CVR Partners LP, which owns a nitrogen fertilizer plant in Coffeyville, Kan., on March 29 announced more details in its launch of its initial public offering of 19,200,000 common units representing limited partner interests. CVR Partners will list its common units on the New York Stock Exchange under the symbol “UAN.”
CVR Partners anticipates granting the underwriters a 30-day over-allotment option to purchase up to an additional 2,880,000 common units from CVR Partners to cover over-allotments, if any, at the IPO price, less underwriting discounts and commissions. All of the common units to be sold in this offering (including the common units that may be sold to satisfy the underwriters’ over-allotment option) will be sold by CVR Partners.
If all 22.08 million shares are sold at the high end of the $12-$14 per share range proposed by the offering, CVR could pull in $309.12 million.
CVR Partners had said Dec. 20 that it had filed a registration statement on Form S-1 with the U.S. Securities and Exchange Commission in connection with a proposed IPO. At that time it said it would raise $200 million, though the number of shares and a proposed price range were not released (GM Jan. 3, p. 2011). CVR Energy announced back in November that it again planned to spin off the nitrogen unit as an IPO (GM Nov. 8, 2010). Another IPO was pulled in 2008, as well as UAN plant expansion plans (GM June 23, 2008).
After the current offering, CVR Energy Inc., which owns the oil refinery at Coffeyville, will indirectly own common units representing approximately 73.7 percent of CVR Partners’ outstanding units (approximately 69.8 percent if the underwriters exercise their option to purchase additional common units in full) and CVR Partners’ general partner with its non-economic general partner interest. CVR Partners will rely on CVR Energy for its supply of petroleum coke, as well as for management.
CVR Partners is a Delaware limited partnership focused primarily on the manufacture of nitrogen fertilizers. The CVR Partners nitrogen fertilizer manufacturing facility is the only operation in North America that uses a petroleum coke gasification process to produce nitrogen fertilizer, and includes a 1,225 ton-per-day ammonia unit, a 2,025 ton-per-day urea ammonium nitrate unit, and a dual-train gasifier complex having a capacity of 84 million standard cubic feet per day of hydrogen. Historically, petcoke has been lower priced than natural gas, which is used by most of CVR’s competitors. CVR believes it has historically been the lowest cost producer and marketer of ammonia and UAN in North America. During the past five years, over 70 percent of the petcoke used by the plant was sourced from CVR Energy’s next door crude oil refinery via a long-term agreement.
In 2010, the company produced 392,745 st of ammonia, of which about 60 percent was upgraded into 578,272 st of UAN.
Following the completion of the offering, CVR plans to move forward with a significant two-year plant expansion designed to increase UAN production capacity by 400,000 st/y, or approximately 50 percent.
CVR is positioning itself to Wall Street as a pure-play nitrogen fertilizer company, noting that nitrogen is just a component in the earnings of many of its larger competitors. In addition to being the low cost producer, CVR is also touting its transportation advantage, located near major customers.
CVR told analysts last month that it foresees a bullish run of 18-36 months for fertilizer prices (GM March 14, 2011). While CVR nitrogen results were off in 2010 (GM March 7, 2011), the company cited both a major scheduled turnaround and an unplanned equipment outage at the UAN plant. Full-year nitrogen operating income was $20.4 million on sales of $180.5 million, down from the prior year’s $48.9 million on sales of $208.4 million.
Morgan Sta