- Methanex (MX) has issued a series of corporate updates including the restart of construction on its Geismar 3 project
- Construction on the project will resume in October 2021 with commercial operations set to begin in late 2023 or early 2024
- The company believes methanol demand is positive with a 4 per cent CAGR over the next five years
- Current untapped liquidity sits at US$900 million, allowing for a reset of the company’s quarterly dividend to $0.125 from $0.0375 per share
- Methanex is the world’s largest producer and supplier of methanol to major international markets
- Methanex (MX) is up by 6.49 per cent and is currently trading at $43.84 per share
Methanex (MX) has issued a series of corporate updates including the restart of construction on its Geismar 3 project.
Geismar 3
The company estimates total capital costs for Geismar 3 to be US$1.25 to $1.35 billion. It expects to commit $435 million to the project by the end of Q3 2021 and another $800 to $900 million after resuming construction in October 2021.
Geismar is set to begin commercial operations by the end of 2023 or early 2024.
Construction will be funded with cash on hand and future cash flow without incurring incremental debt.
Methanol industry forecast
Methanex believes that current methanol industry fundamentals are positive as growing methanol demand, low global inventory levels, ongoing industry supply challenges and a rising energy price environment have supported higher methanol prices.
This translates to approximately 16 million tonnes of methanol or a 4 per cent CAGR over the next five years, compared with 14 million tonnes of new industry capacity additions over that same period.
Financial position
Methanex recently completed deleveraging initiatives and credit facility amendments to strengthen its balance sheet:
- Repaid $173 million drawn on its Geismar 3 construction facility
- Reduced Geismar 3 construction facility by $200 million to $600 million
- Extended maturity date on Geismar 3 construction facility to 2025 from 2024
- Extended maturity date on $300 million revolving credit facility to 2026 from 2024
These arrangements supplement the company’s shipping partnership with Mitsui O.S.K. Lines, which is expected to unlock $145 million in non-dilutive capital and benefit the Waterfront Shipping business.
Capital allocation
The company is targeting higher cash balances, lower leverage and a greater weighting on share buybacks.
The Board of Directors also approved a reset of the company’s quarterly dividend to $0.125 from $0.0375 per share.
John Floren, President and CEO of Methanex, commented,
“We are very pleased to announce these important steps that we believe will deliver long-term value to our shareholders. The timing is right to restart construction on our Geismar 3 project as the methanol industry outlook is positive, we have a strong financial position to fund the project and the project has been significantly de-risked and is well-positioned to be completed on time and on budget.
Geismar 3 will strengthen our asset portfolio as it will be one of our lowest-cost plants, with access to abundant and low-cost natural gas and have one of the lowest CO2 emissions intensity profiles in the industry.”
Methanex is the world’s largest producer and supplier of methanol to major international markets.
Methanex (MX) is up by 6.49 per cent and is currently trading at $43.84 per share as of 9:39 am ET.
