OCI NV, Amsterdam, and Abu Dhabi National Oil Co. (ADNOC) and their Middle Eastern Fertiglobe plc joint venture said on Oct. 4 they intend to proceed with an initial public offering (IPO) of Fertiglobe and to list the jv’s shares on the Abu Dhabi Securities Exchange.
The companies plan to collectively offer 13.8 percent of Fertiglobe’s issued share capital in the offering. OCI said it intends to indirectly continue to own more than 50 percent of Fertiglobe’s share capital post-IPO, while Abu Dhabi state-owned ADNOC is expected to indirectly own at least 36.2 percent.
OCI, which is backed by Egyptian billionaire Nassef Sawiris, currently owns a 58 percent stake, while ADNOC has a 42 percent holding.
Fertiglobe could be valued at about $7 billion including debt, Bloomberg reported in April. That would make the share sale, expected to be completed this month, one of the largest in the emirate to date. The launch of Fertiglobe’s IPO follows the very recent and successful $1.1 billion IPO of ADNOC Drilling on the Abu Dhabi Securities Exchange.
OCI confirmed back in April that the company and ADNOC were considering a potential IPO of Fertiglobe (GM April 16, p. 1), and in early May said preparations had begun for the offering, following board approvals (GM May 7, p. 43). OCI, though, emphasized that market conditions would dictate whether the potential IPO would go ahead (GM Aug. 6, p. 36; Sept. 17, p. 28).
OCI sees the IPO as helping “crystallize” the value of Fertiglobe’s underlying business going forward.
“The IPO and listing will position Fertiglobe and will enhance its visibility as a pure play nitrogen company with a unique position to capitalize on new demand for low-carbon ammonia as a hydrogen carrier and clean fuel,” OCI said.
The IPO could benefit from the rebound in fertilizers prices, which have jumped in the past year as a rally in crop prices amid a broader commodities’ rally helped farmers boost purchases of the nutrient.
More recently, soaring natural gas prices in Europe have forced some fertilizer companies, including Yara International ASA, CF Industries Holdings, Borealis AG, and Lithuania’s Achema, among others, to curtail some ammonia output in recent weeks.
But Fertiglobe has locked in cheap gas supplies through long-term contracts, OCI CEO Ahmed El-Hoshy told Bloomberg in an interview this week.
Fertiglobe’s natural gas costs will probably average $2.8/mmBtu until the end of 2021, and roughly $3/mmBtu for 2022, with gas supply contracts ranging from seven to 23 years, according to the report, citing OCI statements
El-Hoshy believes gas prices “could stay quite elevated” as winter starts in the northern hemisphere, and that is enabling Fertiglobe to increase sales in Europe, Bloomberg reported.
Sultan Ahmed Al Jaber, ADNOC Managing Director and Group CEO, Fertiglobe Chairman, and also UAE Minister of Industry and Advanced Technology, said like OCI, ADNOC will remain “a long-term and committed major shareholder” in Fertiglobe and will continue to partner with the company on emerging opportunities, including the development of a new blue ammonia project at Ta’ziz in Ruwais (GM June 25, p. 33).
ADNOC is increasingly seeking to raise money from its assets and help the government fund efforts to diversify the economy.
Fertiglobe is the largest export-focused nitrogen fertilizer platform globally and the largest producer in the MENA region, with a production capacity of 5 million mt/y of urea and 1.5 million mt/y of merchant ammonia, according to OCI and ADNOC.
The jv was established by the two companies in September 2019, and combined ADNOC’s fertilizer business into OCI’s Middle East and North Africa (MENA) nitrogen fertilizer platform (GM Oct. 4, 2019).
Fertiglobe generated revenues of $1.55 billion in FY2020, and $1.26 billion in the first six months of 2021, according to OCI’s financial statements (GM Aug. 6, p. 30). The jv posted a FY2020 EBITDA of $461.1 million and $537.2 million in first-half 2021.
Fertiglobe said last month it was in process of closing a $1.1 billion bridge financing facility as part of a capital structure reset to refinance debt and pay dividends to OCI and ADNOC (GM Sept. 24, p. 31). It said it plans to pay at least $150 million in dividends for the second half of 2021 and is targeting at least $315 million of dividends for 2022.
Fertiglobe product sales volumes
| ‘000 mt | 1H-2021 | 1H-2020 | FY2020 |
| Own product | |||
| Ammonia | 734 | 495 | 896 |
| Urea | 2,209 | 2,232 | 4,565 |
| Total own product sold | 2,943 | 2,726 | 5,460 |
| Traded third party | |||
| Ammonia | 64 | 51 | 130 |
| Urea | 458 | 270 | 563 |
| Total traded third-party products | 522 | 322 | 693 |
| Total own product and traded third party | 3,465 | 3,048 | 6,154 |