CF Industries will supply ammonia
Mosaic Co. will buy as much as 800,000 tons of ammonia a year from CF Industries Holdings Inc., instead of spending $1.1 billion to build a plant in St. James Parish.
Under the 15-year contract, the price Mosaic pays for ammonia will be tied to the U.S. price of natural gas.
“The financial advantages of entering into long-term contracts at pricing based on prevailing natural gas prices was simply more compelling with less risk than building an entirely new facility,” said Dave Townsend, a spokesman for Mosaic’s phosphate division.
Townsend said Mosaic’s original estimate of $700 million covered only the cost of the plant and didn’t include the dock improvements, other improvements and the cost of two ocean-going barges and tugs needed to move the ammonia from Louisiana to Tampa, Fla., which would add $400 million to the price.
Economist Loren Scott said Louisiana, and the Baton Rouge corridor, will be so busy with major plant expansion projects in the next few years that the Mosaic plant’s absence might not be felt.
“In normal times that would have been a really serious hit. But when you’re subtracting $700 million from $81 billion (statewide), it’s not so (big),” Scott said.
Still, no one wants to lose a project of this size, especially one where the workers’ wages would have been above average for manufacturing, Scott said.
In announcing the project 11 months ago, Mosaic said the Faustina ammonia plant would have generated 1,400 construction jobs and created 53 full-time positions paying an average of $83,000 a year.
At the time, Mosaic, of Plymouth, Minn., estimated it would cost $700 million to build the plant, capable of producing 800,000 to 1 million tons of ammonia a year.
A month before Mosaic’s announcement, CF Industries said it would build a $2.1 billion ammonia plant at its campus in Donaldsonville.
The plant is expected to begin production by 2016 and will create 93 permanent jobs.
Under the contract, CF industries, with headquarters in Deerfield, Ill., will start supplying the ammonia before January 2017.
CF Industries spokesman Daniel Swenson said the Mosaic contract will not require CF to expand its planned ammonia plant in Donaldsonville.
The new plant will have enough capacity to handle the needs of both CF Industries and Mosaic, Swenson said.
The Mosaic contract won’t affect the construction timeline or the number of workers needed at the plant.
Mosaic still plans to spend about $200 million to buy or lease the barges and tugs, Townsend said.
Ocean-going barges can hold 22,500 tons of ammonia, compared with the 2,500-ton capacity of river barges.
In order to secure the Mosaic plant, Louisiana had offered the company a Modernization Tax Credit of $3 million and job training services.
None of those incentives had been provided since Mosaic had not completed the front-end engineering and design work on the project, Louisiana Economic Development Secretary Stephen Moret said.
The state has offered CF Industries a $3 million tax credit; a $2 million loan that doesn’t have to be repaid if the company meets payroll targets; and workforce training.
Moret said CF will receive those incentives.
Moret said LED expects to announce “other large ammonia manufacturing projects” in the coming months.
The ammonia contract was part of a group of deals announced Monday between CF Industries and Mosaic. CF Industries also will sell its phosphate mining and manufacturing business to Mosaic for $1.4 billion in cash. The total includes $200 million to cover environmental liabilities associated with gypsum stacks, a byproduct of phosphate mining.
David Dismukes, associate director of the LSU Center for Energy Studies, said both companies are focusing on what they do best.
CF Industries is more known for nitrogen-ammonia-based fertilizer while Mosaic specializes in phosphate and potash, or potassium, fertilizers, he said.