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Rentech Nitrogen Partners, L.P. Updates Outlook For 2013 And 2014

Stocks in this article: RNF

Turnaround and Expansion Projects: The expansion projects at both plants continue to be on time and on budget. The East Dubuque plant is currently in the process of startup following the biannual turnaround, and commissioning new equipment installed as part of the expansion of ammonia capacity. Ammonia production is expected to start on schedule in the first week of November.

A routine inspection late last week identified the need to repair the foundation of one of the three existing syngas compressors, taking that compressor out of service. This unplanned repair will require the ammonia plant to run below the planned post-expansion capacity of 1,100 tons per day, at a rate of approximately 790 tons per day, until repairs are complete. Since the problem has just been identified, the repair schedule is in development, but is estimated not to exceed 90 days.

The Pasadena Facility’s ammonium sulfate plant is expected to begin scheduled down time for approximately 2 weeks in early December, to complete the $3 million project to expand ammonium sulfate capacity to 2,100 tons per day, and $3 million of projects to improve on-stream time. The incremental tons of ammonium sulfate are expected to generate significant variable margin. The power co-generation project continues to be on time and on budget with completion scheduled by the end of 2014.

The expansion projects at both plants have been funded, and the Partnership continues to have $35 million of undrawn capacity on its revolving credit facility.

Outlook for 2013 and 2014: Reflecting the factors discussed above, the cash distribution related to the Partnership’s third quarter results, announced on October 24, was in line with the internal quarterly forecast that is a component of the annual guidance issued on August 8, 2013. The outlook for the fourth quarter has deteriorated since issuance of that guidance. Ammonium sulfate prices have declined further than expected, and the illiquidity of the market has continued longer than we had expected. Few transactions are taking place in North America, and typically lower-priced export sales are conducted in a small number of large, vessel-sized transactions. Buying activity in North America is anticipated to return during the fall season, as is typical for fertilizer products, but visibility into fall pricing is quite limited. The Partnership’s current view for the balance of 2013 is based on lower forecasts of ammonium sulfate deliveries and prices compared to the August 8 guidance, with prices only slightly higher than the most recent business conducted. Based on these prices, EBITDA for the Pasadena Facility is expected to improve from the third quarter, but to remain negative for the fourth quarter and the full year.

The fourth quarter forecast for the East Dubuque Facility is now expected to be reduced by increased costs and lower sales due to the compressor-related repair mentioned above. The reduced production is not expected to affect 2013 sales already contracted for delivery, but forecasted spot sales are expected to be lower. Capital and operating expenses are expected to be higher by of no more than $2 million in the aggregate, which will affect the fourth quarter of 2013 and first quarter of 2014. Given these recent developments, the Partnership estimates that cash distributions related to the fourth quarter of 2013 could be as low as zero.

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