Agrium Inc. announced positive developments on two major initiatives last week ?Çô the tripling of the Egyptian nitrogen facility in which it has invested, as well as significant progress with its planned brownfield expansion at its Vanscoy, Sask., potash mine.
Agrium said Egyptian Nitrogen Products Co. S.A.E. (ENPC), a wholly-owned subsidiary of MISR Fertilizer Production Co. S.A.E. (MOPCO) of Egypt, has secured local financing of $1.05 billion. This will allow ENPC to proceed with the next steps of the construction of the second and third production trains at the existing MOPCO nitrogen facility in Damietta, Egypt. This is the largest single financing completed by Egyptian-led banks and is fully underwritten.
“We are extremely pleased that ENPC has been able to reach a financing agreement for the tripling of the existing nitrogen facility in Egypt. This is an outstanding opportunity for Agrium to participate in the significant expansion to this world class facility and in an area with long-term, competitively priced gas and prime access to world markets. We appreciate the support and efforts of the Government of the Arab Republic of Egypt, and especially the Ministry of Petroleum, in achieving this financial close. Our project co-owners bring local business knowledge, energy supply and distribution expertise, which combined with our expertise in operations and global marketing, positions MOPCO as a leading global facility. This investment also grows Agrium’s international presence and is an important step in continuing to diversify our asset base,” said Mike Wilson, Agrium president and CEO.
Agrium owns a 26 percent equity interest in the existing MOPCO facility, which has been in operation since October 2008. This translates into 169,000 mt of the 650,000 mt of urea capacity from a highly cost competitive, export-oriented facility. The equipment fabrication for the two train expansion is approximately 95 percent complete. Field construction of the two trains will now accelerate, with both trains expected to be completed in the first half of 2012. Total annual production at the site will be 1,950,000 mt of urea and 150,000 net mt of ammonia. Agrium’s 26 percent share of the production upon completion of the two new trains will be 507,000 mt of urea and 39,000 mt of net trade ammonia. Agrium will market all 1,300,000 mt of urea and 100,000 mt of ammonia in the export market from the two new trains. Under the financing plan, Agrium will not be required to put any further equity into the project.
In the meantime, the Vanscoy potash expansion is expected to add 750,000 mt of annual potash capacity to the mine, contingent upon final project approval, which is expected to occur in late 2010. An Engineering, Procurement, and Construction (EPC) contract was recently executed by Agrium with a joint venture comprised of SNC Lavalin Inc. and PCL Industrial Management Inc. to further develop the engineering and ultimately complete the expansion.
Agrium says most of the construction work on the capacity addition is expected to be completed in 2013 and 2014. Some incremental capacity and related additional production is expected in late 2013. The majority of the capacity expansion is expected to be available in 2014, with full rates expected to be achieved in late 2014. The full 2.8 million mt of annual production capacity is expected to be achieved in 2015.
“The brownfield expansion is an important part of our strategy to continue to grow all three of our strategic business units,” said Wilson. “The EPC contract with two leading engineering and construction firms is an important step in this process. We believe that global potash demand will start to rebound in 2010 and that brownfield expansions make economic sense given the world ultimately will need this additional production. As I have stated previously, Agrium is committed to growing across all three business units through a variety of value added opportunities. The announcement today in no way diminishes our resolve to proceed with our proposed acquisition of CF Industries Holdings Inc.”