Good afternoon. It's Laurence Alexander with the Jefferies Chemicals team, and thank you for joining the afternoon sessions for the Jefferies Aerospace and Materials ESG Summit. Before I introduce today this session, I have to read a quick compliance disclaimer, so let me do that now. The content presented on this call is proprietary to and/or subject to the copyrights of Jefferies or third- parties. Further, as a matter of legal compliance, we remind you that you must not attempt to elicit from any speaker at this event any material nonpublic information or other confidential information. Accordingly, the speakers may decline to respond to any question at their discretion. This presentation will be recorded. If you object to being recorded, then please drop off the line now. Now, it's my pleasure to introduce the team from LSB. Today we have Fred Buonocore, who is with the Investor Relations, and Jakob Krummenacher, who is the VP of Clean Energy. I guess, without any further ado, since we have kind of a short time available, Jakob, if you wouldn't mind just introducing quickly the history of LSB and how LSB pivoted as a business to start looking at clean energy as an opportunity. Yeah, happy to do that. I just want to mention that Cheryl Maguire, our Executive VP and CFO, is also on the call right now. Hi, everyone. So, yeah, LSB Industries has been a traditional chemical company, typically with a half 50/50 customer base between the ag market and the industrial and mining market. And because of ammonia and the nature of utilizing natural gas as a raw material to produce ammonia and downstream products, you result in an industry that has a very high carbon intensity, very similar to steel and cement, for example. So in order to, you know, it is a company view that in order to operate long- term, you're going to have to do something about that carbon intensity. And hence, the Clean Energy Division within LSB is in charge of finding opportunities not only to decarbonize our existing assets and operations, but also to look at opportunities to expand or grow, always with the mindset of how will that feed into our sustainability strategy, for example. Great. And so you have multiple decarbonization initiatives already underway. Can you give a brief update on what you're tackling, timeline, scale of projects, and so forth? Yeah. Yeah. I mean, Jakob, do you want me to take that one? I'll start and you fill in. Yes. Okay. So we have two projects on the go, two meaningful projects for us. The first one is a carbon capture project at El Dorado, where we're partnering with a company by the name of Lapis, who's going to own and operate the carbon capture and sequestration of the CO2. And so we're looking for being able to capture about 450,000 tons of CO2 annually. And that's going to leave us with about 375,000 tons a year of low-carbon ammonia, which we will have the opportunity to hopefully sell at a premium. Or what's equally as exciting is we can take that low-carbon ammonia and upgrade it to other low-carbon downstream products like nitric acid and AN solution, which we have, as Jakob mentioned, 50% of our customers are tied to that industrial and mining end market. We do have the ability to provide some low-carbon offtake to those industries. We did just announce a new 150,000 tons a year offtake agreement for low-carbon AN solution. We're super excited about that. It's actually directly in our long-term strategy to make low-carbon product and to really dive into that long-term offtake, three and five-year contracts that are more of a cost-plus type of arrangement where you lock in a margin and you take that volatility out of the business. We really like those contracts. That's the project that's underway at El Dorado with an expected kind of go-live date of early 2026. We're well on our way on that project. The second project is down in the Houston Ship Channel. We are looking at a project there for just 1.1 million tons a year low-carbon ammonia project where we're partnering with, sorry, Air Liquide as well as INPEX. Now, Air Liquide, as you know, is a large global supplier of industrial gases, and INPEX is the number one E&P company in Japan. So what we're looking to do with our partners there is Air Liquide is going to provide the technology for the ATR and the carbon capture equipment and the technology. And we are going to partner with Air Liquide, sorry, INPEX on the ammonia loop. So we'll have low-carbon ammonia coming out of that project. And so we're moving through the pre-FEED on that project. So we're in the very early stages. And targeting final investment decision is really going to be based on whether or not we can get offtake for that project. And so the teams are highly focused on securing offtake as we speak. Jakob, is there anything else you'd like to add to my quick overview of those two projects? No, no, that's excellent. I mean, looking forward, obviously, the El Dorado project is highly dependent on the EPA Class VI permitting, which is currently underway, and we have very good engagement with the EPA. So we're pretty confident on early 2026 timeline. Can you just put these initiatives in context with the where we're seeing the demand pull for renewable or green ammonia or low carbon ammonia? Yeah. Jakob, did you want to go with that one? Yep, I'll take this one. This is very much in line with the chart that you guys are seeing here, which is our expectation of what the world will look like in 2030 or 2050. When you look at low carbon products or low carbon ammonia in particular or downstream products, you have your existing uses, which is 80% ag, 20% industrial. Then you have these new uses that everybody keeps talking about, which is the intention of using ammonia as an energy source, as a clean energy source. Going forward, between now and 2030, we see two major markets being developed. One is the marine industry. We expect that to be somewhere between 5 or 6 million metric tons by 2030. Today, there are already about 41 ocean-going vessels, ammonia carriers on order from various people. Two of those vessels are from INPEX, our partner in the project as well. Out of the 41 vessels on order, 34 of them are on order to handle dual fuels. So they could burn ammonia if that was available, or they could burn conventional marine fuel. So this is the way that the industry is typically transformed, right? The first methanol vessel to operate on methanol was a methanol carrier. The first LNG vessel to burn LNG was an LNG carrier. So the expectation is that a lot of these ammonia carriers will burn the cargo as they go. So that is going to be a significant growth between 2030 and 2050, the marine industry, as we see it coming. The other sector is the power generation sector, particularly companies or countries that have policy in order to decarbonize, like Japan and Europe, for example. Japan, as we speak right now, JERA, the largest utility of Japan, is conducting an experiment where they are commingling ammonia on a coal-fired power plant to generate electricity. The test is expected to end at the end of June, and, pending the results, which, preliminary, they release some very good data. So the idea is that to run that coal-fired power plant of 1 GW, 20% ammonia, 80% coal, 100% of the time, that single facility of 1 GW means almost 500,000 tons of ammonia a year. So you can imagine JERA has 10 of those large-scale power plants. Most of them run on coal. Some of them run on LNG. And there are others as well in Japan. So you can really see how quickly this could grow. The rate-limiting step in this particular case would be how quickly can the government develop the infrastructure in order to bring in the ammonia into the country, distribute it, and then be able to build the tanks so that they can use it as fuel. Those two sectors are very crucial for what we see coming in ammonia as an energy by 2030 and 2050. You mentioned sort of the ship orders. I think that's a straightforward validation of the demand pull. On the power plant side, kind of is it already clear that this is a global opportunity, or is it still very much like Japan and a couple of other countries driving the discussion? Right now, we see three major countries, regions driving the discussion. One is obviously Japan. The other one is South Korea. Both of those countries share one common theme, which are very populated, and they have very little natural resources in terms of energy. So today, they rely on imported coal or imported LNG, and those are expensive, especially when you take into account the transportation costs. So for them to switch from that type of energy into clean ammonia, for example, yes, it's going to be an increase in the cost, but it's not going to be a significant increase in the cost compared to the United States and other countries that have abundance of fossil fuel energies. In Europe, on the other hand, you're going to see they don't have natural gas, right? And that's a key component for the industry and for the countries. And so they're looking at importing low-carbon ammonia to crack it into hydrogen and then use the hydrogen instead of natural gas for power generation and other means. And they already retrofitted a significant number of pipelines from operating with gas to be able to operate with hydrogen. So a slightly different approach, but both of those approaches are intended to utilize ammonia as energy, and power generation seems to be the main goal on those regions. Given the available incentives, I mean, you mentioned sort of getting a green premium. What ammonia price do you need to get for a decent IRR on these projects? When you're discussing kind of offtakes, what kind of green premium are your customers willing to entertain at this point? Cheryl? Y eah, I'll start with that one. You know, I think if you think about the El Dorado project in terms of what kind of IRR we need, you know, we've got minimal CapEx on that project. As I mentioned, Lapis, our partner, is going to build and own that carbon capture equipment. We're going to sell them the CO2 that we vent today. And so, like I said, it's being vented today. It's not contributing to income in any way for us today. So the fact that we're able to sell the CO2 now is a direct benefit. I think we're targeting somewhere in the ballpark of $15 million-$20 million a year in incremental EBITDA with little to no CapEx. So the IRRs on that project is pretty darn good. So we're excited about that one. I think with respect to the Houston Ship Channel project, what kind of a level of ammonia price is needed. I think it's too early to tell at this point because we're still going through the pre-FEED, which is we'll have a better idea of what the cost of that project is going to be probably closer to the fourth quarter is when we're targeting that completion of pre-FEED. And that'll give us at least a first look on what the cost of the ammonia loop is really going to be. And in the meantime, we're also negotiating offtake or feedstock arrangements with Air Liquide and our partners there for as they'll supply us with blue hydrogen as well as nitrogen. And so we're working through all of that cost side. So it's a bit too early for us to be able to put an ammonia price out there. And then can you just walk through financing? So both kind of where your balance sheet is, how much capital outlays are ahead of you, how will you fund it? Yeah. So we've got a stated target leverage out there of about 2.5x or no more than 2.5x in a mid-cycle pricing environment. And so we're kind of in that 2x-2.5x today. And if we think about the CapEx required for we'll focus on the Houston Ship Channel project. If I was to just pick a number, like I said, we don't know the number yet because we're just going through the pre-FEED, but let's just say that the let's use $800 million as a ballpark cost for the ammonia loop. And let's assume that we're going to and let's assume that the ammonia loop is owned 50/50 with us and INPEX, although we expect to be slightly higher than that and be the majority owner. But like I said, that's being worked out as we speak. So let's assume it's an $800 million cost. And let's assume that 60% of it is project- financed. So that leaves 40% to come from the equity holders in terms of cash from our balance sheet. So if 40% of it is coming in from cash and we own, let's say, 50% of that, you're looking at somewhere in the ballpark of $150 million-$160 million of cash. And we do have that on the balance sheet today, and we could fund that from cash on the balance sheet. And we do expect, of course, to be cash flow and generating free cash flow as we go through the build process here over the next, call it, three or four years. We would look to fund this project with cash on the balance sheet as well as free cash flow. Okay, great. A couple of questions have come in. Does your strategy change if there's a new U.S. administration that significantly changes the cost of carbon? Are you speaking to the, let's say, changes in the 45Q tax incentive? Yes, for example. Yep. Yeah, like if we went down to I think some of the conservative side have talked about a $10 or $15 cost of carbon instead of $85 a ton. So I'll take that one, Jakob, you jump in as well too. So I think what I would start out by saying, so we're not directly going after the 45Q in our projects, although, of course, our partners are. So Lapis, as well as Air Liquide, will be applying for that 45Q tax credit. However, I think in terms of the likelihood of that going and dropping materially from the $85, I'd say would be pretty difficult to see at this point, given that the 45Q and the $85 level had bipartisan support from both sides. And so I think it is well supported. I think I would also say, if you think about where our projects are located, i.e., Texas and Arkansas, given those states in particular, if there was a change in administration, I don't see a situation where there would be some material changes to those tax credits. I don't know, Jakob, anything else to add there? Yeah, no, I definitely agree. I mean, I spent quite a bit of time in D.C. as part of my role. And every time I get the opportunity to get in front of some politician or a law firm that works with congressmen in D.C., I always pose the same question, right? Because it could be risky for us. And basically, the answer has always been that the way that the IRA structure and the fact that it involves future tax credits, not existing budget, it would be a very difficult thing to reverse on its own. That's the number one point that they make. And then the number two point, which I think is even more important, is that when you look across all of these states that are aligned or in line to receive this 45Q tax credit benefit or the 45V, all of these are red states. So a new administration, Republican administration, can entertain the idea about reversing these, but I'm pretty sure the governors of those states will have a say because this means jobs, this means growth, it means opportunities for those states. Can you talk a little bit about the, unpack the comment around the marine, the shipping of ammonia, those vessels being the ones that burn the ammonia? If you have a large vessel going from the U.S. to Asia, I guess, or Europe, how much of the fuel, how much of the capacity of the vessel would get consumed in driving across the ocean? So the main example that we can use is the conventional fuels, right? A conventional marine fuel has about twice the energy density per gallon than ammonia does. So which means that if I want a conventional vessel to operate the same way with ammonia, I'm going to have to refuel twice as often, or I can only travel half of the distance, right? If you look at the two main marine engines manufacturers in the world, that's Wärtsilä out of Norway and is MAN ES out of Denmark. It's actually a German company, but they have a lot of operations in Denmark. And both of those have the first ammonia internal combustion engines developed is the ones that are going to be used on the majority of these vessels. The vessel operates on ammonia. In the case of Wärtsilä, on ammonia with about 2% diesel. So you need to have a small diesel tank on board that acts as a pile of fuel because the ammonia requires a very high ignition temperature in order to combust in the cylinders. So diesel can provide that initial ignition and then allow ammonia to reach the temperature to burn. MAN ES did it the other way. They went to the drawing board and said, how would we design a vessel? And they came to the conclusion that instead of diesel, they're going to use natural gas, compressed natural gas, 2%, 3%, 4% maybe into the cylinder, and that's the trick. So at the end of the day, what you're looking at is vessels that operate from conventional to ammonia will require about all else equal, right? We don't know yet whether the engine has the exact same efficiency because a diesel engine will have a higher temperature, so the heat losses will be greater. So there is a little advantage there for the ammonia engine, but we don't know exactly what it means yet in terms of going the distance with the vessel. Okay, great. Can you characterize also the competitive landscape between ammonia and the other kind of next generation alternatives, particularly methanol? Yeah, there is a lot of talk about methanol, and there is, at least initially, if you look at the IMO regulation when it says that you have to reduce 20% of your fleet emission on a fleet basis, right? If I'm an owner of 20 vessels, then only I could do two of those vessels to electric, and then I'm good. The rest of them continue to operate as usual to reach that 20% level. Reduction by, I think, is 2035. So methanol, for example, if you compare today marine gas oil versus methanol, you get a reduction of about 15% on emissions simply because methanol has a higher hydrogen to carbon ratio than conventional marine fuel. Also, what the marine industry has been doing in order to meet that 2035 goal is they've been instituting better engine idle speed. They've been instituting gearboxes. Right now, most engines are directly connected to a propeller. So if you need to go faster, you need to increase your RPM. So if you add a gearbox between the propeller and the engine, then you can lower the RPM to go at the same fast speed that you need to go. And that brings you efficiencies on the fuel usage. And all of those things will count towards that reduction that you're talking about because it's in a per fleet per mile driven. So e-methanol, when you're looking at 2050, where IMO says, well, we need to go to net zero, that's when things become very complicated. And that's when ammonia has a significant advantage over e-methanol to do that. Simply because the way of doing e-methanol is you need to find a carbon-free source of hydrogen along with some biogenic CO2, and then you do chemistry between those two, and you end up with e-methanol or carbon-neutral methanol. The key here is the biogenic source of CO2. When you're looking at the size of the marine fuel market, today, the world consumes about 120 million barrels of oil a day. One third of that is strictly for the marine industry as fuel. Gas oil, bunker fuel, some of the diesel that is operating into the marine industry. That's a significant amount, a significant volume that it would be incredibly difficult to have the ability to make that much e-methanol to supply that market, especially when we're looking at net zero in 2050. How much sort of volume gets lost on sort of cracking the ammonia back to hydrogen? I mean, you discussed that sort of opportunity in Europe. Where are we on the technology curve there? How much kind of improvement should we expect over the next 20-30 years? Yeah, so Europe is really looking at that as opposed to what Japan is doing, looking to extract the energy directly from ammonia by burning it, if you will. I think part of the reason is they already have a pipeline infrastructure. They already reverted or retrofitted some of those lines. So they need the hydrogen. But hydrogen is very difficult to ship around. So you need to ship it in a form of another product. And ammonia is one of those key products that can be a hydrogen carrier. In terms of cracking technologies, there are several technologies out there. thyssenkrupp has one. Air Products has one. Air Liquide has one. The problem is that none of them are at scale yet. They're all on the small- scale. They're all at the research level. Companies are moving fast in order to scale them up and be able to have a commercial product sometime around 2030. But that still remains to be seen, right? It's a new technology. And like always with new technologies, you really don't know what the timeline might look like. And then two last ones. You mentioned you're possibly using ammonia power generation to substitute or be blended with coal. What's the CapEx cost for retrofitting a facility to be able to use ammonia? And how does that translate into what green premium is acceptable? Yeah, I mean, it's still unknown. I mean, Japan is doing tests. They've done a bench scale test. They've done pilot scale tests. And now they're doing it for the first time in a world scale facility. So most of those tests are closed doors. Nobody really knows the cost of anything yet. But obviously, they're doing it because the Japanese government will be willing to have a subsidy in order to help on this transition, at least for a certain period of time. I don't expect the cost to be significant compared to the cost of the power generation unit of 1 GW, a power plant. I think the retrofit would be acceptable and doable in terms of economic terms. But we still need to go through all this testing and development before we can know the answer for sure. Then just lastly, how much, if you look out to when these projects are done and fully ramped up, what do you see as the likely net EBITDA contribution? And how much of that would be protected by the take-or-pay contracts with pass-throughs, like cost-plus arrangements? So I'll take that one. So look, on the carbon capture project at El Dorado, we think that yields about $20 million annually. And that should start to come through in 2026. With respect to the Houston Ship Channel project, we don't know yet. As I mentioned, off-take will be a key requirement for us to move forward. We're negotiating the cost side of that today in terms of the blue hydrogen and then nitrogen supply. And so we tend to look at a 15% return on our capital projects. That's the target. Now, with respect to this project in particular, would we take a bit lower than that given we would expect to lock the cost side and the off-take side and have more of an annuity type of flow of income? So if that's the case, we may consider something in the 10%-15% range from a return perspective. So all to be determined at this point. Then just lastly, and I realize we're coming kind of up on the half hour, can you just touch on, are you negotiating these agreements with sort of intermediaries, fuel companies and what have you? Or are these negotiations, should we expect the agreements to be with end customers such as a shipping company or an airline or an industrial company that plans to burn the ammonia? How should we think about the type of customer who will be signing the agreements? Jakob, you want to take that one? Yeah, I can take that one. Typically, it will be end users where we've been talking to. So in Japan, it will be the utilities, some of which are small and might not have the capabilities of developing infrastructure. That's where a company like INPEX comes in and can help them develop that infrastructure. But at the end of the day, agreements will be with the end user. Power generation in South Korea, power generation in Japan. Marine industry will be with the vessel owners directly. So some of them are large enough that they can have their own tankage and terminal and storage. Some others will have to go through a third- party in order to provide that service. But the contract will be with end users. Okay, great. Okay, well, thank you very much for your time today. Thank you, everybody, for sending in those questions at the end. If there's any follow-up questions, please reach out to myself or to Fred, and we'll be happy to put you in touch with the LSB management team. Thank you again, everyone, for participating. Thanks. Thanks, everyone.