Borouge Group International will be transferred to XRG, a wholly owned subsidiary of Adnoc, complementing XRG’s Global Chemicals Platform, and fully supporting its ambition to become a top three global chemicals investor.

Borouge Group will then be owned at equal 50% shareholding by XRG and OMV respectively.

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