Rentech Inc., Los Angeles, said March 6 that it has signed a term sheet with Peabody Energy for the initial coal supply contract for Rentech Energy Midwest Corp.’s ultra-clean fuels conversion project in East Dubuque, Ill. The coal will come from Peabody’s Gateway Mine near Coulterville, Ill. It will supply the REMC project, which will convert the existing natural gas-fired ammonia fertilizer facility into what the company believes will be the United States’ first Fischer-Tropsch and ammonia fertilizer production facility utilizing clean coal technologies.
The terms call for Peabody to provide up to approximately 7.2 million tons of Illinois coal commencing between August 2009 and January 2010 through December 2017. The parties may mutually agree to extend the term of the contract for an additional five years after that. The arrangement provides for a fixed price coal contract with standard industry escalation for five years, and a potential market based adjustment with a ceiling thereafter.
Rentech expects commercial operations of its Phase 1 (nitrogen conversion) and 1 A project (diesel and jet fuel) to begin in 2010. Significant enlargement of the facility is expected to begin within the next year, though the company estimates it still needs $800 million of additional debt and debt financing to finance the project.
Rentech recently reported that it had made income from nitrogen operations of $2.5 million on sales of $35.4 million for the quarter ending Dec. 31, 2006. Rentech acquired the plant in April 2006, therefore, does not have year-ago figures, though it did report that there was a 104 percent increase in sales tonnage from the plant during the quarter over the year-ago period in order to meet good fall demand.
Rentech and Peabody already have a joint development agreement for the co-development of up to two potential clean fuels projects to be located on Peabody reserves. The projects would convert coal into transportation fuels.