Agrium: closure of Kenai nitrogen facility
Agrium Inc. announced it is closing its Kenai nitrogen fertilizer operations due to a shortage of natural gas supply in Alaska's Cook Inlet. Agrium has diligently attempted to encourage development of natural gas supply and to negotiate contracts for 2008 and beyond. Despite these efforts, and after offering what it believed to be competitive prices and incentives, Agrium was unable to secure gas supply.
It is estimated that the facility will contribute approximately $6-million in EBITDA in 2007 and account for less than one percent of Agrium's total 2007 EBITDA. The facility produced about 325,000 tonnes of urea and ammonia in 2007 during the five months it was operational, with the shutdown expected by month-end. It is expected the resulting reduction in nitrogen supply will further tighten the global nitrogen market in 2008.
Agrium purchased 53 billion cubic feet (BCF) of natural gas in 2001 and this supply has steadily diminished to only 10 BCF in 2007. The book value of the asset was written down in 2003 and shutdown costs were accrued at that time, therefore no further impairment charge is required. Incremental costs associated with the shutdown are expected to be less than five cents per share. Agrium's plant was shutdown for the winter period of 2006/2007 but no layoffs occurred. Closing the facility will result in the lay-off of over 100 employees.
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