LOS ANGELES--(BUSINESS WIRE)--Rentech Nitrogen Partners, L.P. (NYSE: RNF) today announced that it has secured a bridge loan of up to $40 million from Rentech, Inc. (NYSE AMEX: RTK), and has entered into a fixed price engineering and procurement contract with Black & Veatch, so that the expansion project can continue on schedule.
The project is expected to increase ammonia production capacity by approximately 23%, or 70,000 tons annually, and includes an additional 20,000 ton ammonia storage tank at the facility in East Dubuque, IL. The expansion will bring Rentech Nitrogen’s annual ammonia production capacity to approximately 370,000 tons, and will increase on-site ammonia storage capacity to 60,000 tons. Rentech Nitrogen also has access to 15,000 tons of leased ammonia storage in Niota, IL. The additional ammonia production is expected to be sold primarily as ammonia, but will also be available for upgrade to other products.
Work related to the expansion will result in various upgrades to the facility, including an approximately 50 percent increase in ammonia loading capacity and upgrades to controls at the ammonia and urea plants. As part of the expansion, Rentech Nitrogen expects the energy efficiency of its plant to improve by approximately 6% as a result of lower natural gas usage per ton of ammonia produced partially offset by increased electricity usage per ton. Based on relative current market prices for natural gas and electricity, Rentech Nitrogen expects its energy cost per ton to remain largely unchanged; however, the lower natural gas usage will reduce the Company’s exposure to increases in natural gas prices going forward.
Capital expenditures for the expansion are expected to total approximately $100 million, of which approximately $20 million relates to the construction of the additional on-site ammonia storage tank. The project is projected to generate a return on investment in excess of 20% given the current environment and expectations for pricing of products and costs of natural gas. The project is anticipated to be completed by the end of calendar year 2013.
Significant work on the expansion project has been completed to date, including a feasibility study, Front-End Engineering and Design (FEED), final air and construction permits, and commencement of construction of certain long lead-time items.
Rentech Nitrogen is currently negotiating with lenders to arrange debt financing for the entire cost of the project, and expects to syndicate and close a term loan within the next several months. To fund the continuation of the project and keep it on schedule, so that the expected downtime for final tie-ins for the expansion project coincides with planned downtime for the plant turnaround in late 2013, Rentech Nitrogen has entered into a bridge loan facility with Rentech, Inc. The facility provides for a loan of up to $40 million at an interest rate of LIBOR plus 5.5% through May 31, 2012. Interest on the bridge facility will accrue. Should the bridge loan remain outstanding after that date, the interest rate would increase in accordance with the terms of the loan agreement, which are summarized in a Current Report on Form 8-K that the Company will file with the Securities and Exchange Commission.
Commenting on the expansion project, D. Hunt Ramsbottom, Rentech Nitrogen’s CEO, stated, “We believe that long-term industry fundamentals favoring strong fertilizer demand and low natural gas costs support the growth in our capacity. Ammonia consumption in our core market of the Mid Corn Belt region exceeds supply by a factor of four. Our increased ammonia production can help address the strong demand in our market.” Mr. Ramsbottom continued, “We are focused on growing cash flow at Rentech Nitrogen. In addition to the ammonia capacity expansion and our urea/DEF capacity expansion currently underway, we are evaluating other opportunities to increase cash flow.”
About Rentech Nitrogen, L.P.
Rentech Nitrogen (www.rentechnitrogen.com) was formed by Rentech, Inc. to own, operate and expand its nitrogen fertilizer business. Rentech Nitrogen’s assets consist of a nitrogen fertilizer facility located in East Dubuque, Illinois, owned by Rentech Nitrogen, LLC, the operating subsidiary of Rentech Nitrogen Partners, L.P. The facility is located in the Mid Corn Belt in the northwestern corner of Illinois, adjacent to the Iowa and Wisconsin state lines, and produces primarily anhydrous ammonia and urea ammonium nitrate solution, using natural gas as its primary feedstock, for sale to customers in the Mid Corn Belt.
Safe Harbor Statement
This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 about matters such as the outlook for our nitrogen fertilizer business and the costs, timing and projected performance of our expansion projects. These statements are based on management’s current expectations and actual results may differ materially as a result of various risks and uncertainties. Other factors that could cause actual results to differ from those reflected in the forward-looking statements are set forth in the Company’s prior press releases and periodic public filings with the Securities and Exchange Commission, which are available via Rentech Nitrogen’s website at www.rentechnitrogen.com. The forward-looking statements in this press release are made as of the date of this press release and Rentech Nitrogen does not undertake to revise or update these forward-looking statements, except to the extent that it is required to do so under applicable law.