Sioux City, Iowa-Terra Industries Inc. announced July 18 that it has executed an agreement with Eastman Chemical Company giving Eastman an exclusive and irrevocable option to purchase all the assets of Terra’s Beaumont, Texas, facility. Eastman may exercise its option to purchase the Beaumont facility on or before Oct. 1, 2007. Should Eastman elect to exercise its option to purchase the Beaumont assets, that transaction would close on or before Jan. 1, 2009. The Beaumont facility has the capacity to produce annually 225 million gallons of methanol and 255,000 tons of ammonia, and includes methanol and ammonia storage capacity. On Dec. 31, 2003, Terra sold its sales contracts and rights to the full output of its Beaumont methanol plant through 2008. Under the terms of that agreement, Terra ceased production at the Beaumont facility on Dec. 1, 2004. As a result of this option agreement, Terra determined that the value of its Beaumont property is impaired. Terra expects to record an estimated $27 million impairment charge to net income ($42 million before income taxes) for the quarter ending Sept. 30, 2007. The impairment charge reduces Terra’s investment in the Beaumont property to approximately $47 million.
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