Kapuni upgrade scoping costs written-off

Mark Wynne from Ballance Agri-Nutrients at Kapuni

Ballance has written off $13.3 million in scoping costs associated with a potential upgrade of our ammonia urea plant in Kapuni, Taranaki.

August 17, 2016

Kapuni upgrade scoping costs written-off

Ballance has written off $13.3 million in scoping costs associated with a potential upgrade of our ammonia urea plant in Kapuni, Taranaki.

Following an earlier write-down of $5.5 million for exploratory work, Ballance CEO Mark Wynne said that the decision to write-off the remaining $7.8 million followed the recent withdrawal of a potential cornerstone partner for a rebuild of the plant.

“We’ve been seriously looking at options for a complete redevelopment of the plant – the only one of its kind in New Zealand – so that we can continue to provide a local, sustainable supply which is globally competitive.

“The withdrawal of our potential partner, coupled with declining global urea prices and surplus global supply, means that the likelihood of the project going ahead in the near term has decreased.”

The write-off will be reflected in the 2016 year-end audited accounts, due to be released in the company’s annual report at the start of September. Mr Wynne said he was confident it is still the right project, in the right place, but the economic outlook makes the timing challenging.

“The potential of the project remains but we need to extend our outlook. Given it is less likely that the project will go ahead in the near future, it is sound accounting practice and a prudent financial decision to write-off costs to date.

“We are continuing to talk with other potential partners for a future rebuild, but it’s early days. If we are unable to secure a partnership agreement this time around, the project will be put on hold for revisiting at a future date.”

Mr Wynne said that should the project be put on hold, the plan was to continue to upgrade and operate the current facility.

“The existing plant is a well-run and maintained facility. On the whole, Kapuni has contributed positively to our trading results for many years, supporting us to deliver superior rebates to our shareholders. We will keep planning ahead to ensure our ammonia urea plant remains a commercially viable part of business which creates value for our shareholders.”

Earlier this year we invested $21.5 million in the plant during its routine biennial maintenance and improvement shut down. The plant is running at full capacity and achieved its highest production month on record during July 2016.

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