Incitec Pivot announces agreement for the sale of Waggaman facility to CF Industries

Date:03-21-2023

Transaction highlights

Incitec Pivot Limited (ASX: IPL) has reached an agreement for the sale of its ammonia manufacturing facility located in Waggaman, Louisiana, USA (Waggaman) to CF Industries Holdings, Inc. (CF) for a total value of US$1.675bn (A$2.50bn)¹.  

IPL has also secured a 25-year ammonia supply agreement with CF for up to 200,000 short tonnes of ammonia per annum to support the Dyno Nobel Americas (DNA) explosives business. The ammonia supply agreement secures ammonia at producer cost² for the DNA business. The value allocated to the ammonia supply agreement is approximately US$425m (A$634m) which will be offset from the cash proceeds of the sale agreement for Waggaman³.  

The divestment of Waggaman remains subject to US anti-trust regulatory clearance and the completion of other customary closing conditions.  

Under the terms of the sale agreement, these conditions must be satisfied within 24 months of execution of the agreement.

Strategic rationale

The Waggaman strategic review was undertaken with our previously articulated objective of monetising the value of the excess ammonia production from the facility while retaining the strategic value of the Waggaman site to the competitiveness of the DNA explosives business.

IPL has undertaken a robust competitive sales process to seek full value delivery for the excess commodity exposure and to secure a long-term cost competitive ammonia supply for the DNA business with a trusted and proven strategic offtake partner.  

Long-term ammonia offtake agreement

Consistent with the objective described above, IPL has entered into a 25-year ammonia supply agreement with CF (initial 15-year term with the option to extend by two further five year periods at IPL’s discretion) for the supply of up to 200,000 short tonnes per annum of ammonia at producer cost⁴ to support the long-term cost competitiveness and sustainability of the DNA business.

The long term ammonia supply agreement provides:
• a basis to monetise DNA’s current excess ammonia exposure whilst maintaining the strategic value of cost competitive ammonia supply into our DNA explosives business;
• a platform to transform the quality of earnings base anchored on a highly competitive cost position; and
• the flexibility to pursue debottlenecking opportunities at DNA’s Louisiana, Missouri plant to support the execution of our value based growth objectives.
 
The ammonia supply agreement is subject to successful closing of the Waggaman divestment, as well as other customary terms and conditions.  

¹Based on an AUD:USD exchange rate of 0.67, and including the value allocated to the ammonia supply agreement.

²This means that the pricing under the offtake agreement is linked to gas based pricing at a level commensurate with Waggaman’s cost of production.   

³Accordingly, it is expected that cash proceeds received on completion of the sale of Waggaman will be approximately US$1.250bn (AUD$1.866bn).

⁴See note 2

Learn more at Incitec Pivot's website.