February 3, 2012

 

Yara International announces new Australian Burrup venture

 

 

Yara International launched a new start at its troubled Australian Burrup venture, which has frustrated managers and forced it into a profits warning, as the fertiliser firm took control of the site.

 

Yara, the world's biggest nitrogen fertiliser group, paid US$143 million to increase its ownership of Burrup Holdings from 35% to 51%, valuing the venture's total equity at nearly US$900 million.

 

Separately, US-based Apache Energy, which provides the company's Burrup fertiliser plant in Western Australia with gas, purchased the outstanding 49%.

 

The deals carved up the stake originally owned by fertiliser tycoon Pankaj Oswal, whose holding was in December 2010 taken on by receivers called in by Australia & New Zealand Bank, owed some AUD800 million (US$857.48 million), amid claims of default and "financial irregularities".

 

Indeed, the venture has represented a thorn in the side of Yara, whose relationship with Oswal deteriorated such that the Norwegian group in late 2010 opened legal action to try to gain access to the Burrup books.

 

Oswal had denied an independent auditor access to the accounts.

 

A year ago, Yara unveiled a profit warning down in part thanks to a charge against its stake in Burrup, which has capacity to produce 850,000 tonnes of fertiliser a year.

 

And in May last year, opposition from Oswal helped thwart plans to start construction on a 330,000-tonne technical ammonium nitrate plant at Burrup to provide explosives for Western Australia's Pilbara mining industry.

 

"Today markets the end of a challenging period for what we have always regarded as a world-class asset," Jorgen Ole Haslestad, the Yara chief executive, said.

 

Yara revealed that it "will now proceed" with the construction of the explosives project, in which it will have a 75.5% stake, with Apache owning the balance.

 

Yara's bid, while trumping an offer from Apache for the 65% holding, and was not in itself viewed by analysts as unduly expensive.

 

However, it is unclear whether Yara has agreed a side deal which would raise significantly the price that Burrup pays Apache for gas supplies.

 

Yara shares, hit on Tuesday (Jan 31) by a Credit Suisse downgrade, rebounded 2.8% to NOK242.80 (US$41.64) in lunchtime deals in Oslo.