Egypt cancels Agrium fertilizer plant
Canada's Agrium Inc. on Tuesday was turned down in its bid to build a fertilizer plant on Egypt's northeastern coast, a move that could cost the fertilizer maker $280 million.
This week, the Egyptian cabinet said it was cancelling a controversial plant to construct a $1.2 billion US nitrogen plant in a prime tourist area in the eastern Mediterranean.
Instead, the state-owed oil company MOPCO would acquire Agrium's Egyptian subsidiary and build the fertilizer plant at another location in the country, the government said.
"MOPCO will complete the agreement negotiated with Agrium to acquire Agrium Egypt's shares and carry out the company's plans on the land allocated to it in the general industrial zone west of the navigation channel," the government in a statement.
In early 2007, Calgary-based Agrium announced a joint venture with three Egyptian state corporations to construct a plant with the capacity to produce 1.4 million tonnes of fertilizer.
At that time, the prospects looked promising for the company to add low-cost capacity in a growing area of the world.
"This is an outstanding opportunity for Agrium to construct and operate a facility in an area with long-term, competitively priced gas, prime access to world markets, and an efficient, well-educated workforce," said Agrium president and chief executive officer Mike Wilson.
Agrium president in Calgary in 2007(Jeff McIntosh/ Canadian Press) The plant had already cost the partners $500 million in cash and was more than 40 per cent complete.
Local residents, however, complained loudly about the plant, arguing that it would ruin the tourist trade in the area.
In June, an Egyptian parliamentary committee said the proposed construction site was safe but still recommended that the government move the plant to another location.
For its part, Agrium has repeatedly stated that it would expect fair compensation if the project did not go ahead.
"Agrium will be aggressively pursuing full recovery of its costs, equity contribution and future lost profits," the company said in a news release at the time of the committee's report.
MOPCO could buy out Agrium or Cairo could give Agrium an interest in a nitrogen plant that the Egyptian government is building next to Agrium's property, the company said.
Without such compensation, however, Agrium said in an earlier release that it might be forced to write off its $280 million US investment in the second quarter of 2008.
Three month chart for AgriumThe company is set to report earnings on Aug. 6.
Agrium's shares were trading 77 cents higher in New York at $80.44.
Still, Agrium's stock is worth considerably less than prior to the Egyptian Parliament's report in June. Back then, a share of Agrium was worth more than $105.
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