EuroChem in Louisiana: “on track” (not shelved)

Yesterday, Bloomberg published an article about EuroChem’s Louisiana greenfield ammonia plant with the headline “EuroChem Shelves $1.5 Billion U.S. Plant as Sanctions Bite” … which is misleading.

EuroChem company reps clarified via e-mail, saying that the Louisiana greenfield “remains on track with its original schedule” and suggesting that the article, which was accurate in its original Russian, suffered from “subjective interpretation by the Bloomberg translator.”

Nonetheless, it was quickly picked up in the media, including Green Markets. The article quoted EuroChem CFO Andrey Ilyin:

“The decision on the project is delayed due to changes on the financial markets, namely affected access to credit resources … The ruble’s devaluation also made development of such projects more attractive in Russia.”

Shelved? The project is not cancelled, but the investment decision is delayed.

Sanctions? They don’t directly affect EuroChem (which became a Swiss company last year).

The impact of sanctions may be most keenly felt in the devaluation of the ruble – although falling global oil prices and a strengthening US dollar are perhaps more important factors. The weak ruble improves EuroChem’s ability to finance capital expansion projects within Russia, but not in the US.

Eurochem devaluation analysisEuroChem spends most of its cash in Russia, but earns most of its revenues in Europe, the Americas, and Asia. Devaluation of the ruble will save them an estimated $700 million US dollars in 2015.

See full details, including feedback from EuroChem company reps, in my updated Research Note (membership required).

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