Just four months after it decided to consider options to sell its big new US ammonia plant in Louisiana, Incitec Pivot has inked a $2.5 billion deal with one of the world's biggest ammonia companies.
In November the Australian fertiliser and explosives heavyweight confirmed it had received unsolicited offers to potentially buy the Waggaman plant, which produces ammonia for its Dyna Nobel Americas explosives division.
At the time managing director, Jeanne Johns, said the six-year-old Louisiana plant had become attractive as a candidate to make low carbon emission blue ammonia fuel, although this was not an area the Australian business wanted to invest in.
Incitec Pivot's plans to split its fertiliser and explosives divisions this year were subsequently put on hold as it considered sale options for Waggaman, which was to have been a key asset in the newly-listed Dyno Nobel company.
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Incitec Pivot originally bought its Dyno Nobel business for about $3b in 2008 as part of what was then a diversification strategy to protect the company's balance sheet from fluctuating fertiliser demand and prices.
However, the Waggaman plant had also attracted some shareholder unease in relation to the planned demerger, because the big US investment was considered itself to be potentially exposed to too much volatility in the explosive market.
Currently 70 per cent of Waggaman's 880,000 tonnes of annual capacity is supplied to other industrial and fertiliser businesses, with the remainder used by Dyno Nobel.
The plant's sale to Illinois-based CF Industries Holdings, which makes ammonia, urea, and ammonium nitrate products, includes a 25-year supply agreement to provide Dyno Nobel with up to 200,000t of ammonia a year.
Incitec will deduct about $634m from its sale proceeds to cover the "competitive" 15-year ammonia supply agreement and options to extend it over a further 10 years.
It will also have to deduct tax on the sale worth about $616m, bringing its net proceeds from the deal to almost $1.25b.
Ms Johns described the sale, which is still to be officially approved by US antitrust regulators, as a pivotal step in the execution of the company's strategy to focus more on high value technical and services needs for its explosives customers.
"We are looking forward to this journey as we seek to deliver long-term sustainable value for our customers and stakeholders."
She said CF Industries was a world class ammonia producer with an excellent track record and Incitec was delighted to be partnering with the company for the sale and offtake deal.
CF Industries has confirmed Waggaman fitted with its strategic focus on developing ammonia as a clean energy source.
The plant is conveniently close to a pipeline connecting to CF's own plant in Donaldsonville, Louisiana.
CF Industries also expected to implement carbon capture and storage technologies at the site on an accelerated timeline.
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Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
