Sustainable Technology Solutions
PRIMER
Supplement
2 Sustainable Technology Solutions Primer Supplement
Why Read This Primer
KBR (Kellogg Brown & Root) has a rich history of more than 100 years in the energy industry. In 2014, KBR began a strategic shift, and the "new" KBR as we stand today emerged in 2020. In this report, we examine the strategies which have driven this shift, with a specific focus on the Sustainable Technology Solutions (STS) segment.
We see STS as a significant growth vector for KBR driven by the Energy Trilemma. We will introduce each of STS' differentiated product and solution lines and outline the market drivers for each.
KBR does many amazing things and is helping solve some of the world's toughest challenges, including climate change, energy security and energy transition. Recent growth in STS has created more interest and attention around this segment specifically. This Primer Supplement is meant to complement the Primer Webinar.
Key Takeaways
- Sustainability is at the heart of KBR's vision and strategy.
- Digital innovation, deep domain expertise and proprietary technologies are capability sets used across KBR.
- KBR is up-market, innovative and future-focused. KBR is no longer a construction company and no longer has the risk appetite for work on lump sum turnkey contracts.
- STS comprises two major product/solution lines (PSLs). The Sustainable Technologies PSL provides 80-plus licensable proprietary technologies. The Sustainable Solutions PSL provides world-class,award-winning digitalized engineering solutions.
- Both the Technologies and Solutions PSLs are high growth, high margin and low capital intensity and aligned to strong end markets with growing market share.
- STS provides solutions across the full asset lifecycle from end-to-end. Our support starts from ideation and continues all the way through plant startup and beyond.
- Customer centricity is part of the success story at KBR, and we do work that matters for our customers and their missions.
3 Sustainable Technology Solutions Primer
Table of Contents
4 Introduction
6 Sustainability Vision
- Organization and Offerings
-
Product and Solution Lines
11 Sustainable Technologies
12 Sustainable Solutions
- Profit Streams
- Energy Market Vectors
15 Clean Ammonia and Hydrogen
17 Sustainable Petrochemicals
19 Plastic Waste Recycling
21 Low-carbon Refining and Biofuels
23 Inorganic Chemistry
25 Next-gen LNG
- Digital Capabilities Highlights
- Global Diversification
- STS Future
- Glossary
- Appendix
4 Sustainable Technology Solutions Primer Supplement
Introduction
KBR was at the forefront of the fossil era and is today at the forefront of the renewables era
KBR delivers science, technology and engineering solutions to governments and companies around the world. We employ a diverse workforce of approximately 34,000 people worldwide. The company's reporting segments include Government Solutions (GS) and Sustainable Technology Solutions (STS).
KBR has a long, proud history dating back to 1901. Over time, the world has changed, the energy industry has evolved, and the company has advanced with it. KBR has been a leader in energy industry engineering solutions for more than 100 years. Some notable achievements include designing the first catalytic cracking technology as well as the first crude oil liquid ethylene cracking technology. KBR also constructed the world's first offshore platform in 1947.
1900
The M.W. Kellogg Co., a small pipe-fabrication company, is founded by Morris W. Kellogg in New York City.
1919
Brown & Root is founded as a road construction company in Houston, Texas, by George and Herman Brown and their brother-in-law, Dan Root.
1947
Brown & Root builds the world's first offshore platform 43 miles south of Morgan City, Louisiana, beyond the sight of land.
1956
Kellogg builds the first crude oil-based liquid ethylene-cracking facility in Europe.
1965
Brown & Root builds the first offshore platform in the North Sea for Conoco, which would later become a major offshore hub.
1977
Kellogg constructs Skikda LNG in Algeria, its first LNG liquefaction plant.
1996
Acquisition of Granherne.
1998
M.W. Kellogg Company merges with Brown & Root to form Kellogg Brown & Root (KBR).
2001
Acquisition of GVA.
2005
KBR begins Pearl GTL in Qatar, its first GTL project and what will be the largest GTL plant in the world.
1900 | 1905 | 1910 | 1915 | 1920 | 1925 | 1930 | 1935 | 1940 | 1945 | 1950 | 1955 | 1960 | 1965 | 1970 | 1975 | 1980 | 1985 | 1990 | 1995 | 2000 | 2005 | 2010 | 2015 | 2020 |
2010 | 2011 | 2016 | 2020 | 2021 | 2023 |
Acquisition of | KBR establishes joint | Acquisition of Weatherly, | KBR exits LSTK | KBR Invests in Mura | KBR launches |
Energo Engineering | venture with AMCDE. | Ecoplanning and PLINKE. | engineering, | Plastics Recycling | Sustainable Aviation |
and Roberts & | procurement and | Technology. | Fuel technology in | ||
Schaefer. | construction (EPC) | KZJV forms with Zachry | alliance with | ||
contracts related to LNG. | Swedish Biofuels. | ||||
for project construction. | |||||
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In 2014, when Stuart Bradie joined as CEO, Construction made up 75% of KBR activity, while Technology and Government Services combined only made up 25%
In 2020, KBR went through a strategic shift and reorganized into two business segments: GS and STS. KBR also formally exited commoditized services (including construction) and announced the strategic shift away from lump sum turnkey- type contracts and the related high-risk,capital-intensive requirements. The company continued investment in high-end,sustainability-focused proprietary technologies. Today STS continues to grow and is approximately 40% of the company's profits.
KBR Adj. EBITDA | KBR Stock Price |
Transformation
2015A | 2020A | 2021A | 2023A | 2025E |
Transformation | ||||||||||
$60.00 | ||||||||||
$50.00 | ||||||||||
$40.00 | ||||||||||
$30.00 | ||||||||||
$20.00 | ||||||||||
$10.00 | ||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
Construction | Sustainable | Government | ||
Projects | Technology | Solutions | ||
Solutions |
The STS segment of today provides sustainable solutions which enable clients to produce cleaner, safer and more energy-efficient products in a number of critical market vectors, all through a whole lifecycle approach.
What has not changed is our industry-leading expertise and the fact that we are leading the way toward a more sustainable future through our innovative solutions. With our culture of agility and delivery focus, we continue to add value to our clients and do work that matters.
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Sustainability Vision
Sustainability is at the heart of KBR's mission and strategy.
KBR received the coveted AAA designation in MSCI's 2023 ESG Ratings. The AAA rating is MSCI's highest and is given to companies that are leading their industries in managing the most significant ESG risks and opportunities
We strive to create a safer, more secure and sustainable world by bringing together the best and brightest to deliver technology and solutions that help our customers accomplish their most critical missions and objectives.
More and more, sustainability is becoming a critical issue across society. In response, a growing number of countries and companies are targeting carbon neutrality and/or net-zero carbon emissions. KBR is uniquely positioned to bring differentiated, sustainability-focused technologies and solutions to bear across all sectors, helping those countries and companies achieve both their business and ESG goals.
KBR believes that each one of us has a responsibility to do the right thing and make decisions that count to safeguard our people, our customers, our planet, and the communities where we live and work. Our primary goal when it comes to our people, customers and partners is to ensure everyone returns home safely at the end of each day. That commitment is the foundation of our Zero Harm culture. We expanded that culture to include our sustainability platform which comprises ten key pillars.
7 Sustainable Technology Solutions Primer Supplement
At KBR, we believe that a commitment to sustainability includes using our capabilities and expertise to help our customers accomplish their sustainability goals, thus creating value for all our stakeholders. It is the people of KBR that are advancing this strategy, including more than 10,000 STS employees located across three major global hubs in India, the U.K. and the U.S. Our technical expertise is recognized internally through our ONE KBR Technical Fellows Program and externally through industry-leading technical journals.
Sustainability is a pillar of our corporate culture, and we believe in walking the talk. As such, we have been carbon neutral since 2019. In 2020, we committed to the UN Global Compact. Going forward we have set targets to become operationally net-zero carbon emissions by 2030.
KBR's commitment to sustainability includes engaging with our communities and the next generation of talent. KBR created ONE OCEAN, a program with the mission to educate and encourage young people to investigate and develop creative and practical solutions to environmental issues. The program also addresses circularity and biomimicry among other innovative sustainability approaches.
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Energy Trilemma
STS has had double-digit growth in adjusted EBITDA the last four years in a row. STS adjusted EBITDA increased 50% year over year from 2022 to 2023. One of the most impactful macro drivers of this growth is the "Energy Trilemma."
The Energy Trilemma is the three-pronged global challenge of energy security, environmental sustainability and energy equity.
Environmental sustainability means minimizing environmental harm, such as reducing emissions that contribute to climate change. Due to increasing societal (i.e., net-zerotargets) and governmental pressures to reduce carbon emissions, companies and governments are transitioning from fossil fuel generation to more renewable sources.
Environmental Sustainability
The Energy
Trilemma
Energy security means ensuring reliability of energy sources. Geopolitical turmoil, including the conflict in Ukraine, have disrupted the world energy supply. As the world is rebalancing, countries are focused on ensuring an adequate, affordable, sufficient supply of energy to meet global needs. International supply chains will be reevaluated and de-risked.
Energy Equity
Energy
Security
Energy equity means making energy affordable for consumers. Affordability is the most dominant and pressing issue because solving for energy security and energy sustainability requires investment, which is then passed onto the consumers. This underscores the importance of using advanced technology to lower total cost of production while doing so in a cleaner manner.
The trilemma represents our current global energy crisis and its three-pronged challenge: delivering more energy, clean energy, and affordable energy. KBR's leadership in decarbonization and energy transition solutions has been in high demand in recent years as more companies and governments are earnestly looking to transition to more sustainable forms of energy and to create sustainable energy economies.
The Energy Trilemma is driving significant new investment in the recently under-invested energy sector as governments and companies are trying to progress on all three core elements. This investment includes a balance across grey (traditional fossil fuels), blue (fossil fuel with carbon capture) and green (renewable) energy sources.
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Organization and Offerings
STS develops and offers proprietary technologies directly responsive to the energy trilemma challenge, and offers a full range of technology services to bring sustainable solutions into reality.
The Sustainable Technologies PSL is composed of KBR's leading global portfolio of proprietary process technologies. KBR's technologies are intellectual property (a mix of patents, trade secrets, and know-how) related to critical aspects of the design, fabrication, installation and operations necessary to chemically process or transform different feedstocks into desired end products. For example, in an ammonia plant, our technology is used to transform nitrogen and hydrogen (the feedstocks) into ammonia (the end product). KBR has more than 80 technologies in our portfolio, for which some of the IP is owned by KBR and some is owned by our alliance partners.
Through our Sustainable Solutions PSL, we provide best-in-class program management and serve as trusted advisor to corporations and governments. Through our differentiated services, we support our clients with sustainability strategies across energy transition topics (e.g., carbon capture utilization and storage, hydrogen infrastructure strategy and planning, renewable energy and fuels, decarbonization and asset optimization, etc.). We also offer integrated services, which provide solutions including engineering solutions, project management consultancy (PMC), and procurement and construction management (PCm).
All of our STS offerings are digitally enabled through advances such as model-based engineering, artificial intelligence, machine learning, predictive analytics, digital twins and real-time industrial process monitoring. KBR's partnerships with leading cloud hyper-scalers help us combine our deep industry expertise with advanced Internet of Things (IoT), cloud services and technology infrastructure to deliver the greatest value for our customers. Our digital solutions drive efficiency, improve reliability and safety, reduce opex and capex, and enhance security.
10 Sustainable Technology Solutions Primer Supplement
STS Project Lifecycle
EBITDA Contribution
CUSTOMER | 75-80% | |
CAPEX | Upgrades | |
and Decar | ||
bonizati | ||
o | ||
n | ||
R | ||
e | ||
v | ||
a | ||
m | ||
p | ||
s | ||
CUSTOMER | 20-25% | |
OPEX | ||
Phase 1 | Phase 2 | Phase 3 | Phase 4 |
(<1 year) | (~1 Year) | (~2-5 Years) | (Ongoing/Perpetual) |
Strategic Planning | Technology and | Execution | Operation |
and Feasibility Studies | FEED Engineering | Proprietary Equipment (PEQ) | Technology Led Industrial |
Concept and Feasibility | Proprietary Technology | and Catalyst | Solutions (TLIS) |
Studies | Licensing | Project Management | Efficiency Improvement and |
Strategic Planning and | Design and Engineering | Consultancy (PMC) | Emission Reductions |
Advisory | Solutions | Complex Program | |
Development | |||
Machine Learning (ML) Enhanced | |||
Schedule Optimizations | |||
Procurement and Construction | |||
Management (PCm) |
STS provides solutions across the full asset lifecycle from end-to-end.
Our support starts from ideation and continues all the way through plant startup and beyond.
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Disclaimer
KBR Inc. published this content on 10 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 March 2024 14:35:02 UTC.