Latrobe Fertilisers

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Latrobe Fertilisers Pty Ltd was a subsidiary of Australian Energy Company Limited (AEC) project until, as a result of a demerger, Latrobe Fertiliser Holdings Limited was incorporated in June 2009.[1]

Coal to urea plant

In late 2007 Latrobe Fertilisers Pty Ltd proposed the Latrobe Fertiliser Project, a coal to urea export project located near Loy Yang.[2]

The Age reported that the proposed plant, which would produce 1.2 million tonnes of urea a year, would cost $2 billion and would "use German coal gasification technology to make the nitrogen-rich urea fertiliser from brown coal". AEC Chairman Allan Blood told The Age that "there are virtually no greenhouse gas emissions," he said. "In its second stage, the plant will use the proposed common-user geosequestration pipeline to move any excess carbon dioxide underground to a permanent storage."[3]

The Age also reported that the proposed plant "will be built next to the Loy Yang power station and will make the fertiliser using coal from Loy Yang's huge open-cut coalmine." It was reported that construction was scheduled to start at the end of 2009 and that "plant will be operational in 2012. About 1000 people will be involved during construction and 180 permanently employed at the plant when it is operating." The article also stated that engineering for the project would be done by the Chinese company WEC and that Blood "said a major multinational fertiliser company would also become a joint-venture partner in the project within six months."[3]

At the time Blood was also hyping the prospects for converting brown coal to diesel. "In the current climate it is extremely viable. We are actually doing a study in the United States at the moment on a large plant to produce up to 150,000 barrels a day and we know the numbers very well and believe me that anything around the $60 a barrel mark, this is an extremely economic process ... Well, within three to four years if buttons got pressed today, you could have a plant producing any number of barrels of diesel or gasoline today that one wanted." While John Boshier from the National Generators Forum supported the concept, took a far less rosy view of the timetable. "These projects will take a long time to clear the environmental hurdles. People can be satisfied they are clean and safe. To get them funded from the banks, to build the projects so I think you can take it for granted that this is not a quick fix at all."[4]

In November 2008 the ABC breathlessly reported that the test drying of a trial batch of brown coal by Blood's company was "a major breakthrough" in the development of "a global scale, coal-to-fertiliser plant in the Latrobe Valley." Blood told the ABC that "it's a significant event, a very significant milestone both for our project, but more importantly, for the Latrobe Valley and brown coal as a whole, because it proves conclusively that the clean coal technology outcome, with very near zero emission outcomes, can be substantiated on a commercial scale."[5]

In May 2009 the Australian Journal of Mining reported that Latrobe Fertilisers’ CEO Bob Davies told a Agribusiness Gippsland meeting that approximately 1,500 tonnes of brown coal from the Loy Yang mine had been test dried in late 2008 to reduce the water content from 65% to 12%. Davies stated that "the tests dried high-moisture, high-sodium lignite coal that the electricity-generating plant at Loy Yang cannot use."[6]

The Australian Journal of Mining reported Davies had stated that the drying would be done using off-the-shelf German technology and that "Latrobe Fertilisers has sourced its gasifier through Siemens." The AJM story stated that "using coal from an existing mine has cost benefits, no capital expenditure, low cost and no permit delays, he said."[6] Davies also claimed that a price on carbon under an emissions trading scheme would render the project uneconomic. "If we have to pay, we will wipe out our cost advantage with freight," Davies stated.[6]

The following month, Blood told The Age that:[7]

"We have been approached by a few of the Chinese sovereign investment funds. I am hopeful that in the next four to six weeks we will have some documentary matters signed to go forward subject to comprehensive due diligence ... The low operating cost of the project has not gone away. Nor has the fact that Australia imports most of its urea from the Middle East. Nor has the fact that all of the transport and market infrastructure, particularly storage and handling, is already in place and is still there and available to us."

The Age also reported that Blood's company had a contract for "3 million tonnes of coal a year for a minimum of 30 years from Loy Yang A in the Latrobe Valley, which is where the coal-to-urea plant will be located." Blood said that he was hopeful of finance from Chinese and local investors and all approvals being in place by late 2010 and the plant being operational in 2013.[7]

Despite all the hype, the project went nowhere.

Groundhog day, 2013

In mid-June 2013 Blood re-emerged with a rewarmed version of the earlier project. On June 11, the "Street Talk" section of the Australian Financial Review (AFR) reported that Blood was "seeking a sharemarket listing after five years waiting for the right conditions" and that anonymous "industry sources" stated that Latrobe Fertilisers "was preparing for an initial public offer" after attracting an investment, rumoured to be by Hubei Yihua Group from China. "Sources said HYG had also committed to help design and construct the urea plant, using its proprietary technology," the report stated. The story indicated that Blood had reduced the size of the proposed project, down from 1.2 million to 500,000 tonnes of urea a year "and extra capacity would be added over time." The AFR reported that the project "has already attracted some institutional money, including investment by BlackRock."[8]

A graph accompanying the web version of the story - but not included in the print version of the AFR - indicated that data from Latrobe Fertilisers flagged that by 2014 it could have assets of $562 million and revenue of $58.4 million. The graph indicated that the company was projecting revenue $423 million by 2017 and an operating profit of $228 million. Separately the AFR reported that Latrobe Fertilisers "could have $3 billion in assets by 2020 and $938 million earnings before interest, tax, depreciation and amortisation".[8]

After the AFR story, Latrober Fertilisers issued a media release, though this is not available on the company's website. The Latrobe Valley Express reported that Blood stated that the Hubei Yihua Group had become a 42 per cent shareholder in the company. The story reported that it was proposed that the plant would "be constructed in China using a modular fabrication method, before being shipped to Australia for localised erection." Blood also stated that the company would spend $35 million on the project in 2013.[9]

Blood said that the project was at a relatively early stage. "I want to set the record straight and state very cautiously (our project) is a long way from a done deal; in terms of economics, all we are trying to do is set the process in place (but) I don't want to give false expectations and false hopes that I've been accused of contributing to before - the bottom line is we've got a long way to go ... We intend to have a damn good go at making this plant work; if successful, we are going to create a lot of long-term jobs for the Valley, but we can't know unless we try," he said.[9]

Blood was also insisting the project needed to be financially attractive. "It's got to be extremely financially sustainable before we can press that button to sign off on the financial proposals we can attract - we will apply a very vigorous financial appraisal to the project before that point," he said.[9]

Potential finance for the project, though, remained uncertain. The Latrobe Valley Express reported that "he [Blood] said the company had been in discussions with a Chinese bank and three potential financial syndicates for months."[9]

Uncertain coal supply

However, Blood said that the former coal-supply deal with Loy Yang had fallen through after a "disagreement over a contractual matter". Blood said that the company was discussing the possibility of a new coal supply deal with EnergyAustralia with the proposed plant to be constructed at the Yallourn site. Blood argued that criticism of the hype about the revival of the company's project was aimed at getting a coal allocation from the state government was "off the mark". "We do not need any coal from the government allocation process; we would be interested in the coal for future expansion, but only in a supply partnership with someone who would operate a mine - we ourselves are not interested in developing a new mine, as it would clearly render the project uneconomic," he said.[9]

Directors

Contact details

Head Office
22 Dalby Road
Hovea W A 6071
Telephone: (08) 9298 9588
Facsimile: (08) 9298 9522
Email : ablood AT latrobefertilisers.com.au

Melbourne office

6-8 Powlett Street
East Melbourne Vic 3002
Telephone: (03) 9415 7844
Facsimile: (03) 8415 0351
Email : pduckett AT latrobefertilisers.com.au
Website: http://www.latrobefertilisers.com.au/index.html

Articles and resources

References

  1. Latrobe Fertilisers, Fertiliser Holdings Limited", Latrobe Fertilisers website, accessed August 2010.
  2. "Latrobe Valley to welcome coal-to-fertiliser plant", Coal Mining' (Reed Business Information), January 1, 2008. (No longer available online)
  3. 3.0 3.1 Philip Hopkins, "$2bn fertiliser plant for Latrobe Valley", The Age, June 3, 2008.
  4. Jane Cowan, "Coal the answer to petrol crisis, says industry", The World Today, June 3, 2008.
  5. "Breakthrough for Latrobe Valley coal-to-fertiliser project", ABC News, November 27, 2008.
  6. 6.0 6.1 6.2 "Turning Gippsland coal into fertiliser", Australian Journal of Mining, May 1, 2009.
  7. 7.0 7.1 Mathew Murphy, "Chinese may back fertiliser deal", The Age, July 14, 2009.
  8. 8.0 8.1 Sarah Thompson, Anthony Macdonald and Gretchen Frieman, "Latrobe Fertilisers pushes ahead with IPO", June 11, 2013 (Subscription required). A slightly different version of the story -- and without the graphic chart showing part of the project finance -- later appeared as Sarah Thompson, Anthony Macdonald and Gretchen Frieman, "Latrobe Fertilisers pushes ahead with IPO", The Land, June 11, 2013.
  9. 9.0 9.1 9.2 9.3 9.4 Louis Nelson, "Reality check for new coal", Latrobe Valley Express, June 13, 2013.

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