Rentech Nitrogen Partners LP announced it has secured a bridge loan of up to $40 million from Rentech Inc, and has entered into a fixed price engineering and procurement contract with Black & Veatch, so that its expansion project can continue on schedule.
The project is expected to increase ammonia production capacity by approximately 23%, or 70,000 tons annually, and includes an additional 20,000-ton ammonia storage tank at the facility in East Dubuque IL. The expansion will bring Rentech Nitrogen’s annual ammonia production capacity to approximately 370,000 tons, and will increase on-site ammonia storage capacity to 60,000 tons.
Rentech Nitrogen also has access to 15,000 tons of leased ammonia storage in Niota IL. The additional ammonia production is expected to be sold primarily as ammonia, but will also be available for upgrade to other products, including urea/diesel exhaust fluid used in the emission control systems in diesel truck engines.
Work related to the expansion will result in various upgrades to the facility, including an approximately 50% increase in ammonia loading capacity and upgrades to controls at the ammonia and urea plants. As part of the expansion, Rentech Nitrogen expects the energy efficiency of its plant to improve by approximately 6% as a result of lower natural gas usage per ton of ammonia produced partially offset by increased electricity usage per ton.
Based on relative current market prices for natural gas and electricity, Rentech Nitrogen expects its energy cost per ton to remain largely unchanged. However, the lower natural gas usage will reduce the Company’s exposure to increases in natural gas prices going forward.
Capital expenditures for the expansion are expected to total approximately $100 million, of which approximately $20 million relates to the construction of the additional on-site ammonia storage tank. The project is projected to generate a return on investment in excess of 20% given the current environment and expectations for pricing of products and costs of natural gas. The project is anticipated to be completed by the end of calendar year 2013.
Commenting on the expansion project, D Hunt Ramsbottom, Rentech Nitrogen’s chief executive officer, says: “We believe that long-term industry fundamentals favoring strong fertilizer demand and low natural gas costs support the growth in our capacity. Ammonia consumption in our core market of the Mid Corn Belt region exceeds supply by a factor of four. Our increased ammonia production can help address the strong demand in our market.
“We are focused on growing cash flow at Rentech Nitrogen. In addition to the ammonia capacity expansion and our urea/diesel exhaust fluid capacity expansion currently underway, we are evaluating other opportunities to increase cash flow.”