Agrium reaches agreement on Egyptian nitrogen facilitySource: www.oilegypt.com 8/11/2008, Location: Africa
Agrium entered into an agreement with MISR Oil Processing Company of Egypt, whereby Mopco will acquire the EAgrium project, and EAgrium shareholders will obtain an equity interest in the combined entity. Agrium will own a 26 percent interest in the combined entity, which includes the recently completed 675,000 tonne urea Mopco facility which is expected to commence commercial production by the start of the fourth quarter of 2008. The combined entity intends to construct two additional urea trains on the Mopco site, which will increase the total annual capacity to approximately two million tonnes of urea. Agrium’s share of the annual production would be 175,000 tonnes of urea until the expansion is complete in 2011, after which it would increase to approximately 525,000 tonnes annually.
“We are extremely pleased that we have been able to reach an agreement with the Egyptian Government that allows us to establish an immediate presence and long-term strategic position in Egypt, as well as providing additional earnings and cash flow almost immediately. We believe that this agreement provides considerable benefits to EAgrium, Mopco and their respective shareholders and Egypt. I would like to take this opportunity to thank the Egyptian Government for the time and effort they have dedicated to deal with this matter. Their full support and cooperation was instrumental in resolving the issues. As a foreign investor in Egypt it gives us comfort to see such commitment on the part of the Government,” said Mike Wilson, President and CEO.
As part of the agreement, Mopco will acquire EAgrium and all related contractual rights and obligations through a share swap, after which EAgrium will become a wholly-owned subsidiary of Mopco and the shareholders of EAgrium will become shareholders in Mopco. The share swap is expected to occur by the end of the third quarter of 2008. The applicable current contracts for the engineering, procurement and construction for the two additional urea trains as well as the gas supply agreement, marketing off-take agreement and various other commitments will be retained in relation to the second and third production trains and transferred to the Mopco site.
Agrium anticipates its ownership in Mopco would result in earnings contributions beginning in the fourth quarter of 2008 on its share of production, which would be reported as equity earnings. Mopco will arrange the proposed project financing facility of approximately $1.1-billion after completion of the share swap which is required to finance all future project costs. Under the current financing plan, Agrium would not be required to put any further equity into the project beyond the approximately $280-million of equity already committed to the EAgrium project. The agreement is subject to a number of conditions which are expected to be concluded prior to the end of the third quarter, including confirmation from the Government of Egypt on key agreed deliverables and establishment of an interim financing facility required in order to proceed with construction of the second and third production trains.
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