The U.K. government has turned down a request for a loan of up to £10 million (approximately $11.9 million at current exchange rates) from a group of investors seeking to restart production at CF Fertilisers UK Ltd.’s mothballed Ince manufacturing plant, according to U.K. media reports.
Operations at the Ince plant near Chester, Northwest England, have been halted since September last year due to high natural gas prices. Early last month, CF Fertilisers announced proposals to permanently close the facility as part of a proposed restructuring of its operations in the U.K. (GM June 10, p. 1).
The consortium of investors, working under the banner of UK Nitrogen and backed by former head of the British army Lord Richard Dannatt, is in talks with CF Industries Holding Inc., Deerfield, Ill., CF Fertilisers’ parent company, to buy the Ince plant, according to a report by the U.K.’s Financial Times newspaper.
According to the report, UK Nitrogen is made up of fertilizer companies, private equity groups, and “high-net-worth” individuals.
UK Nitrogen insisted that it is not asking for any tax payer money, but rather just seeking help to restart the plant, according to the report.
Supporters of the proposed deal argue that a permanent shutdown of the Ince facility would reduce fertilizers supplies for the country’s farmers, further weakening the U.K.’s food industry, as well as posing a risk to future supplies of CO2 in the U.K.
CF’s Ince plant has the capacity to produce ammonia, nitric acid, ammonium nitrate (AN), and NS and NPKs. Ince and CF’s other U.K. fertilizer manufacturing plant at Billingham, in Teeside, Northeast England, together have the combined capability to produce an estimated 60% of the U.K.’s CO2.
As part of its proposed restructuring of its operations in the U.K., CF Fertiliser proposes to focus its U.K. manufacturing operations exclusively at the Billingham manufacturing site, where it produces ammonia, nitric acid, AN, and CO2 as a byproduct of the ammonia production process.
The company believes that only one manufacturing facility is needed to fulfil U.K. AN demand it has been serving. Its Billingham plant has 0.58 million mt/y AN production capacity, according to Green Markets’ “Nitrogen Quarterly Model,” and is the largest ammonia, AN, and CO2production facility in the U.K. CF’s Ince plant has 0.5 million mt/y of AN production capacity.
CF Fertilisers has also said the NS and NPK products manufactured at the Ince plant historically have made “a minimum contribution to gross margin,” and it does not expect this situation to improve due to the significant increase in the price of raw materials.
CF Fertilisers said the closure of the Ince plant near Ellesmere Port could result in up to 283 redundancies.
The decision to provide the loan or not rests with the U.K.’s Department for Business, Energy, and Industrial Strategy, which has so far “firmly rejected” the bid for a loan. The report cited a government spokesperson as saying the government believes this is an issue for the market to solve.
Ellesmere Port and Neston MP Justin Madders and Secretary of State George Eustice said late last month in the U.K. Parliament that the plant could be profitable if reopened, according to a report by Cheshire Live.
Madders noted in Parliament that CF Industries increased its quarterly dividends by 33% in the first quarter of this year (GM May 6, p. 1).
CF Industries, as cited by the report, confirmed it has spoken with several parties.
CF Fertilisers’ proposed restructure follows a strategic review of the company’s U.K. business, which confirmed additional challenges facing the business, and – CF said – is proposed in order to secure long-term profitability and sustainability and to enable the company to continue to supply fertilizer, CO2, and other industrial products to its U.K. customers.
The company halted operations its Billingham manufacturing facility – as well as at Ince – last September due to high natural gas prices that made production at the sites unprofitable (GM Sept. 17, 2021).
The stoppage sparked a shortage of CO2, which threatened to cause food shortages and price rises nationwide in the U.K. A week later, U.K. ministers bailed out CF, providing money to fund the restart of the Billingham plant for three weeks of production, while the Ince plant remained shut (GM Sept. 24, 2021).
Since then, CF has kept the Billingham plant operating, despite further escalations in natural gas prices.
The Billingham complex is capable of producing 750 mt of CO2 per day for commercial use and last October, CF – with U.K. government participation – had reached CO2pricing and offtake agreements with its industrial gas customers in the U.K (GM Oct. 15, 2021). That agreement ran until Jan. 31, 2022, and in early February, CF secured a new offtake and pricing agreement with the U.K.’s carbon dioxide industry (GM Feb. 4, p. 28; Jan. 28, p. 20).