05 November 2013 23:28 [Source: ICIS news]
HOUSTON (ICIS)--CF Industries (CF) described its decision to sell its the phosphate business to Mosaic as beneficial situation for the company and as strategy it has been considering for several years, the US fertilizer producer said on Tuesday.
Speaking during a Q3 earnings conference call, Illinois-based CF said the opportunity to combine the sale with a long-term ammonia supply contract was appealing to the company.
Last week, Mosaic and CF agreed on a deal for the phosphate business for $1.2bn (€888m) in cash plus $200m to fund CF’s asset retirement obligation escrow. The deal included the phosphate mine and plant in Hardee County, Florida, as well as an ammonia terminal and product warehouse in Tampa.
“Mosaic is the logical buyer of our phosphate business and we are pleased that they will become a major customer. This is a clear win-win as evidenced by the market’s reaction last week,” said Stephen Wilson, CF CEO.
“This is a terrific deal for us, and we think it's a very good deal for Mosaic. It provides us with returns that are roughly in line with the returns that we expect in the Donaldsonville expansion project. It takes some amount of uncertainty out of those returns. And we're very, very happy with that agreement. And we're happy to have Mosaic become our largest ammonia customer.”
Wilson said while the agreement meant canceling the company's plans to expand in Louisiana, it fits in with the sentiment that not all of the recently announced North American fertilizer expansions were going to become a reality. He said the company remains quite comfortable with its current expansion plans as CF foresees the market for US produced fertilizers to still be robust.
“I think it's sort of going as one might have expected. Some projects, notably ours and the Orascom projects are in, I guess, in full force going forward under construction. Other projects that have been announced either have not materialised, or in some cases, have been cancelled. And it doesn't surprise me that we have new announcements because if you look at the strip for North American natural gas, it is quite attractive,” Wilson said.
“We'll be able to front-end load the returns on our projects, and we know that the US is a large net exporter. We expect that general environment to continue over the next several years.”
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