FNA Fertilizer Ltd. | Thousands of growers needed to fund construction in Belle Plaine, Sask.
A Saskatchewan community has been selected as the location for a $1.76 billion nitrogen fertilizer plant.
Bob Friesen, spokesperson for FNA Fertilizer Ltd. Partnership, said the site it bought near Belle Plaine has access to both national railways, a good water supply, abundant natural gas, nice highways and a substantial labour pool.
“This announcement is an important step in project development and demonstrates a distinctly tangible milestone,” he said.
Project N is FNA’s attempt to build a farmer-owned nitrogen fertilizer plant that would produce 1.2 million tonnes of urea and 425,000 tonnes of UAN liquid fertilizer annually.
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So far, 2,500 farmers have contributed $9 to $10 million of seed money for the project. The goal is to have up to 6,000 farmer investors in the plant. Seed capital units will be converted to shares in the company once the equity drive is underway.
FNA was hoping more farmers would have signed up by now. The company is expanding its reach, venturing south of the border in an attempt to lure farmer investors in the northern tier states.
“We won’t forever and a day be looking for farmer participation,” said Friesen.
“There will come a time when we will have to decide to move ahead.”
FNA once said farmers would provide half of the funding for the project. Friesen now says it is up to farmers to decide how big an equity stake they want in the plant.
He maintains that 80 percent of the plant’s annual production will be spoken for by the time a shovel goes in the ground.
“We already have an informal agreement with a potential off-take partner that is prepared to take all of the off-take from the plant that farmers don’t take,” said Friesen.
FNA is also in talks with potential strategic partners that will provide some of the capital required to build the facility.
“That’s something that will hopefully be one of those positive announcements that we will be making in the near future,” he said.
John Chu, agriculture research analyst with AltaCorp Capital, said there are fertilizer producers, distributors and large users that are willing to invest in such projects.
“There are definitely parties out there that probably would be interested in something like that,” he said.
“Whether it would be this particular project, I don’t know.”
A senior official with Agrium recently said there is room for 12 to 14 nitrogen fertilizer plants in North America. The company wants to build a two million tonne facility in the U.S. Midwest.
Chu said a plethora of project announcements have been made, but only a couple appear to be moving forward.
It reminds him of the potash sector a couple of years ago when a number of junior companies were formed with the intention of building a facility.
“The reality is today none have really made much progress,” he said.
The allure of building a plant in North America is that the U.S. imports nearly half of the nitrogen its farmers use every year, so there is a nearby market for the product. The other advantage is that natural gas is cheap in North America.
“The question becomes, can you raise the funds for it and do you have a place to put the production once you produce it?” said Chu.
“That’s a lot of money to be raised and at some point you just have to wonder, does the source of funding start to dry up after the first so many (projects) have been fully funded?”
Friesen said there is no better incentive for growers to invest in the project than urea prices pushing $800 per tonne this spring.
He said the original timeline is intact.
“We’re certainly still projecting to be in production in 2017.”
