CVR Partners LP, which owns a nitrogen plant in Coffeyville, Kan., expects its $135 million UAN expansion to begin operations in the first quarter of 2013. “Once completed, the expansion will allow us to convert virtually all of our ammonia production into more highly-valued UAN,” CVR President and CEO Byron Kelley told analysts Feb. 23. “This will increase our capacity to more than 1 million tons of UAN annually, which is approximately 50 percent higher than current levels.”
As reported in Green Markets last week (GM Feb. 27, p. 14), CVR posted the best financial results in company history, with most of that due to increased UAN volumes and prices.
With respect to the expansion, Kelley said all major contracts have been awarded and mechanical and structural work has commenced.
CVR estimates that the expansion could add at least $.25 per unit to the 2013 full-year distribution. Another $.25 per unit would be added since there is no planned turnaround in 2013.
“We had an excellent year in 2011,” said Kelley. “We’re seeing base fundamentals for another very good year in 2012, and we see a solid prospect for a strong 2013.”
Turnarounds occur every other year. There will be one in October 2012 for 18-20 days, and the foregone revenues and operating expenses are estimated to negatively impact results by $.25 per unit.
In the meantime, Kelley said the target date for the completion of its new 10,000 st storage distribution tank facility at Phillipsburg, Okla. (GM Nov.14, 2011, p. 1), is third quarter 2012. The contracts have been awarded, and dirt work is slated to begin in March.
Kelley said the facility will allow CVR to selectively store some production during periods of lower pricing and then sell and market that product during peak periods later in the year, thereby allowing CVR to capture increased margins per UAN tons sold. “Over the next several years, we do plan to build a number of these facilities near farming communities across the Midwest.” CVR has previously noted that it might also build storage and market product out of Wynnewood, Okla., where CVR Energy bought the Gary-Williams Energy Corp. refinery last year (GM Nov. 14, 2011, p. 1).
Overall, CVR Partners expects to spend $110-$115 million in capital expenditures in 2012.
Kelley also told analysts that CVR is looking to expand its sales mix to some higher-margin products such as diesel emission fluid (DEF). “And in addition to investing in our current asset base and enhancing our distribution capabilities and optimizing our sales mix, we are evaluating other opportunities to expand that business by developing new facilities and acquiring existing assets.”