All Posts from January 05, 2018

Dakota Gasification Urea Plant Mechanically Complete and in Start-Up Mode

Dakota Gasification Co. (DGC) confirmed in early January that its new urea plant at Beulah, N.D., is mechanically complete and currently in start-up mode. Once operational, the facility will be able to produce 1,100 st/d of urea at full capacity, with the ability to shift urea production to diesel emission fluid (DEF).

The Beulah facility’s 150,000-square-foot urea storage building was completed in November, and DGC began offering spring urea pricing in late December on a location-by-location basis within a 250- to 300-mile radius of the plant, within its trade territory of the Dakotas, Minnesota, and Montana. The 700 feet by 210 feet urea storage building has capacity for 53,000 st, which the company plans to fill in time for the region’s spring planting season.

DGC reported in late November that construction was nearly 99 percent complete and the commissioning of equipment was in full force at the urea plant. The urea control room and power supply were commercialized in October, and several contractors were already offsite or in the process of demobilizing to exit the job site by mid-December. Most of the process systems had been turned over from construction to commissioning staff by late November.

The project employed more than 1,000 at the peak of construction, with just over 200 contractors remaining onsite in mid-December to complete finishing work. The urea plant will reportedly add 40 new permanent positions to the Great Plains Synfuels Plant’s workforce of 740 employees, the Bismarck Tribune reported.

DGC currently produces two other fertilizers – anhydrous ammonia and ammonium sulfate (Dak Sul 45®) – at the $2.1 billion Great Plains Synfuels Plant near Beulah. The facility’s maximum annual production capacity for ammonia and ammonium sulfate is approximately 400,000 st and 110,000 st, respectively.

Once the urea plant is operational and producing at capacity in the coming months, DGC said approximately 56-57 percent of Beulah’s ammonia capacity will be directed to urea production. The company projects as well that about 51 percent of the gross revenues generated by the Great Plains Synfuels Plant, which was built in the 1980s to produce synthetic natural gas from lignite coal, will now come from fertilizer sales. The plant produces a total of 13 co-products, and is home to the world’s largest carbon dioxide capture project.

The urea production facility’s overall cost was projected at $402 million in early 2014, when DGC announced plans to proceed with the plant (GM Feb. 2, 2014). The company has since pegged the total cost at an estimated $500 million. In addition to the urea storage, granulation, and melt operations at the site, DGC also constructed a new load-out facility for trucks and railcars with the capacity to load up to 110 railcars in a single shipment. The site also includes a 1.1-million-gallon stainless steel tank to store DEF.

DGC had earlier predicted that the urea plant would be operational by late second-quarter 2017, but the company revised those estimates to early 2018 after a powerful storm in July 2016 damaged the urea storage building (GM July 15, 2016), requiring it to be torn down and rebuilt from scratch

DGC reported that it was hosting multiple sessions for truckers and retail customers to visit the urea plant on Jan. 4 and again on Jan. 10 so they can become familiar with the roads and load-out procedures at the facility. The company will hold an official grand opening for the plant in March.

Mosaic, Vale Modify Agreement; Deal Expected to Close On or Around Jan. 8

The Mosaic Co. on Jan. 2 announced modifications to the definitive agreement with Vale SA for the acquisition of Vale Fertilizantes. There are two major modifications.

There is a reduction in purchase price consideration to $1.15 billion in cash and 34.2 million shares of Mosaic common stock, or 8.9 percent of Mosaic shares, from the $1.25 billion in cash and 42.3 million shares of Mosaic stock, or 11 percent of shares, initially agreed to in late 2016 (GM Dec. 23, 2016). The initial deal was valued at $2.5 billion; however, after the announcement, analyst calculations were closer to $2 billion based on Mosaic’s share price at the end of 2017.

In addition, Vale will now retain equity ownership in the TIPLAM port, and Mosaic will continue to have the right to use the TIPLAM port facility, in accordance with commercial arrangements entered into between the parties. Originally, Mosaic was to receive a 20 percent stake in the port.

“Our conviction in the long-term outlook for the business and the promise of Brazil has not changed,” said Joc O’Rourke, president and CEO. “We look forward to completing the transaction and working to realize the exceptional opportunity this acquisition presents.”

The transaction is expected to close on or about Jan. 8, 2018.

RBC analyst Andrew Wong, in a Bloomberg report, said the changing of the terms is positive for Mosaic, as it makes the assets more attractive. BMO analyst Joel Jackson wrote that the new terms lowers leverage for Mosaic, but likely shows the deteriorated earnings of the acquired assets and reduced port asset portfolio could potentially lower synergy potential.

Mosaic recently announced that the deal should result in $275 million of annualized improved cash flow by the end of 2020 (GM Nov. 3, 2017), replacing a previously announced target of $75 million in annual operating synergies.

The Vale business to be acquired currently has capacity to produce 4.8 million mt of finished phosphate crop nutrients and 500,000 mt of potash. It includes five Brazilian phosphate rock mines and four chemical and fertilizer production facilities, as well as one potash facility in Brazil. Through the acquisition, Mosaic also will acquire Vale’s 40 percent economic interest in the Miski Mayo phosphate mine in Peru, taking Mosaic’s own stake in that asset to 75 percent.

The purchase also includes Vale’s junior potash mining project at Kronau, Sask., Canada. While it also included the option to include the partially-constructed Rio Colorado, Argentina, potash project, Mosaic opted against taking that asset. Although the Rio Colorado project was idled in 2013 (GM Jan. 28, 2013), Vale was in talks with Argentinean and provincial authorities in 2016 about getting the project back on track.

Mosaic was already one of the largest producers and distributors of blended fertilizer for agricultural use in Brazil, owning and operating 12 blending plants in Brazil and one in Paraguay. In addition, it leases several other warehouses and blending units, depending on sales and production levels. It has a 62 percent ownership interest in Fospar SA, which owns and operates an SSP granulation plant and a deep-water fertilizer port and throughput warehouse terminal facility in Paranagua, Brazil. The port facility at Paranagua handles approximately 2.6 million mt of imported fertilizer.

Mosaic has completed the integration of its 2014 acquisition of ADM’s fertilizer distribution business in Brazil and Paraguay (GM April 21, 2014). With current assets, the company said it is poised to increase its distribution capacity in the region from approximately 4 million mt to 6 million mt. Also inked with ADM in 2014 were five-year fertilizer supply agreements to meet ADM’s fertilizer needs in Brazil and Paraguay.

Wheat Growers Buys Gavilon Warehouse; Agtegra Chosen as Name of Wheat Growers/NCFE Merger

South Dakota Wheat Growers, Aberdeen, S.D., announced on Jan. 2 that it has purchased a 40,000 st dry fertilizer plant in Kimball, S.D., that was previously owned by Gavilon Fertilizer LLC. The Kimball plant includes access to a 110-car unit loop-track, plus high-speed automated fertilizer loadout and storage capabilities.

The Kimball acquisition comes just one month before Wheat Growers joins forces with North Central Farmers Elevator (NCFE) in Ipswich, S.D., to form Agtegra Cooperative. Gavilon Grain LLC, which is based in Omaha, Neb., will continue to own and operate the adjacent 2.2-million-bushel grain elevator in Kimball.

“The Kimball fertilizer plant has three times the storage capacity as our newest plant in Kennebec,” said John Husk, Wheat Growers chief operating officer. “With this added storage volume and efficient loading capabilities, we can provide our customers seamless delivery of cost-effective product for their operations.”

Husk said growing fertilizer demand along the I-90 corridor has forced Wheat Growers to truck in large volumes of fertilizer from other locations farther away. “Those are clear indications that another modernized plant has great potential in this region,” he said. “This new Kimball plant will be a significant addition to how we serve our customers’ fertilizer supply needs.”

The Kimball plant is Wheat Growers’ largest dry fertilizer plant. The co-op currently has six hub fertilizer plants located in Bath, Huron, Kennebec, McLaughlin, Wolsey, and Oakes. Prior to the Kimball acquisition, the Wolsey warehouse was Wheat Growers’ largest at 31,200 st of dry fertilizer storage capacity.

“Today we add a key asset to our farmer-owned cooperative that will allow us to continue to deliver on our mission to better serve our member-owners for generations to come,” said Wheat Growers CEO Chris Pearson. “As we anticipate becoming a new cooperative on Feb. 1, the addition of this state-of-the-art fertilizer plant allows us to very efficiently provide fertilizer to our farmers. It also opens the door to new opportunities in our South Region by significantly increasing our storage capacity and expanding product availability to producers along the I-90 corridor. This will be key for our producers in that region.”

Wheat Growers and NCFE announced on Jan. 3 that they had settled on Agtegra Cooperative as the name of their combined company. Members of both co-ops approved the merger in a September vote (GM Sept. 29, 2017), just two months after the boards of directors announced that they were considering unification. The two co-ops first attempted a merger in 2015 (GM March 9, 2015), but that proposal was rejected by NCFE members (GM June 22, 2015).

The boards claimed last summer that the decision to pursue a merger again was driven by a number of “market changes and pressures,” including lower commodity prices, a downturn in the agriculture economy, and a drought that is impacting the trade areas of both co-ops (GM Aug. 11, 2017.

Agtegra Cooperative will be headquartered in Aberdeen, with some 900 employees in North and South Dakota serving more than 60 communities and approximately 7,850 member-owners and 22,600 equity holders. In addition to offering grain and agronomy services, the co-op will offer its members aerial application services, fuel, animal feed, and precision ag hardware and software products and services.

Pearson will become CEO of Agtegra on Feb. 1, with Husk serving as COO. Other members of the co-op’s leadership team will include Mike Nickolas, executive vice president and COO, Grain Division; Tracy Linbo, senior vice president of Agronomy, Communications & Marketing; Blake Bomesberger, Chief Financial Officer; Joe Zikmund, senior vice president, Finance; and Judy Stulken, senior vice president, Organizational and Member Development.

“Merging two strong cooperatives into one gives us the ability to expand the services and capabilities we offer our member-owners,” Pearson said. “Our purchase of the Kimball fertilizer plant from Gavilon announced yesterday, and our plans to expand the North Central aerial application service across our entire trade area, are two great examples of the high-quality products, services, and efficiencies that we can provide our members from this new cooperative.”