14/05/2008 - 22:00

Burrup bullish with plant, IPO plans

14/05/2008 - 22:00

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AFTER a setback earlier this year, Pankaj Oswal’s Burrup chemicals empire appears to have gained renewed confidence in the market, unveiling plans for a $600 million ammonia nitrate plant and a likely relaunch of the IPO it shelved in March.

AFTER a setback earlier this year, Pankaj Oswal's Burrup chemicals empire appears to have gained renewed confidence in the market, unveiling plans for a $600 million ammonia nitrate plant and a likely relaunch of the IPO it shelved in March.

After much speculation about the company going further downstream in the fertiliser business, it confirmed earlier this week it was establishing a new joint venture with its European partner Yara International to build a 350,000 tonne a year plant adjacent to its existing joint venture liquid ammonia plant on the Burrup Peninsula, close to gas supplies and a mining client base.

The new Burrup Nitrates Joint Venture will require an investment of between $500 million and $600 million and could put the group in direct competition with its own clients, such as Wesfarmers CSBP, which buys key liquid ammonia input from the north-west plant.

Mr Oswal said the project's viability had been underwritten by Yara, which had guaranteed a minimum selling price.

"We were able to do a good deal," he said.

Mr Oswal named Burrup Holdings Pty Ltd as the joint venture company in the deal.

Burrup Holdings, which recently became a public company, is the parent of Burrup Fertilisers Pty Ltd, the company behind the liquid ammonia plant which is operating above its nameplate capacity.

"We have good cash flows and its time to expand the company," he said.

Burrup Holdings' name change is an obvious step in the IPO process which Mr Oswal confirmed was close at hand.

Perth businessmen Roger Steinepreis and Michael Perrot will join the board of the public company, bringing its directors to five.

He said he was waiting for the audited 2008 results before pressing the button on the relaunched IPO, with an investor roadshow likely to be undertaken this month, possibly next week, ahead of a June listing.

Burrup Holdings operates on a financial year ending March 31.

Regarding the possibility of competing in the ammonia nitrate market with existing clients such as CSBP and Dyno, Mr Oswal said Burrup was assessing that issue.

"We have to figure that out, they are aware that we are coming up," he said.

Mr Oswal also confirmed that other locations had been considered, though he mentioned Mount Anketell further up the north-west coast as the strongest contender, as it remains close to the Apache Energy gas supplies at prices that Burrup claims allows it to be the lowest cost producer of liquid ammonia.

"I think for now we are concentrating on the north-west," he said.

Burrup was known to be looking at Papua New Guinea but that option's viability was reduced when an LNG plant got the go-ahead.

While the mechanics of the float plan appear the same as the previous effort - Burrup is seeking to sell 20 per cent of company via an IPO to raise between $500 million and $600 million, valuing the company between $2.5 billion and $3 billion - Mr Oswal confirmed the market had tightened and his expectations were lower.

"The market has shifted a little bit," he said.

Interests associated with Mr Oswal will sell down from 70 per cent to 53 per cent of the company, while its European partner will reduce its stake to 27 per cent from 30 per cent.

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