Israel’s Finance Ministry is stepping up its battle on royalties with Israel Chemicals Ltd. (ICL). The ministry’s accountant general has sent a letter to ICL demanding that the entire level of royalties issue be reopened. ICL reported on the letter in its annual report, issued in late March, but did not detail its contents, saying only that it was unclear at this stage how the issue would play out and what impact it would have on ICL profits.

In the letter, Accountant General Shuki Oren noted that the state has the right to demand a reopening of the level of royalties paid on the production in excess of 1 million mt of potash annually. Oren noted that the only stipulation was that the royalties should not exceed 10 percent of the value of the potash sales. He added that when the company was privatized in 1995, the government agreed not to reopen the issue prior to 2010.

The Finance Ministry said that the letter was in effect a demand for reopening the whole issue, and would specifically focus on production above 3 million mt annually. The ministry is proposing that the discussion be held as part of the arbitration between the Finance Ministry and ICL that relates to a demand for $291 million plus interest in royalties from 2000-2009. The arbitration is set to begin in the coming weeks.

Last month Israel’s Finance Ministry sued Dead Sea Works and its parent company, ICL, for back payment of the royalties (GM March 21, 2011). The Finance Ministry charges that DSW, a subsidiary of ICL, the country’s largest chemical concern, failed to transfer to the ministry all data pertaining to the mining operations of potash under the terms of the company’s concession. The ministry said that this prevented it from presenting the court with an exact amount in the suit, which pertains to royalties from 2000-2009.

In response, ICL said that it is studying the suit and is weighing its options, including presenting a countersuit against the government. ICL has denied any wrong doing and rejects claims that it owes the state money. The company said it has used the same accounting practices that were employed when ICL was state owned, and that were accepted by the Finance Ministry.

According to ICL, it transferred $20 million in royalties in 2007, $41 million in 2008, $90 million in 2009, and $23 million for 2010.

Austin Powder Co., Cleveland, Ohio, is now projecting that its planned nitrogen/explosives plant to be built near Mosheim, Tenn., will require an investment of $160 million, rather than the earlier reported $110 million. The new figure comes just six weeks from Austin’s late February announcement about the proposed construction of the facility (GM Feb. 28, p. 1). The increase, based on better engineering and pricing data received by the company, was reported in the local newspaper, The Greeneville Sun. Austin had not returned calls at press time.

Despite the increase in cost estimates, Austin plans to continue with the facility. It has also increased its expectations of the number of construction workers needed to build the facility from 125 to 300.

Austin, through a new subsidiary, U.S. Nitrogen LLC, plans to build a new liquid ammonium nitrate plant (AMSOL or ANS) with a capacity of 420 st/d in Greene County in Eastern Tennessee. Some five buildings, including an anhydrous ammonia (200 st/d) facility and nitric acid plant (330 st/d), will be constructed on the 400-acre site. It will include a two-three story cooling tower.

Austin says the site is within a 250-mile radius of 70 to 75 percent of its customers. It plans to ship the product to its manufacturing sites in Ohio and elsewhere for further upgrading into explosives. The company assured local officials that no actual explosives would be made at the site. The site is about a mile off Interstate 81 and not far from I-40, I-75, and I-74. A Norfolk Southern Railroad track adjoins the property, and a rail link will be built into the plant. The company expects to send some 20 truckloads of product out of the plant each day, and will also ship product out by rail.

Austin said some front-end products for the plant will arrive by railcar and be unloaded at the plant.

The plant will take up approximately 50 acres of the 400 acre site, allowing plenty of green space between it and neighbors. The site is in a rural area near the I-81 and Highway 11-E interchange, with a large Walmart Distribution Center close by.

The East Tennessee Gas Co. pipeline is only one mile away for the company’s gas supply. It will procure water (800 gallons per minute) from the local water district and dispose of it in the Mosheim Sewer system.

The local Greene County Commission on Feb. 22 voted unanimously to approve the site’s rezoning from agricultural and industrial to heavy industrial. Austin was to submit air and water permit applications in March, and after an expected four-month review process to start construction in July or August, with the plant being in production by the end of 2012.

Austin says potential vendors for the new plant should send information via e-mail to usnitrogeninfo@austinpowder.com, or by mail to: Austin Powder Co., Attn: Greeneville Project, 25800 Science Park Drive, Suite 300, Cleveland, Ohio 44122.

The New Brunswick Department of Natural Resources (DNR) has issued a Request for Proposals (RFP) for the exploration of a development in the Millstream Potash Deposit. The area for development is approximately 10,100 hectares some five to ten kilometers west of Sussex in south central New Brunswick. The site is about two kilometers from a rail link, and about 70 kilometers from the Port of St. John.

The detailed RFP, issued April 6 and available on the New Brunswick Web site, www.gnb.ca, said that Millstream is the fourth major potash discovery in the province, with two having already been developed and the third currently under construction by Potash Corp. of Saskatchewan Inc. The RFP noted that the Millstream discovery was made 38 years ago, and that in addition to potash, there are potential magnesium resources. The area was explored by BP Resources Canada Ltd. in the 1980s.

The RFP is asking for proposals by June 6. The DNR plans to inform each proponent of its decision by Aug. 6, 2011. New Brunswick is looking for serious proposals and has outlined its criteria, including: necessary capability and commitment to undertake the proposed work that will provide the best outcome for the province; sincere commitment, with an experienced team and dedicated resources to undertake the work; significant financial capability; a strategy and access to the expertise necessary for potential mine development and the sales of the potash and related minerals; and the offer of the maximum economic benefit that can be realized from the deposit.

Proponents must also submit a certified check in an amount representing 5 percent of the estimated value of the proposed exploration program to be undertaken. Asked if there was a minimum amount for the check, the province told Green Markets that the figure is subjective. However, it did note that there is a commitment to drill a minimum of four boreholes.

New Brunswick would enter into a three-year agreement, with the successful company having two years to complete an exploration program.

If mining eventually takes place, a minimum royalty based on production and an opportunity to share in the profits realized from a mining operation will also be required.

Fitch Ratings, New York, recently released updated ratings for FertiNitro Finance Inc., and said FertiNitro, the Venezuelan nitrogen producer nationalized by the country last year (GM Oct. 25, Oct. 18, 2010), has stated that it will continue to meet its debt obligations. Fitch says FertiNitro and state-owned petrochemical company Pequiven continue to work with relevant parties to reach agreement on the effects of the recent expropriation.

Fitch maintains FertiNitro Finance Inc.’s “CCC”-rated US$250 million 8.29 percent secured bonds due 2020 on Rating Watch Negative. The “CCC” rating reflects FertiNitro’s expected payment of $45.6 million in semi-annual debt service due April 1. The anticipated timely payment prevents further decline to the rating.

Fitch expects rating pressure to remain through 2011, as the project reaches its maximum annual debt service requirement of $91.5 million. The subsequent decline in debt service coincides with the maturity of bank debt separate from the secured bonds.

Due to a planned outage for plant overhaul in October and November 2010, the capacity factor for the urea plant declined to 67 percent in 2010 from 74 percent in 2009. While management projects the recent major maintenance will result in a 2011 capacity factor of 85 percent for the urea plant, Fitch projects the capacity factor will be more consistent with 2009 at 74 percent. Despite the reduced production in 2010, FertiNitro achieved positive cash flow resulting in a debt service coverage ratio of 1.1 times as urea prices rebounded in the last quarter of the year, resulting in an average price of $225/mt similar to the 2009 average price of approximately $224/mt.

Fitch notes that FertiNitro will continue to be exposed to volatility in urea and ammonia prices. Fitch has also expressed concerns that FertiNitro, per national decree, must sell urea at $36/mt in the local Venezuelan market. Mitigating this concern is that local sales were below management’s projections and were only 15 percent of 2010 urea sales. Notable increases in local sales could erode FertiNitro’s cash flow.

Fitch said FertiNitro continues to invest in infrastructure improvements which are important to stabilizing operations – with $9.5 million in capital expenditures planned in 2011. Specifically, FertiNitro will procure spare parts and upgrade water demineralization systems, and PDVSA will continue to improve the reliability and capacity of the methane gas pipeline for FertiNitro’s fuel supply.

Fitch notes a material decrease in annual debt service, from $91.5 million in 2011 to $35.5 million in 2012, and rising to $50 million by 2019. With a declining debt burden and continued stability in plant operations, Fitch projects some improvement in debt service coverage ratios, but continued variability with some years. It said FertiNitro reports that it benefits from the ability to pay PDVSA for gas supply up to 180 days after delivery, providing additional financial flexibility and cash flow relief.

FertiNitro, located in the Jose Petrochemical Complex in Venezuela, ranks as one of the world’s largest nitrogen-based fertilizer plants, with nameplate daily production capacity of 3,600 mt of ammonia and 4,400 mt of urea. Prior to the nationalization, FertiNitro was owned 35 percent by a Koch Industries Inc. subsidiary, 35 percent by Pequiven, 20 percent by a Snamprogetti S.p.A. subsidiary, and 10 percent by a Cerveceria Polar C.A. subsidiary.

CVR Partners LP, which is currently involved with an initial public offering (GM April 4, p. 1), says it plans to pay out all cash it generates each quarter to investors. As a result, it says for the year ending March 31, 2012, this could represent 14.8 percent distribution yield.

CVR is projecting net income for the year ending March 31, 2012, of $125.7 million on sales of $297.4 million. EBITDA is put at $150.4 million and dividends of $1.92 per common unit.

CVR says its payout to investors should be a greater percentage of operating cash flow when compared to its publicly traded competitors across the broader fertilizer sector, such as Agrium Inc., Potash Corp. of Saskatchewan Inc., CF Industries Holdings Inc., Yara International ASA, and Terra Nitrogen LP. It puts those companies’ average dividend yields at 0.1 percent, 0.3 percent, 0.4 percent, 1.6 percent, and 6.9 percent, respectively, as of Feb. 28, 2011.

CVR said its general partner will have a non-economic interest and no incentive distribution rights, and will therefore not be entitled to receive cash distributions. Common unitholders will receive 100 percent of cash distributions.

Despite CVR’s assertions, sources noted that the fertilizer industry is cyclical, and traditional limited partnership investors looking for stable and consistent dividends over time might see volatility with CVR.

CVR’s March 2012 estimates include full production, something it did not achieve in 2010. The company assumes its units will not be offstream in 2011 for a turnaround. It assumes on-stream factors for its gasifier, ammonia, and UAN at 96.2 percent, 95.4 percent, and 92.2 percent, whereas they were 89 percent, 87.8 percent, and 80.8 percent, respectively, in 2010. The company had both a major scheduled turnaround and the rupture of a high-pressure UAN vessel in 2010.

CVR estimates it will sell 686,200 st of UAN at an average plant gate price of $278/st, for total UAN sales of $191 million for the year ending March 31, 2012. By comparison, it sold 580,700 st of UAN at an average price of $179/st on sales of $103.9 million for the year ending Dec. 31, 2010.

CVR estimates it will sell 157,400 st of ammonia at an average price of $547/st, for sales of $86 million for the year ending March 31, 2012, compared to 164,700 st, $361/st, and $59.5 million, respectively, for the year ending Dec. 31, 2010.

For the quarter just ended March 31, 1011, CVR estimates that it produced 100,000-105,000 st of ammonia, with 33,000-35,000 net st available for sale. The rest would be upgraded to some 163,000-170,000 st of UAN. For the year-ago quarter, CVR produced 105,100 st, of which 38,200 net st were available for sale and the rest upgraded to 163,800 st of UAN.

CVR estimated the average plant gate price of ammonia recognized in revenue for the quarter ending March 31, 2011, to be $560-$565/st, and the average plant gate price for UAN at $200-$210/st. For the year-ago quarter, prices were $282/st and $167/st, respectively.

CVR said UAN pricing for first quarter 2011 was adversely impacted by the outage of a high-pressure UAN vessel that occurred in September 2010. This caused CVR to shift delivery of lower-priced tons from the fourth quarter 2010 to the first and second quarters of 2011.

For the quarter ending March 31, 2011, CVR estimates ammonia sales of 23,500-26,500 st and UAN sales of 169,500-175,500 st, compared to the year-ago 31,200 st and 155,800 st, respectively.

CVR said it will spend some $135 million for the 400,000 st/y expansion of its UAN plant (GM April 4, p. 1). At the end of 2010, some $31 million had already been spent on this project. It expects to take 18-24 months to complete. The project is being funded by $91.4 million from the net proceeds of the IPO.

Citing Blue Johnson & Associates, CVR said the convenience of using UAN