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HECA pulls out of fertilizer project

News

The Hydrogen Energy California (HECA) project, which had hoped to build a large coal/petroleum coke-based nitrogen and electricity project in Kern County, Calif., withdrew its motion to reinstate its application for certification (AFC) with the California Energy Commission on March 3. HECA had filed the motion late last year (GM Dec. 7, 2015) and a hearing was set for March 7, 2016.

“Recent developments, such as the U.S. Supreme Court’s Feb. 9, 2016, decision to stay implementation of the Obama Administration’s Clean Power Plan, which was rendered subsequent to applicant’s pending request to reinstate the revised AFC proceedings, have cast additional uncertainty over the timing of such projects,” HECA said in its withdrawal filing. “Given the current uncertainty related to timing, the time that has passed since some of the analysis related to the project was completed, and the likely need for substantially revised analysis to reflect anticipated changes to the project, applicant has decided to withdraw the revised AFC.”

The CEC quickly terminated the AFC proceeding and cancelled the hearing.

HECA conceded that the timeframe for deploying the project had been much longer than was originally anticipated.

HECA said it continues to believe that the site, which it will retain control over, is well suited for carbon sequestration. It said it will continue to monitor relevant policy, regulatory, legal, and economic developments, and work with agencies and other entities likely to play a role in the future deployment of the project. It said the information and analysis collected to date would be a substantial base upon which to develop a new application.

HECA arose out of the American Recovery and Reinvestment Act of 2009, when the DOE’s Office of Fossil Energy received $3.4 billion to focus on clean coal technology projects. In 2011, after DOE and HECA had spent $75 million on the project, HECA was transferred from original owners BP and Rio Tinto to SCS Energy California. As of late 2011, the cost of building the project was put at $4 billion and DOE’s share at $408 million. As of 2012, plans were for it to generate a total net output of up to a nominal 300 megawatts, make up to 1 million st/y of nitrogen-based products, capture a stream comprised primarily of CO2, and transport it by pipeline to a neighboring oilfield for enhanced oil recovery and sequestration (GM Dec. 31, 2012).

HECA requested and received a six-month suspension of the AFC last summer while it readied the project for a more detailed review (GM July 13, 2015). When it filed its motion to reinstate the AFC, it said it had resolved the C02 off-taker and carbon sequestration issue, as well as Kern County concerns that it might produce non-fertilizer nitrogen products. HECA had argued that it could permanently sequester the C02 beneath the project site, with this approach eliminating the need to contract a C02 off-take agreement. HECA was originally going to sell the C02 to oil companies, but was never able to reach a deal.

Opponents were not happy with this plan and continued opposition was expected. HECA had opposition from neighbors, environmental groups, and Kern County officials.

Another coal-based nitrogen project was still in the proposal stage in January (GM Jan. 8, p. 1). The Summit Power Group’s Texas Clean Energy Project (TCEP) near Odessa, Texas, would produce 714,000 st/y of urea. TCEP had been anticipating a financial close in the spring of 2016. Did the Supreme Court decision also alter their thinking? The company had not responded to inquiries at press time.

GMO labeling bill passes Senate ag committee

News Briefs

Washington—The Senate Committee on Agriculture, Nutrition, and Forestry on March 1 approved the Biotechnology Labeling Solutions Bill, which would preempt state GMO food and seed labeling laws and create a voluntary national labeling standard administered through the USDA. The legislation now heads to the full Senate for consideration, and has the support of the Agricultural Retailers Association (ARA), the American Seed Trade Association (ASTA), and more than 650 farmers, cooperatives, agribusinesses, processors, seed makers, food and feed manufacturers, lenders, and retailers. The Coalition for Safe Affordable Food, which includes ARA and ASTA as members, praised the bill. “Agriculture and food policy should be based on sound science, not fear tactics,” said ASTA President and CEO Andrew LaVigne. “Today’s vote was an important step in bringing consistency and transparency to the marketplace, while protecting consumers and the food and agriculture community from a costly and confusing patchwork of state labeling laws.” Ag Committee Chairman Sen. Pat Roberts (R-Kan.) said the bill “sets national uniformity, based on science, for labeling food or seeds that are genetically engineered. This allows the value chain from farmer-to-processor-to-shipper-to-retailer-to-consumer to continue as the free market intended.” In February the Coalition for Safe Affordable Food launched a phone-a-thon to U.S. Senate offices in support of a uniform, national labeling standard for bioengineered foods. ARA sent an alert to members asking for their participation.

ChemChina seeks $35 B to finance Syngenta deal

China, News Briefs

Beijing—China National Chemical Corp. (ChemChina) is reportedly seeking to borrow a total of $35 billion to help fund its purchase of Syngenta AG (GM Feb. 5, p. 18), a record amount for an overseas acquisition by a Chinese company. ChemChina is reported to have hired China Citic Bank International Ltd. to arrange a $15 billion loan facility, which will be fully guaranteed by ChemChina and likely syndicated in Asia, with a separate $20 billion acquisition loan still under negotiation. Syngenta AG announced on Feb. 3 that ChemChina had offered to acquire the company for more than US$43 billion (US$465 per ordinary share) in a deal touted as the largest-ever acquisition by a Chinese company.

Scotts concludes Bonnie investment

News Briefs

Marysville, Ohio—The Scotts Miracle-Gro Co. said March 2 that it has completed a minority economic investment in Bonnie Plants Inc. (GM Feb. 5, p. 16), the largest and only national grower and supplier of quality vegetable and herb plants for consumers, thus solidifying its commitment to edible gardening. As part of the partnership, Scotts will provide exclusive marketing and R&D services to Bonnie for its edible gardening initiatives. Bonnie is a wholly-owned subsidiary of the Alabama Famers Cooperative.

BHP and Vale Brazilian jv to pay $5.1 B

Brazil, News Briefs

Brasília—Samarco Mineração SA and its two shareholders, BHP Billiton Ltd. and Vale SA, have reached an agreement with Brazil’s Federal Attorney General, the states of Espírito Santo and Minas Gerais, and certain other Brazilian authorities to pay clean-up costs and damages for the devastating dam spill in November (GM Nov. 23, 2015). According to estimates by the Brazilian government, the total amount will reach about R$20 billion ($5.1 billion). However, in separate statements by BHP and Vale outlining the obligations under the deal, the total came close to R$12 billion. The difference is said to be due to varying estimates of future amounts, according to local media quoting government sources. Some R$4.4 billion is payable through to 2018, less any amounts already paid by the iron-ore miner. The agreement is for 15 years, renewable for periods of one year successively until all obligations are fulfilled. In the event Samarco is unable to pay, BHP and Vale would be responsible for covering the costs. The deal, reached on March 2, does not cover other public or private civil claims or criminal charges relating to the dam failure against the three companies.

ICL up on POT comments, sheds non-core unit

News Briefs

Tel Aviv—Potash Corp. of Saskatchewan Inc. has no plans at this stage to sell its 13.9 percent minority stake in Israel Chemicals Ltd. (ICL) according to PotashCorp CEO Jochen Tilk, who spoke to analysts last week. He said that the company would not sell its stake as long as ICL’s share price were so low. The news helped boost ICL’s stock up by 6 percent. The share price is currently 12 percent above its 12-month low. Psagot analyst Ilanit Sherf said that Tilk’s remarks could be viewed as a signal to the Israeli government to hold another round of talks on the approval of a proposed deal for PotashCorp to acquire ICL. In 2013, PotashCorp attempted to purchase a majority stake in the company, but the move was thwarted by then Finance Minister Yair Lapid. Meanwhile, ICL is continuing its efforts to focus on fertilizers and industrial chemicals. The company’s ICL Industrial Products division announced the sale of its Clearon Corp. business unit to Hui Yu Xin American Corp, a subsidiary of China’s Dalian Hui Yu Xin Technology Development Co. Ltd. Clearon is a leading manufacturer and supplier of water treatment chemicals for the pool and spa industry.

Lower share prices spur takeover talk

Canada, News Briefs

Saskatoon—Lower fertilizer company share prices continue to spur speculation that it may be a good time to try and take over a fertilizer company. “This stock is getting to a point where somebody with a lot of cash who’s in a business that may not have the secular growth that an ag business does, should be looking,” CLSA Analyst Mark Connelly told Bloomberg last week, referring to Potash Corp. of Saskatchewan Inc. stock. PotashCorp said it did not respond to speculation. “If it continues to slide,” said Connelly, “it will be taken out.” However, he noted the moves that potash producers have been taking to balance the market, and said agriculture tends to be more in 3-4 year slumps, with the secular outlook still good. Other recent analyst speculation has had PotashCorp buying up Intrepid Potash Inc., partly to shutter its potash production, though that company is moving to take down its own higher cost production (see page 1). BCMI Research Analyst Chris Damas last week suggested that the three Canadian potash producers might have too many antitrust issues to make a play for Intrepid, but suggested that it might be a natural fit for Compass Minerals, which could utilize Intrepid’s Moab and Wendover, Utah, assets, in particular.

Vale posts $12.13 B loss; fertilizer positive

Brazil, News Briefs

Rio de Janeiro—Brazilian mining giant Vale SA reported a net loss of $12.13 billion on gross operating revenues of $26.05 billion in 2015. This compares to a net income of $657 million and revenues of $38.24 billion for the previous year. The group attributed the year-on-year decrease in income to lower commodity prices, especially iron ore, and to higher impairment charges in 2015 ($9.37 billion versus $1.15 billion in 2014). The 47 percent year-on-year depreciation of the Brazilian real against the U.S. dollar, which inflated the group’s debt, was also a major factor. Underlying earnings were a negative $1.70 billion in 2015, against a positive $4.42 billion in the previous year. Vale’s Fertilizers business segment saw its adjusted EBITDA more than double, to $567 million on net revenues of $2.23 billion in 2015, compared with 2014’s $278 billion and $2.42 billion, respectively. The increase was driven mainly by exchange rates and commercial and cost savings initiatives, and was partly offset by lower sales volumes and prices. Gross revenues from the sales of phosphates were 4.5 percent lower at $1.82 billion in 2015, down from $1.90 billion. Nitrogen fertilizer revenues declined 13.6 percent, to $355 million from $411 million, while potash revenues also were 13 percent lower at $147 million, down from $169 million in 2014. Sales volumes declined for most of Vale’s fertilizer products in 2015 compared with the prior year, although sales of MAP increased 3.9 percent, to 1.08 million mt from 1.04 million mt. Sales of other phosphates were largely lower year-on-year: SSP volumes amounted to 1.85 million mt (down 11.7 percent); TSP 744,000 mt (down 0.7 percent); dicalcium phosphate 459,000 mt (down 6.9 percent); and phosphate rock 3.19 million mt (down 2.0 percent). Potash sales were 2.5 percent lower at 463,000 mt from 475,000 mt. Nitrogen fertilizer sales fell 5.7 percent to 641,000 mt from 680,000 mt. Vale said while sales volumes were down, it increased its market share in Brazil. It expects Brazilian consumption will remain weak as buyers continue to postpone purchases due to credit issues and ag commodity prices.

Land O’Lakes reports record earnings

News Briefs

Arden Hills, Minn.—Land O’Lakes Inc. reported record net earnings for the year ending Dec. 31, 2015, of $307.6 million on net sales of $13 billion, up from 2014’s $266.5 million and $14.7 billion, respectively. “Delivering record earnings in the current market environment underscores the strength of Land O’Lakes core business strategy,” said Chris Policinski, president and CEO. “This was a record year for Land O’Lakes in spite of challenging commodity markets, declining on-farm income, and increasing industry consolidation. Additionally, we completed the largest merger in our company history and extended our global reach to Africa.” In 2015, LOL merged its Winfield Solutions LLC with United Suppliers Inc.’s crop protection and seed business. LOL expects to merge with United Suppliers crop nutrient business in the fall of 2017. Also in 2015, LOL purchased a majority ownership stake in Villa Crop Protection, based in South Africa, which is LOL’s first commercial investment in Africa. The Crop Inputs unit in 2015 reported net sales of $4.8 billion, down from the year-ago $4.9 billion. Pretax earnings were $189.6 million, down from 2014’s $220 million. LOL said low commodity prices impacted results across the portfolio and were offset to some extent through strength in Croplan corn, soybeans, and alfalfa. LOL-wide, fourth-quarter earnings were up at $119.4 million on sales of $3.3 billion, compared to the year-ago $38.3 million and $3.5 billion, respectively. LOL said all three major units – Crop Input, Dairy, and Feed – delivered strong quarterly earnings well ahead of year-ago figures.

India cuts P&K subsidies, increases urea

India, News Briefs, Urea

New Delhi—India’s government has reduced the subsidy allocation on phosphate and potash fertilizers by 13 percent, to Rs190 billion ($2.77 billion) for the 2016/17 fertilizer year, starting April 1, but it has raised the allocation for urea by 1 percent, to Rs510 billion. The total fertilizer subsidy allocation for 2016/17 is Rs700 billion, down from an estimated Rs724 billion for 2015/16. For phosphate and potash fertilizers, Rs120 billion is allocated for indigenously-produced product and Rs70 billion for imported phosphate and potash fertilizers. The final subsidies on DAP, potash, and NPK are expected to be announced later this month. Out of the total allocation for urea, Rs400 billion has been earmarked for domestically-produced product and Rs110 billion for imported urea. FAI Director General Satish Chander has said the fertilizer subsidy allocation is sufficient to meet requirements for 2016/17 if international prices for urea, DAP, and potash remain at current low levels, but would not cover outstanding subsidies arrears from past years, which he put at Rs450 billion. India’s Finance Minister Arun Jaitley on Feb.29 also announced the government will introduce a direct benefit transfer (DBT) of fertilizer subsidy to farmers on a pilot basis in a few districts of the country, with the aim of improving quality of service delivery to farmers. It is thought the new scheme also will bring financial benefits to India’s fertilizer producers. India already has introduced a DBT on LPG. India Farmers Fertiliser Cooperative Ltd. (IFFCO) welcomed the government’s move, and said it will go a long way to improving the financial and operational sentiments of the ailing domestic fertilizer industry, local media reported.