Rentech Nitrogen’s Ammonia Capacity and Storage Expansions Continue Moving Forward
January 04 2012 - 6:00AM
Business Wire
Rentech Nitrogen Partners, L.P. (NYSE: RNF) today announced that
it has secured a bridge loan of up to $40 million from Rentech,
Inc. (NYSE AMEX: RTK), and has entered into a fixed price
engineering and procurement contract with Black & Veatch, so
that the 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.
Work related to the expansion will result in various upgrades to
the facility, including an approximately 50 percent 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.
Significant work on the expansion project has been completed to
date, including a feasibility study, Front-End Engineering and
Design (FEED), final air and construction permits, and commencement
of construction of certain long lead-time items.
Rentech Nitrogen is currently negotiating with lenders to
arrange debt financing for the entire cost of the project, and
expects to syndicate and close a term loan within the next several
months. To fund the continuation of the project and keep it on
schedule, so that the expected downtime for final tie-ins for the
expansion project coincides with planned downtime for the plant
turnaround in late 2013, Rentech Nitrogen has entered into a bridge
loan facility with Rentech, Inc. The facility provides for a loan
of up to $40 million at an interest rate of LIBOR plus 5.5% through
May 31, 2012. Interest on the bridge facility will accrue. Should
the bridge loan remain outstanding after that date, the interest
rate would increase in accordance with the terms of the loan
agreement, which are summarized in a Current Report on Form 8-K
that the Company will file with the Securities and Exchange
Commission.
Commenting on the expansion project, D. Hunt Ramsbottom, Rentech
Nitrogen’s CEO, stated, “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.” Mr. Ramsbottom continued, “We are
focused on growing cash flow at Rentech Nitrogen. In addition to
the ammonia capacity expansion and our urea/DEF capacity expansion
currently underway, we are evaluating other opportunities to
increase cash flow.”
About Rentech Nitrogen, L.P.
Rentech Nitrogen (www.rentechnitrogen.com) was formed by Rentech, Inc. to own, operate and
expand its nitrogen fertilizer business. Rentech Nitrogen’s assets
consist of a nitrogen fertilizer facility located in East Dubuque,
Illinois, owned by Rentech Nitrogen, LLC, the operating subsidiary
of Rentech Nitrogen Partners, L.P. The facility is located in the
Mid Corn Belt in the northwestern corner of Illinois, adjacent to
the Iowa and Wisconsin state lines, and produces primarily
anhydrous ammonia and urea ammonium nitrate solution, using natural
gas as its primary feedstock, for sale to customers in the Mid Corn
Belt.
Safe Harbor Statement
This press release contains forward-looking statements as
defined in the Private Securities Litigation Reform Act of 1995
about matters such as the outlook for our nitrogen fertilizer
business and the costs, timing and projected performance of our
expansion projects. These statements are based on management’s
current expectations and actual results may differ materially as a
result of various risks and uncertainties. Other factors that could
cause actual results to differ from those reflected in the
forward-looking statements are set forth in the Company’s prior
press releases and periodic public filings with the Securities and
Exchange Commission, which are available via Rentech Nitrogen’s
website at www.rentechnitrogen.com.
The forward-looking statements in this press release are made as of
the date of this press release and Rentech Nitrogen does not
undertake to revise or update these forward-looking statements,
except to the extent that it is required to do so under applicable
law.
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