In August 2017, Cronus Chemicals announced that its proposed greenfield in Tuscola, IL, is still moving forward, with a shiny new agreement with an EPC firm, as well as a revised project scope (more ammonia, less urea), and a more realistic schedule.
Quasi-contract: an agreement to agree later
Unfortunately, while this was widely reported as being a major step forward, there’s a world of difference between an agreement with an EPC firm and an actual EPC agreement.
Cronus Fertilizers announced today that it has signed an agreement with Thyssenkrupp Industrial Solutions (TKIS), one of the world’s leading fertilizer plant technology and construction companies, to serve as its new engineering, procurement and construction (EPC) contractor for its Tuscola, Illinois fertilizer plant …
“With this agreement in place, project development will now accelerate,” said Erzin Atac, CEO of Cronus Chemicals.
Cronus Chemicals press release, 08/23/2017
This seems to me to be a prime example of a misleading developer press release: Cronus does not have an EPC agreement, but only an agreement to work on an agreement:
This agreement will enable the companies to execute an EPC contract on a fixed price, lump-sum turnkey basis, and puts the proposed Cronus Fertilizers plant on track to start construction in 2018 …
Cronus Chemicals press release, 08/23/2017
This agreement doesn’t therefore appear to be deeply meaningful, which is probably why there is no mention of Cronus on the TKIS website, yet. ThyssenKrupp is not shy of publicizing its project awards when it wants: just a couple weeks ago, it announced a real EPC contract for a world-scale ammonia-urea plant in Brunei. Presumably it will do the same for Tuscola when it considers the project to merit such an announcement.
Hopefully, Cronus’s new relationship with TKIS will unfold smoothly and result in a plant being built, unlike the experience of nearby Midwest Fertilizer, which saw its EPC contract with TKIS derailed by a corruption scandal last year.
Reduced capacity, reduced cost
The downsized project “will focus more on ammonia production,” which is another way of saying that the urea capacity has been cut in half. This may explain where Cronus found a $300 million saving, reducing the projected capex from $1.9 billion down to $1.6 billion. This may be solely due to reduced urea capacity, or to the engineering partner switch to TKIS from the previously announced KBR-Tecnimont joint venture.
In August 2017, the Cronus website was updated with a new schedule that calls for groundbreaking in “late 2018,” with a three year construction phase leading to start-up “during the 4th quarter of 2021.”
Proposed dates for this project are poor predictors of the future, if history is any guide: Cronus has expected to break ground every year since 2014. As recently as February 2017, we were told that “they hope to start this summer [2017] and be up and running three years later [2020].” In March 2016, local news had quoted company reps talking about finalizing a deal with construction firms, saying that “the project is on track, and we’re looking to break ground in 2016.” I could go on.
All this and more is in my Research Note for Tuscola, IL.