CF Industries Holdings, Inc. (Deerfield, Ill.) announced that it has signed a definitive purchase agreement with Incitec Pivot Limited for IPL’s ammonia production complex located in Waggaman, Louisiana. 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 $1.675 billion. The companies will allocate approximately $425 million 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 $1.25 billion 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.