The local newspaper in Jamestown reports this morning that the CHS greenfield plant in Spiritwood, North Dakota, is now on hold.
“Further study revealed additional project infrastructure and labor costs,” Degnan wrote in the press release. “At the current cost estimate, the project will not generate the targeted returns on capital and would not be viable” …
Degnan said CHS needed more time to evaluate options for reducing overall construction costs and to look at ways to improve profitability.
“CHS leaders recently met with the state of North Dakota on financial considerations to improve project returns,” Degnan wrote.
CHS provided me with the following statement by e-mail:
Spiritwood fertilizer manufacturing plant remains under review
CHS is delaying its anticipated April announcement on construction of a potential fertilizer manufacturing plant at Spiritwood, North Dakota, due to significantly higher than expected construction and labor cost estimates.
“Given that the potential project would be the single largest in CHS history and the largest in the state of North Dakota, we must be stewards of our owners’ capital and evaluate every opportunity to find solutions in the most responsible and strategic manner,” says Carl Casale, CHS president and chief executive officer.
The Front-End Engineering Design (FEED) study indicated materials and construction costs of $1.5-$2 billion. But, Casale says, “The bid received from our turnkey vendor was considerably higher, which makes the project returns positive, but unattractive, given the risks associated with building a large, greenfield nitrogen plant in North Dakota.”
CHS leaders recently met with the state of North Dakota on financial considerations to improve project returns. The potential plant is expected to contribute $23 billion in additional local and state economic revenue over 20 years.
The Spiritwood project team also is evaluating options to reduce overall construction costs and has hired a third party to analyze the large cost difference between the FEED study and construction bid.
“As a result, more time is needed for further review before a final decision can be made on the potential Spiritwood project. It is important to remember that this plant will be around for 70 years, so taking a little more time to get it right seems wise,” Casale says.