UPDATED: 05/01/2017 — see Change Log

OWNER: Magnida (Magnolia Nitrogen Idaho LLC)
PROJECT: Greenfield nitrogen fertilizer plant [memberful does_not_have_subscription=”1314-ammonia-industry-annual-subscription,1311-ammonia-industry-monthly-subscription,3338-ammonia-industry-30-day-subscription”]

COST (reported): $2.5+ billion
JOB CREATION (reported): 150 permanent, 1,900 construction
START-UP DATE (reported): 2017

CAPACITY	USGS[1]	COMPANY[2]	PERMIT[3]	ADJUSTED[4]
Ammonia		None given	[Membership required]	[Membership required]
Units: stpd, stpy, mtpd, mtpy = short/metric tons per day/year. [1] United States Geological Survey (USGS) Mineral Yearbook, Nitrogen gives capacity in metric tons per year, calculated as “engineering design capacity adjusted for 340 days per year of effective production capability,” rounded to three significant digits. Source: most recent year, Table 4: Domestic Producers of Ammonia, http://minerals.usgs.gov/minerals/pubs/commodity/nitrogen/. [2] No capacity data on company website or press reports. [3] [Membership required]. Sources: linked below. [4] [Membership required]. See Methodology.

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SUMMARY STATUS: Cancelled
In September 2016, local news reports implied that Magnida was winding down. The project was first announced in 2013, as a revitalized fertilizer version of a power plant initially proposed in 2005. Magnida’s equity was originally committed in full, but became uncertain when costs escalated and the project met with resistance, finally the sponsor pulled out and new equity partners could not be found.

COST: $2.5+ billion, originally $1+ billion, down from $3 billion
JOB CREATION: 150 permanent, 1,900 construction
START-UP DATE: originally 2017
LIKELIHOOD: Dead — see Methodology

CAPACITY	USGS[1]	COMPANY[2]	PERMIT[3]	ADJUSTED[4]
Ammonia		None given	2,500 stpd	827,806 mtpy
Urea			4,100 stpd	1,357,602 mtpy GROSS
Nitric Acid			1,000 stpd	331,122 mtpy GROSS
Ammonium Nitrate			1,300 stpd	430,459 mtpy GROSS
UAN			2,900 stpd	960,255 mtpy
DEF			1,050 stpd	347,679 mtpy
Units: stpd, stpy, mtpd, mtpy = short/metric tons per day/year. [1] United States Geological Survey (USGS) Mineral Yearbook, Nitrogen gives capacity in metric tons per year, calculated as “engineering design capacity adjusted for 340 days per year of effective production capability,” rounded to three significant digits. Source: most recent year, Table 4: Domestic Producers of Ammonia, http://minerals.usgs.gov/minerals/pubs/commodity/nitrogen/. [2] No capacity data on company website or press reports. [3] Air permit. Sources: linked below. [4] Adjusted Capacity is in metric tons per year assuming operations for 365 days per year; based on permitted capacity. See Methodology.

FEEDSTOCK: Natural gas
END PRODUCTS: Urea, UAN, (“and potentially”) DEF

RESEARCH NOTES:
In April 2017, local news reported that the Magnida fertilizer plant “will not be built.”

“(Magnida) spent $40 million to bring the project to light,” she said [Kristen Jensen, executive director of the Great Rift Business Development Organization]. “But in the end, they were not able to secure the financing to actually build it.”

… Currently, Jensen said there are no potential tenants for the land where the Magnida plant was slated to be built … “We would like to find somebody who would be interested in that industrial area.”
Idaho State Journal, Proposed Magnida fertilizer plant will not be built, 04/29/2017

Back in September 2016, local news had reported that Magnida intended to sell its water rights – perhaps its last marketable asset – implying that the long-delayed project had finally given up trying to raise equity and was winding down. Magnida was reportedly “seeking to dispose of the project’s assets,” while retaining “first option of re-acquiring those rights if the company is able to secure financing.” The citizens of Power County voted in November 2016 to issue a $8 million bond to buy the water rights. By December 2016, the county was negotiating the lease or sale of these rights, even though it didn’t expect the transaction with Magnida to close until March 2017.

In my experience, when I’m told that a private equity firm is liquidating assets and “trying to be realistic,” it means that it is exiting its position. Magnida’s CEO told me by phone in October 2016 that it was not accurate to describe the project as winding down. However, I didn’t take that comment very seriously because the project’s air permit was due to expire that month and, as I confirmed with Idaho DEQ in November 2016, Magnida did not file for an extension. Without an air permit, Magnida would need to begin the years-long permit application process again; so, if there was any chance that Magnida was not winding down, it would have filed for an extension.

With neither air permit nor water rights, this project was so unlikely that I wrote it off in November 2016.

It was back in 2013 that Magnida had first announced its plans for “developing a world scale fertilizer project” on a 540 acre site in Power County. It originally hoped “to initiate construction in 2015 and have the facility fully operational in 2017,” but escalating costs, air permit appeals, and the loss of the original project sponsor made it impossible to reach financial close.

In March 2016, when people were seriously questioning whether the project could still go ahead, local news reported that the project had renewed its special use permit, implying that the project was not dead, quite yet. The air permit contained a 30 month construction deadline, and didn’t need to be renewed until October 2016 (it wasn’t renewed). Water rights also remained in place at that time (only to be sold later).

“They are still working furiously to secure funding,” … What Magnida is trying to secure is a total investment commitment of $900 million. “They do have a bank on board that will finance the loan.”

Only a year earlier, in July 2015, Magnida had awarded the EPC contract to KBR. Company reps had confirmed to me, in June 2015, that the project was “very much alive,” despite acknowledging that progress had been slower than anticipated, reporting that it was moving ahead on all fronts, including efforts to secure long-term natural gas contracts and renegotiate its previously received EPC bids.

Fixed cost, completion guaranteed EPC bids had previously been submitted by both KBR/Kiewit and Bechtel/Uhde, in September 2014. These bids pushed the estimated project cost up “from $2.1 billion to $3 billion” due to “competition with the booming domestic energy sector” (when first announced, the project was to cost $1+ billion). Following the collapse in the price of oil and industry-wide layoffs in the winter and spring, these costs were reexamined: “they expect to save nearly half a billion dollars in construction costs thanks to lower oil prices,” pushing the project cost, last quoted in March 2015, to “somewhere north of $2.5 billion.”

However, as a result of those escalating costs, in November 2014, the project sponsor, Egypt Kuwait Holding Company (EKH), decided to write off its entire investment to date as impairment losses, deemed the project “economically infeasible,” and “decided not to expend any further amounts” due to “the decrease of the IRR” (see EKH’s Q1 2015 financial statement, Note 53). These facts notwithstanding, Magnida reps confirmed to me in June 2015 that EKH remained the project sponsor, and that Magnida was already well enough funded that they can push on to financial close without additional capital from EKH.

According to company reps, Magnida was a managed account for New York-based private equity company I Squared Capital, which describes itself as “an independent infrastructure investment and management platform that focuses on energy, utilities, and transport in US, Europe, and select high growth economies based on risk-adjusted metrics across sectors and geographies.” In April 2015, I Squared Capital closed on its first fund, the $3 billion Global Infrastructure Fund – Magnida was not a part of that fund.

The original project sponsor, Egypt Kuwait Holding Company, is an Egyptian public company that describes itself as “one of the MENA region’s leading investment companies.” EKH owns Magnida through its Kuwaiti subsidiary Bawabet Al Kuwait Holding Company, via Magnolia Holding LP, which is based in the Cayman Islands.

EKH knows about fertilizer plants: it established the Egyptian greenfield AlexFert in 2003, for a 2006 start-up, and announced in February 2015 its plans and investment partners for a $7 billion petrochemical complex, including phosphate fertilizers, in Egypt.

In January 2014, Magnida said that $500 million in equity had been committed to the project (later, “$500 to $600 million”); they aimed to fund the project with 30-40% equity and 60-70% debt (a requirement of $750 million to $1.4 billion debt). In July 2014, Societe General was appointed to raise the debt for the project.

In April 2014, Idaho DEQ issued Magnida’s air permit. Despite knowing for seven years of plans for the site, ConAgra waited until after Magnida’s air permit was approved to file an appeal against the project, in May 2014. This triggered an internal Idaho DEQ review, which took four months to resolve. ConAgra’s Lamb Weston plant was adjacent to the Magnida site; its publicized arguments (no longer available online) about air quality and safety concerns were weak and seemingly disingenuous, in my opinion, and a local advertising campaign, launched in June 2014, looked a lot like scare-mongering. In September 2014, the hearing officer dismissed ConAgra’s appeal as being without “legal merit … speculative … based upon what appears to be little more than suspicion.” ConAgra appealed this decision and effectively continued to delay approval of the necessary permits. The situation wasn’t resolved until December 2014, when the two companies settled their differences under a “confidential” agreement.

Magnida brought new life to the former (abandoned) plans for a greenfield on this site, with a new business plan, new corporate structure, and new leadership. The abandoned project, first announced in 2005 by Southeast Idaho Energy (a subsidiary of Refined Energy Holdings, both entities now apparently defunct), was to have been a 520 MW clean-coal, combined cycle gasification power plant with a byproduct ammonia capacity of ~600,000 tons per year. A benefit of reanimating the abandoned project was that a number of hurdles had already been surmounted: they had purchased the land and “already acquired the necessary senior industrial water rights.” These water rights ended up being the assets that Magnida sold back to the county.

According to Magnida’s expired air permit, most of the ammonia produced would have been upgraded, although the exact mix of end products would “change depending on market conditions.” One on-site ammonia storage tank would have had a capacity of 33,000 tons. Fertilizer was to be shipped out by truck and rail; Union Pacific Rail Road was said to be building an industry track. [/memberful]

View larger map with all ammonia plants.

ADDRESS: Lamb Weston Road, American Falls, Idaho 83211, United States

WEBSITE (US): DEAD LINK: http://www.magnida.com/
WEBSITE (EGYPT): http://www.ekholding.com/

REGULATORY SOURCES:

• USGS: Minerals Yearbook, Nitrogen [RECENT / ARCHIVE]
• Air Permitting: Idaho Department of Environmental Quality: Magnida Application for Air Quality Permit [LINK / PDF]

NEWS SOURCES:

• 04/29/2017: Idaho State Journal: Proposed Magnida fertilizer plant will not be built [LINK]
• 12/15/2016: Capital Press: Irrigators consider leasing water from Power County [LINK]
• 11/08/2016: Idaho State Journal: Multiple bonds pass in Southeast Idaho [LINK]
• 11/02/2016: Local News 8: Power County has one chance to pass $8 million bond [LINK]
• 09/23/2016: Idaho State Journal: Power County looking to secure Magnida water rights [LINK]
• 03/28/2016: Idaho State Journal: Magnida seeks $900M for A.F. fertilizer plant [LINK]
• 08/28/2015: Idaho State Journal: Magnida fertilizer project lands main contractor [LINK]
• 08/19/2015: Power County Press: Magnida picks contractor for proposed fertilizer plant [LINK]
• 06/17/2015: Power County Press: Despite rumors, Magnida still very much alive [LINK]
• 03/23/2015: Capital Press: Idaho fertilizer plant project still on track [LINK]
• 03/16/2015: Idaho State Journal: Magnida fertilizer plant still moving forward [LINK]
• 12/31/2014: Power County Press: Lamb Weston, Magnida come to agreement [LINK]
• 12/14/2014: Idaho State Journal: Magnida’s plight showcasing why Idaho’s economy is the way it is [LINK]
• 12/08/2014: Idaho Statesman: Fertilizer plant permit delays show limit to Idaho’s ‘speed of business’ [LINK]
• 09/18/2014: Idaho State Journal: DEQ hearing officer finds in favor of Magnida [LINK]
• 06/30/2014: ICIS: Magnida selects Societe Generale for US nitrogen plant financing [LINK – paywall]
• 05/13/2014: Idaho State Journal: Proposed $1.5B area plant advances [LINK]
• 01/29/2014: The Power County Press: Magnida execs highlight plant progress [DEAD LINK]
• 12/10/2013: Magnida community relations letter [PDF]
• 07/17/2013: Bloomberg News: Ex-Morgan Stanley Executives Said to Plan $2 Billion Fund [LINK]

NEWS SOURCES (abandoned Southeast Idaho Energy project):

• ONGOING: Source Watch: Power County Advanced Energy Center [LINK]
• 11/30/2009: Idaho Department of Environmental Quality press release: DEQ issues revised air permit to Southeast Idaho Energy for Power County plant [LINK]
• 07/27/2007: Idaho State Journal: Gasification permit sought [LINK]
• 06/28/2007: Idaho State Journal: Gasification plant reborn [LINK]
• WEBSITE: Refined Energy Holdings: Southeast Idaho Energy [DEAD LINK]