Scheduled Facility Outages
The East Dubuque Facility will undergo its scheduled bi-annual turnaround during the fourth quarter of 2013. The turnaround is anticipated to take up to four weeks, which is longer than the typical 18 to 25 days, due to the installation of the final tie-ins for the ammonia capacity expansion. During the turnaround, the facility’s ammonia and UAN units will be off-line so production and sales volumes for these products during 2013 are expected to be lower than in 2012. The impact of the turnaround on 2013 cash distributions is anticipated to be approximately $0.40 per unit. Included in this impact are approximately $4 million of costs for work related to the turnaround which are anticipated to be included in cost of sales in the fourth quarter of 2013.
The Pasadena Facility is scheduled to be down for approximately 14 days in the fourth quarter of 2013 due to work related to the ammonium sulfate debottlenecking project, as described below. The impact of the scheduled outage to 2013 cash distributions is anticipated to be approximately $0.11 per unit.
East Dubuque Facility
At the end of 2012, Rentech Nitrogen completed the urea/DEF expansion project to increase urea production capacity by approximately 15%, or 21,900 tons annually. The additional urea tons are being converted into and sold as diesel exhaust fluid (DEF) to Yara North America Inc. or as additional urea liquor sales. The sales are expected to increase Rentech Nitrogen’s cash available for distribution beginning this year. The total cost of the expansion project is $6.5 million.
The ammonia expansion project at the East Dubuque Facility is progressing on schedule and within budget. The project is designed to increase production of ammonia for sale or upgrade to other products by approximately 23%, or 70,000 tons annually, and to increase on-site ammonia storage capacity by 20,000 tons. The estimated $100 million expansion project, which is being financed by a multiple-draw capital expenditure loan facility, is scheduled to be completed by the end of 2013, after the scheduled bi-annual turnaround. The Partnership expects the additional 70,000 tons of ammonia production to contribute to per unit cash distributions beginning in 2014. Using the same assumptions underlying the 2013 guidance, including those regarding commodity prices, Rentech Nitrogen calculated that the increased production associated with this expansion project could increase cash available for distribution by $0.75 per unit.
In the third quarter of 2013, Rentech Nitrogen intends to commence construction of an efficiency improvement project that is designed to increase nitric acid production at the East Dubuque Facility by approximately 1,200 tons annually, without consuming additional feedstock. This project is also expected to reduce the amount of ammonia required for nitric acid production by about 350 tons annually. The additional nitric acid will be sold as a standalone product or used to increase the production of UAN. The project is expected to be completed during the first quarter of 2014 at a cost of approximately $2 million, with approximately $1.6 million expected to be expended in 2013.
Rentech Nitrogen is accelerating the previously announced debottlenecking project at its Pasadena Facility. The project, which is anticipated to increase ammonium sulfate production capacity by approximately 20%, or 115,000 tons annually, is now expected to be completed in the fourth quarter of 2013, sooner than the previously anticipated completion of mid-2014. As part of this project, Rentech Nitrogen expects to make process improvements to the ammonium sulfate plant at the facility during a 14-day planned outage in November 2013. During the outage, Rentech Nitrogen expects that sulfuric acid and ammonium thiosulfate production will be uninterrupted, while ammonium sulfate production will cease. The additional ammonium sulfate production is expected to begin contributing to per unit cash distributions in December 2013. The project is expected to cost approximately $6 million and will be funded from an existing capital expenditures facility. Using the same assumptions underlying the 2013 guidance, including those regarding commodity prices, Rentech Nitrogen calculated that the increased production associated with this expansion project could increase cash available for distribution by $0.15 per unit.
Rentech Nitrogen has commenced plans and engineering for a 15 megawatt electrical power generation project at the Pasadena Facility. The Partnership intends to install a steam turbine/generator set that would use excess steam now produced from the sulfuric acid plant at the facility to produce electrical power. It is expected that a portion of the power will be used in the Pasadena Facility, reducing electricity expenses, and the remaining power will be sold in the deregulated Texas power market, creating an additional revenue stream. Rentech Nitrogen expects that this project could cost approximately $30 million and would be completed in the fall of 2014. The project is expected to be funded under the 2012 credit agreement which provides for a $35 million incremental term loan facility allowing the Partnership, at any time on or before October 31, 2014, to borrow additional funds under the terms of the 2012 credit agreement, if lenders agree to lend such amount.
Rentech Nitrogen declared its fourth quarter 2012 cash distribution of $0.75 per unit, paid on February 14, 2013 to unit holders of record as of February 7, 2013. The cumulative cash distributions paid from cash generated during the twelve months ended December 31, 2012 was $3.30 per unit, which exceeded the Partnership’s previous guidance of $3.27 per unit (as described in its press release dated December 17, 2012). The calculation of cash available for distribution has been included below in this press release.