CHS will be building a fertilizer plant in Spiritwood, ND.
by Todd Neeley, DTN Staff Reporter
OMAHA (DTN) — CHS Inc. took the next step in building what will be a $3 billion fertilizer plant in Spiritwood, N.D., after the company's board of directors gave the final approval to build the plant expected to create at least 160 jobs, CHS announced in a news release Friday.
The CHS plant is expected to produce more than 2,400 tons of ammonia daily that will be converted to urea, urea and ammonium nitrate and diesel exhaust fuel. “The majority of the nitrogen products from the plant will serve farmer-owned cooperatives and independent farm supply retailers within a 200-mile radius of the plant in the Dakotas, parts of Minnesota, Montana and Canada,” the release said.
Construction on the plant to be completed by 2018 will be located about 10 miles northeast of Jamestown, N.D., on a 640-acre site near the Spiritwood Energy Park. The fertilizer plant will be CHS' single-largest investment in company history, the release said. CHS initially announced its plans two years ago, but postponed the project after construction and labor costs exceeded the initial $1.2 billion estimates.
“With this decision, CHS is taking an important, strategic step on behalf of its member-owners by ensuring them a reliable domestic supply of nitrogen fertilizers essential to help farmers raise healthy, profitable crops to feed a growing global population,” said Carl Casale, CHS president and chief executive officer. “CHS is proceeding today as the plant's sole investor. However, because our owners' interests are at the heart of what we do, we will always pursue ownership of strategic assets and partnerships that will help us continually add value to their businesses.”
In an interview with DTN, Casale emphasized that the company had reassessed not only its cost analysis, but “pressure tested” fertilizer demand and lower corn prices in the equation.
The U.S. still imports 50{ba1edae1e6da4446a8482f505d60d3b8e379ff6dedafe596d9ba4611a4e33a48} of its nitrogen needs, with urea prices particularly sensitive to Black Sea suppliers. Energy and fertilizer independence could be a competitive advantage for U.S. growers, Casale said.
“We took a very conservative view of long-term nitrogen pricing, looking at prices now, not 24 months ago. We wanted to make sure we could afford this plant in the worst of times, not just the best of times,” he explained.
One key advantage the Spiritwood site offers is location, Casale added. It will be positioned on top of natural gas pipeline, taking advantage of access to the Bakken reserves. But it also offers to serve farmers in one of North America's most logistically challenged regions.
“We're at the end of the nitrogen supply chain in the U.S., but if we need to, we can get rid of all of our supply in the trade area by truck,” he said. Longer term, he expects domestic transportation bottlenecks on rail and barge lines to be solved.
North Dakota Farmers Union President Mark Watne, said the plant will be an important addition for farmers and the regional economy.
“It means a reliable supply of fertilizer products now will be available in our region,” he said in a statement. “Timely delivery of crop nutrients from foreign sources will no longer be a worry or factor come spring planting. We appreciate CHS' due diligence in investigating the feasibility of moving forward with a project of this magnitude. Our cooperative system is alive and well.”
Tim Skidmore, CHS executive vice president and chief financial officer, said in a statement that the company is in a good financial position to undertake the project.
“CHS is a financially strong company with the balance sheet strength to undertake this significant investment,” he said. “We believe this fertilizer plant will deliver solid returns on our owners' investment in addition to providing them with an essential crop input.”
CHS' Casale said the sheer size of the project was cause for pause for the company.
“Because of the size and scale of this investment, we needed to take the additional time to review costs and reassess areas where we could make modifications,” he said. “We are now fully prepared to proceed with an investment that will add tremendous value to our member-owners, and further expand our global crop nutrients business platform.”
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Posted with DTN Permission by Haylie Shipp
