CHS2Jamestown (CSi) CHS president and CEO, Carl Casale has announced that CHS had decided against moving forward with its planned nitrogen fertilizer plant at Spiritwood.

CHS announced a $2.8 billion minority equity position in nitrogen fertilizer in CF Nitrogen, LLC. to serve as a supplier of nitrogen fertilizer to CHS.

In a news release Casale stated,  “Ultimately, we determined that the construction cost, water supply challenges, overall risk profile and time required for the Spiritwood project had changed significantly since it was first considered. As a result, we concluded we couldn’t achieve the level of returns needed to justify the increased costs and risks.”

“We deeply appreciate the tremendous support and assistance from the Jamestown and Spiritwood communities, North Dakota’s governor, elected officials and state agencies and organizations like the North Dakota Farmers Union; and other government leaders who have supported us through our due diligence process.”

Jamestown-Stutsman Development Corp indicated to CSiNewsNOW that the JSDC will be issuing a news release later after they receive official notice from CHS.

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CHS news release:

Nitrogen Fertilizer Manufacturing Investment Positions Co-Op CHS For Assured Supply, Efficiency, Economics

ST. PAUL, Minn., Aug. 12, 2015 /PRNewswire/ — A record $2.8 billion investment in nitrogen fertilizer manufacturing through CF Industries Nitrogen, LLC, is a historic step that links CHS Inc. (NASDAQ: CHSCP) member cooperative- and farmer-owners to long-term assured product supply, efficiency and economics, the president and chief executive officer of North America’s leading farmer-owned cooperative said today.

CHS and CF Industries Holdings, Inc. announced today that they have agreed to enter into a strategic venture through an equity investment agreement and a fertilizer supply agreement through CF Nitrogen, LLC.

“This investment links CHS strength as the nation’s largest fertilizer wholesaler with CF Nitrogen’s manufacturing platform, creating supply sourcing efficiency and economics for our owners,” said Carl Casale, CHS president and chief executive officer. “In short, through CF Nitrogen, CHS will be able to add direct value and provide sustained access to dependable, patronage-eligible fertilizer products comparable to our successful 70-year-old petroleum refining platform.”

Casale also announced today that the company has made a separate decision against moving forward with construction of a proposed fertilizer plant at Spiritwood, N.D.

“Our long-term goal has always been to add value for CHS owners through investment in the nitrogen fertilizer manufacturing space. To that end, we’ve continued to look at a variety of options, including the Spiritwood project,” he said. “Ultimately, we determined that the construction cost, water supply challenges, overall risk profile and time required for the Spiritwood project had changed significantly since it was first considered. As a result, we concluded we couldn’t achieve the level of returns needed to justify the increased costs and risks.

“We deeply appreciate the tremendous support and assistance from the Jamestownand Spiritwood communities, North Dakota’s governor, elected officials and state agencies and organizations like the North Dakota Farmers Union; and other government leaders who have supported us through our due diligence process.”

Casale noted that CHS has been a committed North Dakota business and neighbor since its 1931 founding and looks forward to a bright future that includes other investments in the state.

Given the dynamic market for nitrogen fertilizer manufacturing and distribution, investing in CF Nitrogen creates access to more immediate benefits to CHS owners and customers than a four-year plant construction window, Casale said.

An investment in CF Nitrogen enables CHS to serve its entire customer base through geographically diversified production and multiple transportation modes – including truck, rail and barge – that leverages the CHS distribution system and risk management expertise, he said.

CHS Inc. (www.chsinc.com) is a leading global agribusiness owned by farmers, ranchers and cooperatives across the United States. Diversified in energy, grains and foods, CHS is committed to helping its customers, farmer-owners and other stakeholders grow their businesses through its domestic and global operations. CHS, a Fortune 100 company, supplies energy, crop nutrients, grain marketing services, animal feed, food and food ingredients, along with business solutions including insurance, financial and risk management services. The company operates petroleum refineries/pipelines and manufactures, markets and distributes Cenex® brand refined fuels, lubricants, propane and renewable energy products.

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CF Industries and CHS Announce Agreement to Form Strategic Venture – Company Release – 08/12/2015 07:30

CHS to Purchase Minority Equity Position in CF Industries Nitrogen, LLC for $2.8 Billion

CHS Entitled to Purchase Annually up to 1.7 Million Tons of UAN and Urea from CF Industries Nitrogen for Ratable Delivery

DEERFIELD, Ill. & ST. PAUL, Minn.–(BUSINESS WIRE)– CF Industries Holdings, Inc. (NYSE: CF) and CHS Inc. (NASDAQ: CHSCP) announced today that they have agreed to enter into a strategic venture. CHS, the nation’s leading farmer-owned cooperative, will make an equity investment in a wholly owned CF subsidiary and also enter into a supply agreement. Under the supply agreement, CHS will be entitled to purchase annually up to a total of 1.7 million tons of UAN and urea at market prices. CHS will purchase a minority equity interest in CF Industries Nitrogen, LLC (“CF Nitrogen”) for $2.8 billion and be entitled to semi-annual profit distributions from CF Nitrogen.

CF Nitrogen currently owns three production facilities in the United States: Donaldsonville, Louisiana; Port Neal, Iowa; and Yazoo City, Mississippi. CF also expects to contribute its Woodward, Oklahoma, plant to the LLC prior to the transaction closing. CF will continue to manage and operate all production facilities.

“This venture represents tremendous strategic value to both CF Industries and CHS,” said Tony Will, president and chief executive officer, CF Industries Holdings, Inc. “In the past, we have entered into long-term relationships with industry leaders Mosaic and Orica, and this venture with CHS, an industry leader in agriculture, is the logical next step. This transaction matches us with a reliable partner that will take ratable delivery of product across the year, supported by an attractive valuation.”

“Entering nitrogen fertilizer manufacturing through the purchase of a minority ownership in CF Nitrogen is the single largest investment in CHS history,” said Carl Casale, president and chief executive officer, CHS Inc. “This positions CHS and our owners for long-term dependable fertilizer supply, supply chain efficiency and economic value. In addition, the ability to source product from CF Nitrogen production facilities under our supply agreement benefits our owners and customers through strategically positioned access to essential fertilizer products.”

Once the capacity expansion projects are completed at Donaldsonville and Port Neal, CF will have total production of 18.9 million product tons, not including the new capacity from the business combination with OCI N.V. Of that total 18.9 million tons, CHS will have the right to purchase up to 1.7 million tons, or about 8.9 percent of CF Industries’ total production capacity. CHS, a major CF customer and knowledgeable industry leader, is making a $2.8 billion investment for approximately 8.9 percent of CF’s total system capacity.

CF Nitrogen will sell annually to CHS up to 1.1 million tons of granular urea and 580,000 tons of UAN, at market prices. The 1.7 million tons available under the supply agreement have an average gross margin that reflects the average gross margin across the entire CF system.

CHS’s semi-annual profit distributions from CF Nitrogen will be based generally on the volume of granular urea and UAN purchased by CHS pursuant to the supply agreement.

The transaction is expected to close February 1, 2016, or earlier by mutual consent, subject to satisfaction of certain conditions.

Morgan Stanley & Co. LLC and Goldman, Sachs & Co. are serving as financial advisors to CF Industries on the transaction. Skadden, Arps, Slate, Meagher & Flom LLP is acting as its legal advisor. Kirkland & Ellis LLP is acting as its tax advisor. Baker & McKenzie LLP is acting as legal advisor to CHS on the transaction.