01/02/2012 - 14:55

Yara deal values Burrup Fertilisers at $850m

01/02/2012 - 14:55


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Yara senior vice president Tor Holba said Burrup Fertilisers would be renamed Yara Pilbara

Norwegian group Yara International has secured control of Burrup Fertilisers after striking a deal with Apache Energy that will see them become joint owners of the business, while also disclosing that Apache renegotiated its all-important gas supply contract with Burrup in November last year.

Yara has also confirmed plans to proceed with development of an ammonium nitrate plant in the Pilbara, which may include Orica as a part owner.

Under the deal announced this afternoon, Yara will pay US$143 million to acquire an additional 16 per cent stake in Burrup Holdings, lifting its total shareholding to 51 per cent.

Concurrently, Apache has paid US$439 million for the remaining 49 per cent stake.

Burrup Holdings main asset is the Burrup Fertilisers’ ammonia plant, located on the Burrup peninsula near Karratha, which was developed by Indian businessman Pankaj Oswal.

As part of the completion of the sale, insolvency firm PPB Advisory today resigned as receivers and managers of Burrup Fertilisers Pty Ltd.

“Burrup Fertilisers Pty Ltd will however continue to pursue its claim for over $200 million against Pankaj and (his wife) Radhika Oswal and seek the return of any funds which the Court determines were wrongly removed from the company prior to (PPB's appointment in) December 2010,” PPB said in a statement.

Yara president and CEO Jørgen Ole Haslestad said the company was pleased to secure majority ownership.

“Today marks the end of a challenging period for what we have always regarded as a world-class asset, and we look forward to integrating Burrup fully into Yara’s global production system,” he said in a statement.

“Furthermore, today’s agreement allows us to intensify work on the planned technical ammonium nitrate (TAN) project in the Burrup peninsula together with Apache.”

Yara said the Burrup Nitrates project, which involves construction of a TAN plant with annual nameplate capacity of 330,000 metric tons, will proceed with 75.5 per cent Yara ownership and 24.5 per cent Apache ownership.

However that may change, with Orica a potental investor in the project.

Orica was linked to the project last December, when Apache announced plans to buy 65 per cent of Burrup Holdings and disclosed that it was "negotiating to sell most of its interest in the TAN plant to Orica".

Apache was subsequently gazumped by Yara, which had a pre-emptive right to match any bid for Burrup Holdings negotiated by the receivers.

Apache said today that "Yara intends to proceed with the TAN plant and will assume control of negotiations concerning ownership of the project with Orica".

However Yara senior vice president Tor Holba put a different slant on the matter, telling journalists in Perth that "we are not running the negotiations on behalf of Apache but we are facilitating it”.

"We need to facilitate it (because) this is a downstream asset to the ammonia plant."

He also debunked media reports that Burrup Fertilisers would pay $5 per gigajoule under its new long term gas supply contract, which PPB negotiated last November with Apache.

“It will for a good number of years enjoy significantly lower gas prices than this," he told journalists.

Gas is the major input into ammonia production and is therefore a key factor in the profitability of the plant.

Yara, which has an agreement to market the entire output from the TAN plant, said its close proximity to the Pilbara mining industry together with adjacent ammonia supply would give it a distinct advantage over other ammonium nitrate suppliers.

“We will re-name our Burrup activity to Yara Pilbara, marking a more active role for Yara in the region as we move swiftly to establish Yara standards of corporate governance. We now look forward to working with public and private stakeholders to shape and strengthen the long-term future of the Pilbara region”, said Mr Haslestad.




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