UPDATED: 10/03/2017 — see Change Log

OWNER: ProjectN / FNA (Farmers of North America)
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): $2.2 billion
JOB CREATION (reported): 170 permanent, 1,900 construction
START-UP DATE (reported): 2018

CAPACITY	USGS[1]	COMPANY[2]	PERMIT[3]	ADJUSTED[4]
Ammonia		2,400 mtpy	[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] News reports, November 2013. Sources linked below. [3] No air permit yet. [4] [Membership required]. See Methodology.

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SUMMARY STATUS: Planning phase
FNA is “moving steadily” towards building its own nitrogen fertilizer plant, starting with the establishment of a fertilizer and grain sales and distribution business. In 2017, FNA broke ground on the first of its distribution “supercentres,” at Belle Plaine, (delayed from 2016). FNA began work on this project in 2010 and the pre-FEED study for the nitrogen production complex is complete, but FNA still needs to find a major equity investor and a partner to operate the plant.

COST: $2.2 billion, originally $1.76 billion
JOB CREATION: 170 permanent, 1,900 construction
START-UP DATE: 2022 earliest estimate, FNA last announced 2018, originally 2017
LIKELIHOOD: Unlikely — see Methodology

CAPACITY	USGS[1]	COMPANY[2]	PERMIT[3]	ADJUSTED[4]
Ammonia		2,400 mtpd		876,000 mtpy
Urea		3,425 mtpd 1,200,000 mtpy		1,250,000 mtpy
UAN		1,215 mtpd 425,000 mtpy		443,500 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] News reports, November 2013. Sources linked below. [3] No air permit yet. [4] Adjusted Capacity is in metric tons per year assuming operations for 365 days per year; based on news reports. See Methodology.

FEEDSTOCK: Natural gas
END PRODUCTS: Urea, UAN

RESEARCH NOTES:
In June 2014, FNA announced that ProjectN, its proposed world-scale ammonia, urea and UAN plant, would be located near Belle Plaine, Saskatchewan. The 225 acre site had been secured but undisclosed since at least November 2013; it has a natural gas pipeline running through it and rail and road access for distribution.

According to the ProjectN website, accessed in February 2017, FNA has completed both the Stage 1 Bankable Feasibility Study, done by Stantec Engineering, and the Technical Project Proposal, “which includes environmental studies and other regulatory data” – this is the Canadian regulators’ equivalent of the US air permit application.

FNA began developing ProjectN in 2010; they first announced their plans in September 2012. In late 2013, it was reported that the plant could start up “by the first quarter of 2017,” but plans for ProjectN have evolved since then.

ProjectN will now be the third phase in FNA’s three phase development plan.

Phase One is the establishment of a fertilizer sales and distribution business, Genesis Grain and Fertilizer LP, which launched an Offering Memorandum in February 2015, seeking to raise between $23 and $116 million (net) for the construction of seven “Supercentres.”

I do not know to what extent construction has properly begun yet, but the company held a groundbreaking ceremony for its first site in April 2017.

The minimum raise sought by Genesis’s offering was $23 million ($24.2 gross), which was the cost to build the first “Supercentre,” to be located on the future ProjectN site in Belle Plaine. The other six Supercentres will be spread across Alberta, Saskatchewan, and Manitoba. Genesis’s original schedule for these Supercentres had involved “starting construction on 1 to 4 facilities to be ready for the 2016 seeding season,” but construction was later slated to begin in 2017, on just the first facility.

Phase Two – grain handling and marketing – “will not commence for approximately two years from the Closing Date” of the Genesis offering.

In January 2016, Genesis announced that it had raised enough equity to “initiate the construction process” on the first “Supercentre,” which will be on the ProjectN site in Belle Plaine. Genesis continues to seek investors in the meantime, but only in order to reduce the amount of debt required: “We have bank financing but the terms suck.”

Although Genesis had plans to be “moving dirt” in the summer of 2016, it wasn’t until January 2017, when local news reported that “Genesis has hired Stueve Canada Limited as contractors for the project and plan to break ground on the supercentre as soon as weather allows with the facility hopefully up running by the end of the year [2017].”

The capital has been raised to build the supercentre in Belle Plaine with the manufacturing facility also planned to be built there. Genesis would also like to start building more supercentres in Manitoba and Alberta as soon as possible.

The Belle Plaine supercentre will have a storage capacity of 52,000 tonnes with the intention of turning the inventory over three times a year. The facility will store urea, phosphate, mico-nutrients, sulphur and potash. The proposed $24 million facility will include state-of-the art blending capabilities …

ProjectN is still in the planning stages (the risk capital to pay for the cost of project development has been raised, but investment capital has not been raised yet).
The Leader-Post: Fertilizer supercentre to be built at Belle Plaine, 01/31/2017

These Supercentres are, initially, for fertilizer sales and distribution, but ultimately – in Phase Two – they will co-locate grain handling and marketing operations.

This strikes me as an astute piece of corporate strategy. It’s easy to demonstrate the economic benefit of selling fertilizer made from cheap natural gas; it’s much more difficult to reduce project risk (and thus cost) by securing long-term sales and distribution contracts for the plant’s annual output, and establishing the necessary logistics and infrastructure. By starting with distribution, the challenges that FNA will face securing financing and partners for the ProjectN plant could be significantly reduced.

The “Supercenters will begin construction well ahead of ProjectN.” In December 2014, company reps had been quoted saying that, if the first two phases went well, “construction [on the ProjectN plant] could begin in 2016 or 2017.” In 2015, ProjectN was said to be “moving steadily toward production in 2018.” I expect it will take longer, especially given the rate of progress so far: I’m estimating a 2021 start-up date.

The cost of ProjectN, originally given as $1.76 billion, had increased to $2 billion in 2015, and increased again, to a total of $2.2 billion, in 2016.

FNA, established in 1999, is a business alliance of farmers (not technically a co-operative), with about 10,000 members who own “20 percent of the nation’s farmland” in Canada. However, in December 2014, FNA announced “a major strategic expansion of its organization into the United States.”

FNA’s argument for building its own fertilizer plant is that “farmers in Western Canada pay more for their fertilizer than anywhere in North America, yet it is the cheapest place to produce the product due to low natural gas costs.” “We keep telling farmers that they will pay for someone’s plant … We’re suggesting if you’re going to pay for a plant, why not pay for your own.”

FNA intends to get its members “better prices” for fertilizer by creating a “closed-loop system where farmer investors in the plant would be obligated to purchase a certain amount of fertilizer annually.” While “the fertilizer is already presold to its investors,” those investors will receive dividends.

FNA estimates that it will take “8.9 years to pay off the plant” including 3.5 years of design and construction work, during which time “there will be distribution of $150 million to shareholders” each year; thereafter, they expect the plant to “earn $400 million in cash flow” annually.

FNA’s long-term cost projections are based on the assumption that natural gas will remain “below $5 per gigajoule for the next 30 years.” “Farmers can choose to get cheaper fertilizer, but then they would get less dividends … if they paid higher for their fertilizer, the plant’s going to make more money and the more dividends it will be able to pay. So as owners of the plant, they have that choice.”

To launch ProjectN, FNA originally aimed to sell 12,000 seed capital units to 4,000 farmers representing 20 million acres – this many acres would consume the plant’s total output and, moreover, this level of investment would give the farmers “legitimate leverage to get a majority of the equity in the plant” … “We want farmers to own as much of the plant as they possibly can.”

By January 2014, FNA had raised $8 million seed capital from 2,300 FNA members, who farmed 10 million acres of farmland (which would consume half of ProjectN’s output). In December 2013, FNA was reportedly promoting investment in ProjectN to farmers in the US. By December 2014, it was reported that ProjectN had raised $9 million in seed capital from “about 3,000” farmers.

FNA appointed BMO Capital Markets as its “capital development and business advisor” in October 2012, and commissioned Stantec to perform the feasibility study in January 2013 (now complete). In February 2013, FNA hired MNP LLP to “study and assist in the design of the sales and distribution structure” – which, presumably, evolved into Genesis Grain and Fertilizer. In December 2014, it was reported that the pre-FEED study was also complete.

FNA does not intend to operate the fertilizer plant itself: it is looking for a major equity investor and operator for the project and, in December 2013, was engaged in “talks with nine third parties, one of which it expects will undertake construction and partial ownership of the plant.”

In the meantime, FNA “continues to seek farmer-investors who would put up $1,000 to $10,000 each in seed capital … and will stop selling seed capital when it secures” a major investor.[/memberful]

View larger map with all ammonia plants.

ADDRESS: near Belle Plaine, Saskatchewan, Canada

WEBSITE: http://projectn.com
WEBSITE: http://www.fna.ca
WEBSITE: http://genesisgrainandfertilizer.com

REGULATORY SOURCES:

• USGS: Minerals Yearbook, Nitrogen [RECENT / ARCHIVE]

NEWS SOURCES:

• 04/06/2017: Genesis Grain and Fertilizer press release: Genesis Breaks Ground on Belle Plaine Supercenter [PDF]
• 02/02/2017: The Western Producer: Genesis pushes forward with fertilizer super centre at Belle Plaine, Sask. [LINK]
• 01/31/2017: The Leader-Post: Fertilizer supercentre to be built at Belle Plaine [LINK]
• 01/21/2016: The Western Producer: Fertilizer project gets the nod [LINK]
• 02/26/2015: Genesis Grain and Fertilizer press release: Genesis Grain and Fertilizer releases new offering [LINK]
• 12/08/2014: FNA press release: Farmers of North America expands in the United States [LINK]
• 11/06/2014: FNA press release: Farmers want majority ownership of CWB [LINK]
• 06/18/2014: FNA press release: FNA Fertilizer Limited Partnership Announces Plant Site Location [LINK]
• 01/10/2014: The Western Producer news story: Fertilizer makers add capacity [LINK]
• 12/19/2013: The Western Producer news story: FNA seeks American investors [LINK]
• 11/26/2013: Lacombe Globe local news story: Farmers cooperative seeks investors in fertilizer plant [LINK]
• 11/14/2013: The Western Producer news story: FNA gets into nitrogen business [LINK]
• 02/28/2013: ProjectN press release: MNP to assist in the design of ProjectN fertilizer sales and distribution [LINK]
• 01/31/2013: ProjectN press release: Stantec engaged to proceed with ProjectN Bankable Feasibility Study [LINK]
• 12/18/2012: ProjectN press release: Farmers show impressive support for fertilizer plant [LINK]
• 10/19/2012: ProjectN press release: FNA Fertilizer Limited Partnership extends public meetings [LINK]
• 10/02/2012: ProjectN press release: FNA Fertilizer Limited Partnership retains BMO Capital Markets [LINK]
• 09/26/2012: ProjectN press release: FNA Announces Limited Partnership moving on fertilizer plant [LINK]