UPDATED: 10/16/2017 — see Change Log

OWNER: AM Agrigen Industries
PROJECT: Greenfield ammonia-urea plant[memberful does_not_have_subscription=”1314-ammonia-industry-annual-subscription,1311-ammonia-industry-monthly-subscription,3338-ammonia-industry-30-day-subscription”]

COST (reported): $1.2 billion
JOB CREATION (reported): 150 permanent
START-UP DATE (reported): 2018

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] Company announcements and press reports include no capacity data. [3] [Membership required]. Sources: linked below. [4] [Membership required]. See Methodology.

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SUMMARY STATUS: Planning Phase
Greenfield ammonia plant: in development since 2012, permits approved in 2015, delayed, then completely redesigned in 2016. Now awaiting EPC announcement and revised budget and schedule. AM Agrigen has made no public announcements but permit documents reveal changing scale and technology licensors.

COST: $1.2 billion reported, presumably less now
JOB CREATION: 160 permanent, 1,600 construction at peak, presumably fewer now
START-UP DATE: 2021 estimate, originally 2018
LIKELIHOOD: Possible — see Methodology

CAPACITY	USGS[1]	COMPANY[2]	PERMIT[3]	ADJUSTED[4]
Ammonia		None given	3,000 stpd GROSS 550 stpd NET	500,000 mtpy estimate
Urea		None given	4,409 stpd	0 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] Company announcements and press reports include no capacity data. [3] Permit documents. Sources: linked below. [4] Adjusted Capacity is in metric tons per year assuming operations for 365 days per year; estimate based on unit’s past capacity; urea plant cancelled since permit issued. See Methodology.

FEEDSTOCK: Natural gas
END PRODUCTS: Ammonia (Urea plant cancelled)

RESEARCH NOTES:
In May 2014, Bobby Jindal, Governor of the State of Louisiana, announced that AM Agrigen Industries (AMAI) had “secured options to purchase 650 acres” near Killona, in St Charles Parish, to build a world-scale greenfield ammonia-urea plant.

AMAI’s air permit applications were approved in April 2015 and its water permit was approved in August 2015. Local press reported that AMAI needed to have “the permits in hand before the final investment decision is made.” However, once those permits were in hand, progress stalled, presumably because capex estimates increased at the same time as global nitrogen market prices collapsed, making the project financially inviable.

In January 2016, the Indian press wrote about the project’s financial sponsor, saying that “there is an over $1 billion (Rs 6,600 crore) ammonia plant coming up in the US, for which feasibility studies have been conducted and process is on for acquiring land.”

However, by mid-2016, the project had been completely redesigned: the urea plant has been thrown out and, instead of building a new plant, the ammonia plant will be an old unit, imported from the UAE, of roughly half the capacity.

According to AMAI’s September 2016 application to extend its permit to construct:

AM Agrigen Industries is currently engaged in negotiations involving bringing an existing ammonia plant located in Sharjah, United Arab Emirates, to the site. The intention is to disassemble, transport the plant to the site, and reconstruct and upgrade the relocated plant.

The existing plant is currently undergoing evaluation, which will be followed by the full development of an Engineering, Procurement and Construction (EPC) agreement for its transportation, upgrade, and reconstruction. The EPC development contract has already been negotiated and is expected to start in early October 2016. We anticipate starting site preparation work in 12-14 months (ie, 3rd Quarter 2017).
AM Agrigen, LDEQ application to extend Permit to Construct, 09/10/2016

Louisiana DEQ approved this twelve month permit extension, giving AMAI until October 2017 to begin construction work but, as of October 2017, nothing has happened yet, except that LDEQ has approved a second permit extension of another six months (not the full twelve months requested). This means that construction must begin by April 7, 2018, or AMAI must submit a full re-evaluation of the permit methodology (BACT).

In its 2017 extension request, AMAI reminded LDEQ that the initial permit extension was “necessary to negotiate the purchase of an existing ammonia unit from overseas. However, AMAI is now encountering an additional delay due to the timing of the U.S. Army Corps of engineers,” related to the permitting process to mitigate impacts on the wetlands. It continues:

Funding for the project will not be made available until all environmental permits … have been obtained … AMAI will then enter into a contract with an engineering firm to develop the construction drawings. This process is anticipated to take 9-12 months to complete before construction can begin at the site. For this reason, AMAI does not foresee construction beginning until the 4th quarter of 2018.
AM Agrigen, LDEQ application to extend Permit to Construct, 08/25/2017

Although LDEQ refused to extend the permit by the full 12 months requested, the project is unlikely to face significant permitting delays going forward, despite its complete change of plans, because the reconstructed plant will be smaller than the original proposal and will therefore represent a reduction of emissions relative to the already-approved permits.

I described AMAI’s new strategy for its Louisiana ammonia plant in December 2016. I estimate that the rebuilt and revamped ammonia unit’s capacity could be 500,000 mtpy, or roughly 25% greater than it was when idled at Lawrence, KS, in 2001 (1,180 mtpd).

As clarified in permit documents from February 2017, AMAI’s plans to build a urea plant have been cancelled (for now):

AMAI has elected to pursue an opportunity to purchase an existing ammonia plant that will be dismantled and reconstructed on the Killona site. Current plans call for construction of only the ammonia plant and elimination of the previously proposed urea facility. This change will significantly reduce the size and footprint of the plant.
AMAI Joint Permit Application, LDEQ documents, 02/16/2017

In June 2014, I identified the project backer as Ashwin Muthiah, the Indian-born, Singapore resident “third generation scion” of one of India’s industrial families. In March 2015, Muthiah confirmed this information in an Indian newspaper interview. The son of AC Muthiah (aka Ashwin) and grandson of MA Chidambaram (aka MAC), Ashwin recently became Chairman of the family operations, the MAC Group, which includes the Indian fertilizer company SPIC – of which more information follows below.

Construction on the Killona plant was originally scheduled to begin in June 2015, according to documents filed with the Louisiana DNR in 2014, and take “approximately 30 months to complete,” with a start up scheduled for the first quarter of 2018. In March 2015, international media reports said construction was “likely to begin in the last quarter of 2015.”

Given that the project has been completely redesigned and permit documents don’t foresee construction even beginning before Q4 2018 and, moreover, no EPC contract has yet been announced, it seems safe to assume that the earliest the Killona plant could start up would be 2021.

The original permit documents available at Louisiana DNR and DEQ, mainly filed by URS Corporation, specified that the plant would have had an ammonia capacity of 3,000 stpd, using the KBR Purifier Process. The granular urea plant was to have a capacity of 4,409 stpd (4,000 mtpd), using Toyo Engineering Corp’s ACES21 technology. Water permit documents had originally put the plant’s total intake requirements at over 7 million gallons per day, with 1.8 mgpd discharged to the Mississippi.

“About 80%” (~2,450 stpd) of the ammonia was to be upgraded to urea; the remainder, “about 550 stpd” net ammonia, was to be sold “directly to its customers either by pipeline or by barge/vessel through its dock when the Urea Plant is not in service.”

AM Agrigen’s original target market was the US corn belt, reached by barge up the Mississippi and by rail via the Union Pacific Railroad, but it was also reported to be targeting Europe – given the revised plans, the plant may not produce enough product to serve so many markets. Permit documents from 2014 stated that “while export markets are not currently attractive compared to markets within the US” … “if the market becomes an export market rather than an import market, we’ll be in a good position to take advantage of that.” These documents also provided details on the construction of a loading terminal on the Mississippi River “capable of accommodating Panamax and Cape class vessels,” and “the ability to construct a deep-draft marine terminal was a paramount consideration in the site selection process.”

In Jindal’s initial press release, he claims to have secured the project for Louisiana not just because of the availability of cheap natural gas feedstock, but also “because of Louisiana’s welcoming business environment and strong workforce.” This welcoming environment included a “performance-based $5.6 million grant to offset infrastructure costs” as well as anticipated incentives from “the state’s Quality Jobs and Industrial Tax Exemption programs.” AM Agrigen, which incorporated in Delaware in July 2013, began its discussions with Louisiana Economic Development in October 2012.

In March 2015, reports in India revealed that the “bulk of the investment” would come directly through Ashwin Muthiah’s holding company, AM International Holdings (AMIH). Additionally, the project intends to “tap a mix of global and domestic investors,” as well as “roping in companies with which it will have offtake agreements.”

AM Agrigen has not itself released any information regarding project funding, except to say that the company will be the “sole owner” of the project. It describes itself in permit documents as “a company with extensive financial backing to develop credible projects, with credible assurances that they will be constructed.”

The MAC Group founded SPIC (Southern Petrochemicals Industries Corporation Limited) in 1969 to build a naphtha-based, 620,400 mtpy urea plant in Tuticorin (Thoothukudi), in Tamil Nadu.

At its peak in the 1980s, SPIC reportedly enjoyed an almost 70% share of the Indian urea market, but it grew into a spectacular failure over the years, as the company tried to diversify into finance, petrochemicals, pharmaceuticals, and electronics. Reportedly badly mismanaged, it was brought close to collapse by too much debt (around 3,300 crore, or more than $500 million at today’s exchange rate).

SPIC also tried its hand at international investments, setting up an ammonia-urea plant in the Jebel Ali Free Zone in Dubai. SPIC describes this project as a “non-starter … due to non allocation of gas,” and it fell apart completely in 2010, after significant investment, when Dubai authorities seized the property and the plant machinery, because they were owed approximately $5 million in overdue lease payments.

It isn’t clear what role, if any, Ashwin Muthiah played in the company operations during this time, but a significant restructuring has been underway at SPIC over the last few years. Muthiah took over as Chairman in November 2011, and claims to have been personally responsible for SPIC’s turnaround.

SPIC’s restructuring is said to have reduced its debt by around 90%. Creditors were forced to choose how deep they wanted their haircuts to be: they could write off 81.5% of the amount owed for a lump sum payment, or they could lose only 40% if they were willing to accept payments over the next 11 years. As part of this restructuring, however, the concentration of equity held by the MAC Group rose significantly, while public and state shareholdings were reduced – mainly because Ashwin Muthiah’s AM International Holdings (AMIH) was issued convertible warrants for more than 18% of the company.

Muthiah’s Louisiana investment in AM Agrigen is also likely to come through AMIH, a private company registered in Singapore which appears to be wholly owned by Muthiah and his wife (although, according to company records accessed from ACRA in May 2014, AMIH’s sole shareholder, with slightly over $25 million in paid up capital, is Avida Investment Corporation, presumably a shell corporation, registered in the British Indian Ocean Territory with an address in the British Virgin Islands).

While AM Agrigen’s CEO declined to confirm or deny Muthiah’s involvement when I contacted him in June 2014, he did so using his amagrigen.com e-mail address (a quick whois lookup confirmed that AMIH owns the domain amagrigen.com, which is registered at SPIC House in Chennai, India).

It’s tempting to imagine that SPIC’s poor performance might be repeated in Louisiana but I think this is unlikely. While SPIC’s 2013-2014 operating profit margin was roughly 0.003% (barely profitable at all) and its current ratio was 0.91 (more liabilities than assets, raising questions about its liquidity), these numbers demonstrate a huge improvement over previous years and I view them, with skepticism, in the context of a long-term recovery under new management.

Moreover, it may not be a fair comparison: some basic assumptions we have for operating a fertilizer plant in the US cannot be taken for granted in India. In the 2013-2014 financial year, for example, SPIC’s Tuticorin plant was out of commission for more than 6 months because of the Indian government’s “delays in the disbursement of fertilizer subsidy,” which meant that SPIC couldn’t pay for feedstock because of its insufficient working capital. The previous year, the plant lost 53 days of production because of a water shortage “arising out of failure of monsoon” (see SPIC’s Annual Reports for more). I haven’t mentioned the feedstock shortages, or the fact that, as of June 30 2014, the government subsidy ended (maybe) – because the plant is supposed to have been converted from naphtha to natural gas feedstock.

Jindal’s press release describes AM Agrigen as having a “high-caliber leadership, a commitment to safety and a strong desire to become a model corporate citizen.” An Indian press report described the impact of Ashwin Muthiah thusly:

“Thanks to … the scion of its erstwhile boss at the helm, SPIC has managed to emerge from the rubble of its past financial fiascos … a phoenix-like ascent from the ashes of a misconceived corporate strategy, as well as rising debt that it was unable to coral in time until it became an albatross that sunk the company.”

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ADDRESS: Killona, St Charles Parish, Louisiana, United States

WEBSITE: No content yet at http://amagrigen.com/
WEBSITE: http://www.aminternational.sg/

REGULATORY SOURCES:

• USGS: Minerals Yearbook, Nitrogen [RECENT / ARCHIVE]
• Air and Water Quality Permit Documents (Title V, PSD, LPDES): LDEQ document search: AM Agrigen Industries LLC [LINK – search AI # 192221]
• Coastal: Louisiana DNR permit documents: AM Agrigen Industries LLC [LINK]

NEWS SOURCES:

• 02/24/2016: St Charles Herald Guide: St. Charles Parish’s industrial future lies in Killona [LINK]
• 01/02/2016: The Economic Times: Ashwin C Muthiah scripts family business revival with newer ventures [LINK]
• 03/16/2015: Business Standard (India): Ashwin Muthiah’s firm plans $1-bn US plant [LINK]
• 09/22/2014: NOLA.com / The Times-Picayune: AM Agrigen seeks key permits for $1.2 billion plant in St. Charles Parish [LINK]
• 09/19/2014: St. Charles Herald-Guide: Fertilizer company applies for permits for $1.2 billion Killona plant [LINK]
• 05/19/2014: Office of the Governor, State of Louisiana, press release: GOVERNOR JINDAL AND AM AGRIGEN INDUSTRIES CEO MARK VANDEVOORDE ANNOUNCE POTENTIAL $1.2 BILLION INVESTMENT IN LOUISIANA [LINK]