Brent Crude, Naphtha and HDPE Price Forecast

89 Cost Curves

Polyethylene (PE)

HDPE Cost Curve, Year 2021

The above cost curves represent the relative cost position of Borouge’s HDPE production with respect to the other global producers. The above comparison with global producers has been carried out on an integrated basis at a brent crude oil price of USD72 per barrel in 2021. IHS Markit has used the HDPE cost curve as a representative of Borouge’s position in the global PE cost curve.

Cost curve representation on an integrated basis implies all the PE plants represented on the cost curve are considered integrated to ethylene feedstock, and the ethylene feedstock is transferred to the PE plant at cash cost.

All Borouge PE plants currently lie in the first quartile of the PE cost curve due to access to cost advantaged ethylene feedstock obtained from steam cracking of low-cost ethane. Low feedstock, energy and utilities costs relative to other regions and integration to the ethylene production units make the Borouge PE plants highly competitive.

The PE cost curve is relatively steep and has a high degree of separation between assets, with a differential of more than USD1,000 per ton between first and fourth quartile facilities. PE margins on purely a market ethylene price basis (non-integrated basis) are thin, with the monomer side of the olefin/polyolefin business capturing most of the chain margin. However, on an integrated basis, assuming ethylene value at the cost of production, much of the operating capacity enjoys decent profitability. Therefore, most new projects coming on-stream in the next few years are being built alongside an ethylene unit.

The lowest cost producers of PE exist in North America and the Middle East as low feedstock and utility costs give regional producers a competitive edge. PE producers in these two regions continue to benefit from their advantaged ethane feedstock cost position, supported by the increases in crude oil prices in 2021.

The highest cost PE producers are in Europe and Northeast Asia as they are heavily tied to naphtha feedstock, and the PE assets in these regions fall toward the right side of the curve.

The same general trends are seen across all three grades of PE.

The marginal producers on the extreme right of the curve have high costs of production since they are non-integrated resulting in high feedstock costs.

Profitability among individual PE producers is expected to vary significantly based on feedstock type and geographic location. Production cost for naphtha-based facilities are expected to rise together with higher crude oil prices, impacting primarily producers in Europe and Asia. On a long-term basis, naphtha-based facilities will continue to be disadvantaged versus integrated producers based on ethane cracking, since the price differential between crude oil and natural gas is expected to remain wide over the forecast period. This situation will allow integrated, ethane-based PE producers in North America and the Middle East to maintain reinvestment- level integrated margins.

The majority of the production as well as the new capacity additions in Northeast Asia and Southeast Asia are expected to remain naphtha-based, keeping the average feedstock costs elevated. After 2025, a slowdown in the growth of coal-to-PE capacity additions in mainland China is expected owing to economic and environmental factors and the integrated economics of naphtha-based crackers and associated PE plants are expected to continue to drive the cost and price of PE in the Asia Pacific region during the longer term.

The methanol-to-olefins process has been known for incurring higher production costs than other processes producing ethylene and cash costs have been volatile during the last several years, driven by the volatility of methanol feedstock prices. PE produced from this process continues to be on the high end of the cost curve.

HDPE Cost Curve, Year 2022, USD100/Barrel Brent Crude Scenario

HDPE Cost Curve, Year 2022, USD90/Barrel Brent Crude Scenario

The above cost curves represent the relative cost position of Borouge’s HDPE production with respect to the other global producers. The comparison with global producers has been carried out on an integrated basis at a brent crude scenario of USD100 per barrel and USD90 per barrel respectively in 2022.

A high crude oil price, where the brent crude price increases to USD90/barrel and USD100 per barrel, results in an increase in naphtha feedstock prices across the globe. Ethane prices in some Middle East countries are regulated and hence the feedstock costs are not impacted by the increase in crude oil prices. The PE cost curve becomes steeper and the positions of naphtha-based producers, especially in Asia and Western Europe, shift towards the higher end of the cost curve as their production costs increase.

Borouge PE plants continue to be placed in the first quartile of the PE cost curve due to access to cost advantaged ethane feedstock. A high crude oil price increases the competitive advantage and results in higher margins for producers such as Borouge.

92 Polypropylene (PP)

PP Cost Curve, Year 2021

The above cost curve represents the relative cost position of Borouge’s PP production with respect to the other global producers. The above comparison with global producers has been carried out on an integrated basis.

Cost curve representation on an integrated basis implies all the PP plants represented on the cost curve are considered integrated to propylene feedstock, and the propylene feedstock is transferred to the PP plant at cash cost.

Borouge PP plants currently lie in the first quartile of the PP cost curve due to access to cost advantaged propylene feedstock obtained from metathesis and steam cracker, together with fluidized catalytic cracking (FCC) and propane dehydrogenation (PDH) units (ADNOC Refining Company assets). Low feedstock, energy and utilities costs relative to other regions and integration to the propylene production units make the Borouge PP plants highly competitive.

The PP cost curve is relatively steep. The lowest cost producers of PP exist in the Middle East as low feedstock and utility costs and a high level of integration to propylene production give the regional producers a competitive edge. The Middle East’s production costs are expected to remain in the first quartile.

The average production cost for Southeast Asia is in the second quartile due to high levels of integration to propylene production. The average production cost for Northeast Asia is in the third quartile due to presence of some relatively high-cost producers utilizing coal-to-olefins and methanol-to-olefins technologies.

The average production cost for North America is in the third quartile due to presence of a relatively higher number of non-integrated PP producers who currently buy propylene feedstock at market price. PP producers integrated to propane dehydrogenation (PDH) in North America are relatively more competitive and as more integrated PDH-PP projects are expected to start

operations in North America, the average production cost of the region is expected to decrease during the forecast period and the region is expected to become more competitive.

Western European cash costs are expected to remain high and would be driven by naphtha crackers and very little on-purpose propylene being produced in the region.

The marginal producers on the extreme right of the curve have high costs of production since they are non-integrated resulting in high feedstock costs.

PP cost curve is responsive to oil prices since little propylene is produced by fixed price feedstock. On-purpose technologies for propylene production, particularly propane dehydrogenation (PDH), are expected to gain share in the Middle East and North America. In Asia, producers integrated into PDH are expected to enjoy a competitive edge through the forecast period.

In contrast, the pace of coal-based PP projects has slowed because of unfavourable economics and a more forceful implementation of mainland China’s dual control policy that aims at reducing both energy consumption and intensity. The methanol-to-olefins process has been known for incurring higher production costs than other processes producing propylene. Cash costs have been volatile during the last several years, driven by the volatility of methanol feedstock prices. PP produced from this process continues to be on the high end of the cost curve.

PP Cost Curve, Year 2022, USD100/Barrel Brent Crude Scenario

PP Cost Curve, Year 2022, USD90/Barrel Brent Crude Scenario

The above cost curves represent the relative cost positions of Borouge’s PP production with respect to the other global producers. The comparison with global producers has been carried out on an integrated basis at a brent crude oil scenario of USD100/barrel and USD90/barrel, respectively, in 2022.

A brent crude oil price of USD90/barrel and USD100/barrel results in an increase in naphtha feedstock prices across the globe. The PP cost curve becomes steeper and the positions of naphtha-based producers, especially in Asia and Western Europe, shift towards the higher end of the cost curve. Borouge PP plants continue to be placed in the first quartile of the PP cost curve due to competitive feedstock and utilities costs as well as high degree of integration to propylene feedstock.

4. Statement of capital development History

Upon its incorporation in the ADGM as a public company limited by shares on 28 April 2022, the Company’s total issued share capital was USD 50,000 consisting of 50,000 Shares of USD 1.00 each, which were subscribed for in full by ADNOC and BMEH.

At a general meeting held on 10 May 2022, the Company’s existing shareholders resolved, among other things, that: (i) the existing Shares each having a nominal value of USD 1.00 should each be sub-divided into 6.25 Shares of nominal value USD 0.16 each (so that the Company’s share capital became USD 50,000 divided into 312,500 Shares of USD 0.16 each) and (ii) the Articles be adopted in substitution for and to the exclusion of the existing articles of association of the Company (effective from, and conditional upon the occurrence of, Listing).

As at the date of this Prospectus, the Company does not hold any Shares in treasury and its total issued share capital is USD 50,000 consisting of 312,500 Shares of USD 0.16 each, of which 187,500 Shares are owned by ADNOC (representing 60% of our total issued share

capital) and 125,000 Shares are owned by BMEH (representing 40% of our total issued share capital).

Immediately prior to Listing, and following the issuance of new shares to ADNOC and BMEH as described in “Business –Corporate Structure”, pursuant to the Subscription and Transfer Agreement the Company’s total issued share capital will be USD 4,809,230,653 consisting of 30,057,691,583 Shares of USD 0.16 each, of which 18,034,614,950 Shares will be owned by ADNOC (representing 60% of our total issued share capital) and 12,023,076,633 Shares will be owned by BMEH (representing 40% of our total issued share capital).

The Selling Shareholders will offer 10% of the Company’s share capital for sale as part of the Offering. Immediately following the Offering, assuming that the Selling Shareholders sell all of the Shares being offered, 16,231,153,455 Shares shall be owned by ADNOC (representing 54% of our total issued share capital) and 10,820,768,970 Shares shall be owned by BMEH (representing 36% of our total issued share capital).

Company’s current share capital structure before the commencement of the Offering

The following tables set forth (i) the shareholding percentages by ADNOC and BMEH in the Company as at the date of this Prospectus; and (ii) the shareholding percentages by ADNOC and BMEH immediately following the Offering, assuming that the Selling Shareholders sell all of the Shares being offered:

As at the date of this

Prospectus Immediately following the Offering⁽¹⁾

Number of

Shares Percentage

Number of

Shares Percentage Shareholder

ADNOC 187,500 60% 16,231,153,455 54%

BMEH 125,000 40% 10,820,768,970 36%

(1) (1) Assumes that the Reorganisation has taken place and that the maximum number of Shares offered in the Offering are sold. 3,005,769,158 Shares are being offered in the Offering.

Prior to the Listing, Borealis shall transfer its shareholding in ADP and PTE to its wholly owned subsidiary, BMEH. See “Business – Corporate Structure”. Following the Borealis Transfer and prior to Listing, the Group will undertake a reorganisation of its corporate structure as a result of the consummation of the transactions set forth in the Subscription and Transfer Agreement.

Under the terms of the Subscription and Transfer Agreement, prior to Listing, the Company will become the holder of the entire issued share capital of ADP and the holder of approximately 84.75% of the issued share capital of PTE (with the remaining shares in PTE, amounting to approximately 15.25% of its issued share capital, being retained by BMEH) (the

“Reorganisation”).

Following the Borealis Transfer and prior to Listing, the Subscription and Transfer Agreement provides that:

(a) ADNOC will transfer to the Company:

(i) its full legal and beneficial interests in ADP, being 60% of ADP’s total issued and outstanding share capital; and

(ii) its full legal and beneficial interests in PTE, being 50% of PTE’s total issued and outstanding share capital, and

(b) BMEH will transfer to the Company:

(i) its full legal and beneficial interests in ADP, being 40% of ADP’s total issued and outstanding share capital; and

(ii) approximately 34.75% of PTE’s total issued and outstanding share capital (and, as noted above, BMEH will remain the holder of approximately 15.25% of PTE’s issued shares).

In consideration of the transfer by ADNOC of its shares in ADP and PTE and the transfer by BMEH of its shares in ADP and PTE (other than the Retained PTE Shareholding), in each case to the Company, the Company will:

(a) issue and allot new shares to ADNOC, that will result in ADNOC holding, immediately prior to Listing, 60% of the Company’s total issued and outstanding share capital; and (b) issue and allot new shares to BMEH, that will result in BMEH holding, immediately prior

to Listing, 40% of the Company’s total issued and outstanding share capital.

Please refer to “Business Description – Corporate Structure” for further details on the Borealis Transfer and the Reorganization prior to Listing.

Company’s capital structure upon completion of the Offering

Immediately prior to Listing, and following the issuance of new shares to ADNOC and BMEH as described in “Business – Corporate Structure”, pursuant to the Subscription and Transfer Agreement our total issued share capital will be USD 4,809,230,653 consisting of 30,057,691,583 Shares of USD 0.16 each, of which 18,034,614,950 Shares will be owned by ADNOC (representing 60% of our total issued share capital) and 12,023,076,633 Shares will be owned by BMEH (representing 40% of our total issued share capital).

No. of Selling Shareholders’ Shares: 27,051,922,425 Shares No. of total Subscribers’ Shares (assuming

that all of the Offer Shares are allocated): 3,005,769,158 Shares

Total: 30,057,691,583 Shares

5. Statement of the status of litigation actions and disputes with the Group over the past three years

There are no outstanding material governmental, legal or arbitration proceedings pending against the Group, and the Group is not aware of any such proceedings which are threatened.

6. Statement of the number and type of employees of the Group:

As of 31 March 2022, we had 3,125 employees. The following table sets forth our employees as of 31 March 2022:

Abu Dhabi Polymers Company Limited (Borouge) 2,272

Borouge PTE Ltd 853

Total 3,125

We award long-term employee benefits to certain employees in accordance with the local employment requirements in the UAE. These obligations are a post-employment benefit plan.

With respect to our UAE national employees, we make pension contributions to the Abu Dhabi Retirement Pensions and Benefits Funds in accordance with the Abu Dhabi Retirement

Pensions and Benefit Fund’s regulations. With respect to our GCC national employees, we make pension contributions to the pension funds or agencies of their respective countries. Such contributions are charged to operating costs during the employees’ period of service.

Our obligation in respect of the long-term post-employment benefit plan is calculated by estimating the amount of future benefit that employees would have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value on the employee benefit obligations for the period by applying an appropriate discount rate. As of 31 December 2021, our provision for employees' end of service benefits amounted to USD 95 million. For additional information, see note 21 to our2021 financial statements.

7. Accounting policies adopted by the Company:

ADP prepares its accounts in accordance with IFRS.

8. Statement of the Group’s loans, credit facilities and indebtedness and the most significant conditions thereof:

Please see section 3.3 (The Group’s Financing Arrangements) for a summary of the Group’s borrowings.

9. Statement of current pledges and encumbrances on the Group’s assets As at 31 March 2022, there are no pledges or encumbrances on the Group’s assets.

10. Investment Risks:

Investing in and holding the Shares involves financial risk. Prospective investors in the Shares should carefully review all of the information contained in this Prospectus and should pay particular attention to the following risks associated with an investment in the Company and the Shares that should be considered together with all other information contained in this Prospectus. If one or more of the following risks were to arise, our business, financial condition, results of operations, prospects or the price of the Shares could be materially and adversely affected and investors could lose all or part of their investment. The risks set out below may not be exhaustive and do not necessarily include all of the risks associated with an investment in the Company and the Shares. Additional risks and uncertainties not currently known to the Company or which it currently deems immaterial may arise or become material in the future and may have a material adverse effect on the Company’s business, results of operations, financial condition, cash flows, prospects or the price of the Shares.

Risks Related to Our Business

The cyclical nature of the polyolefins business could have a material adverse effect on our business, results of operations, financial condition and prospects.

Historically, selling prices for polyolefins have fluctuated in response to periodic changes in supply and demand conditions. For example, prices of polyolefin products have been cyclical as a result of shifts in production capacity and demand patterns in Europe, Middle East, Africa, Asia, and more generally worldwide. The polyolefins industry historically has experienced alternating periods of tight supply, causing prices and margins to increase, followed by periods of substantial additions to capacity, resulting in excess supply and declining prices and margins.

Such supply and demand fluctuations can be unexpected and has in the past and is expected to continue to significantly impact selling prices. According to IHS, heightened health and safety concerns in response to the COVID-19 pandemic have contributed to increased demand for polyethylene-based packaging, in particular during the year 2020 and 2021, however the demand is expected to moderate over the course of 2022, which in turn may in turn result in declining prices and margins. Demand for polyolefins is also affected by population growth, GDP growth, and governmental policies, among other things. Conditions in the global polyolefins industry significantly impact our operating results. A number of factors beyond our control may affect global polyolefins industries, including demand for plastic products, socio- economic factors and consumer behaviour, use of substitute products such as non-plastic

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