CF Industries Holdings, Inc., a global manufacturer of hydrogen and nitrogen products, has signed a definitive purchase agreement with Incitec Pivot Limited for IPL’s ammonia production complex located in Waggaman, Louisiana, according to a news release.
The facility has a nameplate capacity of 880,000 tons of ammonia annually.
Under the terms of the agreement, CF Industries will purchase the Waggaman ammonia plant and related assets for $1.675bn. The companies will allocate approximately $425m of the purchase price to a long-term ammonia offtake agreement under which CF Industries will supply up to 200,000 tons of ammonia per year to IPL’s Dyno Nobel subsidiary. CF Industries expects to fund the remaining $1.25bn of the purchase price with cash on hand.
“We are pleased to reach this agreement with Incitec Pivot Limited that benefits from our industry-leading ammonia production capabilities, deploys our capital efficiently and provides long-term value for both companies’ shareholders,” said Tony Will, president and chief executive officer, CF Industries Holdings, Inc. “We believe the Waggaman facility will fit seamlessly into our network, as well as our strategic focus on ammonia as a clean energy source, given its proximity and pipeline connection to our Donaldsonville, Louisiana, Complex, its distribution and logistics flexibility, and its favorable characteristics for the addition of carbon capture and sequestration (CCS) technologies to enable low-carbon ammonia production.”
Ammonia produced at the Waggaman facility today is distributed ratably to three customers, including Dyno Nobel, with approximately 75% used in industrial applications. Based on the nature of the medium- to long-term offtake agreements in place with these customers, CF Industries estimates that the plant will generate gross margin per ton commensurate with its existing ammonia segment prior to synergies, which the company expects to capture through greater capacity utilization and operational and logistics optimization. Over the last five years, CF Industries’ operational capabilities have resulted in ammonia asset utilization that is approximately 10% higher than the average utilization rate of the company’s North American peers.
Additionally, CF Industries anticipates implementing CCS at the site on an accelerated timeline, increasing its network’s low-carbon ammonia production capability, supporting Louisiana’s and the country’s climate goals, and earning 45Q tax credits for sequestered carbon dioxide.
The transaction has been unanimously approved by the boards of directors of both companies and is subject to receipt of certain regulatory approvals and other customary closing conditions.
Goldman Sachs & Co. LLC is serving as the financial advisor to CF Industries on the transaction. Skadden, Arps, Slate, Meagher & Flom LLP is acting as its legal advisor. Latham & Watkins served as legal advisor to the seller while JP Morgan was financial advisor.
About the Waggaman Ammonia Production Complex
The Waggaman, Louisiana, ammonia production complex is situated on an integrated chemicals complex owned by Cornerstone Chemical Company.
- Commissioned October 2016
- Nameplate capacity: 880,000 tons of ammonia per year
- Approximately 90 employees
- 38,500-ton ammonia storage tank onsite
- Ability to load and transport ammonia by NuStar Pipeline, barge, truck and rail
- Located in Jefferson Parish on the Mississippi River with potential for vessel loading capabilities for low-carbon ammonia exports
- Site is 60 miles southeast of CF Industries’ Donaldsonville Complex, facilitating resource and best practice sharing between the complexes
