Agrium Closes Alaska Nitrogen Plant

Company cites persistent shortage of natural gas used to make fertilizer at the plant as the reason for closure and loss of 100 jobs.

CALGARY — Agrium Inc. is closing its operations in the Alaskan coastal community of Kenai and laying off 100 employees there due to a persistent short supply of natural gas, a critical raw material used to make fertilizer at the plant.
 
The Canadian-based company, which has struggled for several years to get sufficient supplies of natural gas from Cook Inlet on Alaska's Pacific coast, said it is investigating using gassified coal as a substitute feedstock.
 
However, the soonest that such a plant could be built and operational would be in 2012. A decision on whether to advance to the next stage of the project will likely be made later this year, Agrium said.
 
''It is a sad day for us to have to close this facility, which has added much value to the Alaskan economy for the past 40 years,'' Mike Wilson, president and CEO of Agrium said in a statement.
 
Wilson said the Alaskan operations have been a major supplier to international markets in the Pacific region and was Alaska's third largest exporter in 2006, despite running at 50 percent capacity.
 
''Our employees at Kenai have been the key to the success of the operation. Had it not been for the natural gas supply situation in the Cook Inlet, we would not have had to make this difficult decision which will impact our employees, customers and the community,'' Wilson said.
 
Kenai is about 70 miles southwest of Anchorage, Alaska, which also is on Cook Inlet.
 
Calgary-based Agrium said it has attempted to encourage producers to develop natural gas supplies and to negotiate contracts for 2008 and beyond but was unable to do so at what company asserts are competitive prices and incentives.
 
Agrium said it already has written down the plant's value on its books in 2003 and took accounting costs for its shutdown at that time.
 
The remaining incremental costs of the shutdown are estimated to be less than 5 cents per share, the company said.
 
Agrium produces and distributes the three major types of agriculture fertilizer ingredients — nitrogen, potash and phosphate. It also sells seeds and agricultural chemicals through its retail outlets and wholesale operations.
 
Last month, Agrium reported record quarterly earnings due to burgeoning demand for corn to supply the ethanol bio fuel industry.
 
The company said profit for the second quarter ended June 30 was US$229 million — a 60 percent increase from the year before. Earnings per share were $1.70 compared, surpassing analyst estimates of $1.59 a share and well ahead of its earnings per share of $1.06 a year ago.
 
Sales increased $139 million to $658 million and gross profit increased $50 million and $159 million, respectively, due to increases in both volumes and sales prices.
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