CHS Inc. pulls plug on planned $3 billion fertilizer plant

In a deal that extends a spate of tie-ups in the fertilizer sector, CHS will invest $2.8 billion in a CF subsidiary in return for the right to buy a slice of its production capacity at market prices. Cooperative members will also benefit from greater efficiency and economics under the agreement.

In the CHS deal, CF also secures sales of up to 1.7 million tons annually, similar to its 2014 ammonia-supply deal with phosphate producer Mosaic Co, providing significant sales in uncertain times.

“Our long-term goal has always been to add value for CHS owners through investment in the nitrogen fertilizer manufacturing space”.

“What CF is doing is classic corporate self-preservation in a world where there are well-financed people trying to get in to their core Midwest and U.S. Gulf Coast nitrogen market”, said Chris Damas, editor of the BCMI Report on markets.

CHS said on Wednesday it would not go ahead with the construction of a fertilizer plant at Spiritwood in North Dakota.

CF Nitrogen owns three of CF’s production facilities including Donaldson, Louisiana, Port Neal, Iowa, and Yazoo City, Mississippi. CF plans to contribute an Oklahoma factory to the unit prior to the completion of the deal, which is expected February 1.

Moody’s Investors Service says that CF Industries Holdings Inc.’s (Baa2 stable) strategic venture with CHS Inc. It runs seven nitrogen fertilizer production facilities in North America.

CHS’s semi-annual profit distributions from CF Nitrogen will be based generally on the volume of granular urea and UAN purchased by CHS pursuant to the supply agreement.

CHS Inc. (www.chsinc.com) is a leading global agribusiness owned by farmers, ranchers and cooperatives across the United States. The company supplies energy, crop nutrients, grain marketing services, animal feed, insurance, financial and risk management services, as well as food and food ingredients.

This document and other CHS Inc. publicly available documents contain, and CHS officers and representatives may from time to time make, “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Report Act of 1995. CHS, a major CF customer and knowledgeable industry leader, is making a $2.8 billion investment for approximately 8.9% of CF’s total system capacity.