Australia’s Incitec Pivot Ltd. (IPL) today announced that it has approved US$850 million of capital expenditure for the construction of a world scale 800,000 mt/y ammonia manufacturing plant. IPL has been reviewing the project for some time. The plant will be situated on a brownfield site, which is part of Cornerstone Chemicals Co.’s chemical complex in Waggaman, La., situated on the industrial corridor along the Mississippi River.
IPL, through its subsidiary Dyno Nobel Louisiana Ammonia LLC, has entered into a contract with KBR Inc., a global engineering, construction and services company with world leading ammonia technology. This contract is for the engineering, procurement and construction of the plant and will include a license of KBR’s ammonia technology.
Production is planned to commence in the third-quarter 2016. IPL said the plant is sold out from day one of production commencing with 300,000 mt to the group’s own plants in the U.S. The balance is committed to offtake agreements with Transammonia Inc. and Cornerstone Chemicals Co.
The group’s U.S. business, Dyno Nobel, is the largest manufacturer of industrial explosives in North America having nine major manufacturing sites.
The project will be funded by debt facilities and internally-generated cash flows.
IPL Managing Director and CEO James Fazzino said the project met IPL’s strict investment hurdles with compelling financial metrics, with a payback of less than five years and a 15 percent Internal Rate of Return. “Two years ago, IPL identified the unique opportunity to capitalize on a potential investment in the U.S. through a brownfield site, competitively-priced energy, labor productivity and responsive regulatory environment.
“Also, this project leverages the “one off” benefits of the brownfield site, utilizing existing infrastructure, including ammonia logistics and access to the U.S. ammonia market.”
“The plant will sit in the bottom quartile of the global cost curve and takes our U.S. business, and potential future ammonium nitrate expansions, back to U.S. gas economics.”
“This is a unique set of factors that allows IPL to grow its international business and strengthens our presence in one of the world’s largest economies.”
Fazzino said that the project was a good strategic fit for IPL and leverages the group’s core manufacturing competence. He said it brings to seven the number of ammonia plants operated by IPL globally.
“The confidence to proceed with the project was underpinned by support from the State of Louisiana, Jefferson Parish and community,” he said. “The U.S. Federal Administration’s energy policy platform and commitment to manufacturing was also a major factor.