Venezuelan President Hugo Chavez has nationalized nitrogen maker FertiNitro, according to reports in the Latin American press. Private U.S. company Koch Industries Inc., which owns a portion of FertiNitro, could not confirm the news early in the week.
“We’ve seen the news reports of President Chavez’s ‘forced acquisition’ of FertiNitro,” a Koch spokesperson told Green Markets Oct. 12. “We have not received details on how this will affect the offtake going forward. We are still attempting to obtain details and other information.” Koch did not respond to inquiries made later in the week.
FertiNitro, located in the Jose Petrochemical Complex in Venezuela, ranks as one of the world’s largest nitrogen-based fertilizer plants, with nameplate daily production capacity of 3,600 mt of ammonia and 4,400 mt of urea. FertiNitro is owned 35 percent by a Koch subsidiary, 35 percent by Pequiven, 20 percent by a Snamprogetti S.p.A. subsidiary, and 10 percent by a Cerveceria Polar C.A. subsidiary.
Ironically, Fitch Ratings had just renewed FertiNitro Finance Inc.’s bonds at “CCC” Rating Watch Negative, despite improved performance by the company (GM Oct. 11, p. 16). Fitch told Green Markets Oct. 14 that it anticipates putting out a press release to update the news, but one was not received by press time.
FertiNitro’s presence in socialist Venezuela has always been a concern. Prior to Koch’s involvement in the project, which began in 1998, other U.S. companies considered involvement, but shied away.
A FertiNitro nationalization is just another in a long list of nationalizations by Chavez. Two more were announced at the same time – Industrias Venoco CA, a lubricant company; and a large ranch owned by a unit of the Vestey Group, a British company, with the latter reportedly done on amicable terms.
There is no word as to what will happen to the private stakes in FertiNitro, or to Koch’s 50 percent offtake agreement. To date, other nationalizations have resulted in reimbursement to the private players, arbitration, or minority ownership.
Any future Koch offtake is now in doubt due to quotes attributed to Venezuela Energy Minister Rafael RamArez in El Universal. “The Koch company grabbed our fertilizer and was selling it abroad at speculative prices,” he reportedly told workers at the plant Oct. 11.
Industry observers said last week that the news would likely have more impact on urea than ammonia. Urea, they say, would be more apt to find a home in Venezuela or other nearby Latin American countries, whereas ammonia, with limited storage and less demand in general in Venezuela or Latin America, might continue to find a home in traditional markets. Sources said Northwest Europe has been a regular destination for the product.
As for Koch, sources noted that if the company loses out on the offtake product it could bring more discipline to the urea market, as the company will have fewer options in sourcing product.