Rentech Nitrogen Partners, L.P.
Goldman Sachs Seventeenth Annual
Agribusiness Conference
Hunt Ramsbottom, CEO
February 26, 2013
Forward-Looking Statements
This presentation contains forward-looking statements. These statements are
based on management’s current expectations and actual results may differ
materially as a result of various risks and uncertainties. Other factors that
could cause actual results to differ from those reflected in the forward-looking
statements are set forth in the Company’s press releases and periodic public
filings with the Securities and Exchange Commission, which are available via
Rentech Nitrogen’s website at www.rentechnitrogen.com. The forward-looking
statements in this presentation are made as of the date of this presentation
Rentech Nitrogen does not undertake to revise or update these forward-looking
statements, except to the extent that it is required to do so under applicable
law.
2
Rentech Nitrogen Partners, L.P.
Publicly traded MLP with variable distribution
Two fertilizer production facilities with strategic
locations and premium product pricing
East Dubuque Facility
Pasadena Facility
• Located in East Dubuque, IL
• Primary products: ammonia & UAN
• Customers in the heart of U.S. Corn
Belt
• Natural gas feedstock
• Expansion project underway
• Located along the Houston Ship
Channel in Pasadena, TX
• Largest producer of synthetic
granulated ammonium sulfate in North
America; other products: ammonium
thiosulfate and sulfuric acid
• Customers primarily west of MS River
and in Brazil
• Several organic growth opportunities
identified
3
Diversified Markets
East Dubuque’s
Core Market1
Pasadena’s AS
Sales2
Volume Range (st)
Color
Pasadena Facility
Location
10,600 to 67,500
8,400 to 10,600
5,100 to 8,400
1,000 to 5,100
0 to 1,000
Leased warehouse locations from marketers
1Core
market is within a 200 mile radius of the East Dubuque facility.
on historical sales at the Pasadena facility.
Low-cost Gulf access to
Southwest and Central
U.S. as well as export
markets
2Based
4
Diversified Product Mix
• Rentech Nitrogen’s main products provide two of the most important
nutrients to crops
˗ Nitrogen - most important nutrient in determining crop yields
• Products: ammonia, UAN, ammonium sulfate, ammonium
thiosulfate, and urea
˗ Sulfur - helps crops efficiently utilize nitrogen and phosphate
• Products: ammonium sulfate and ammonium thiosulfate
• Other products: DEF, nitric acid and sulfuric acid
Ammonium Sulfate
Ammonia
5
Multiple Fertilizers for Diversified Crop Solutions
Corn
Alfalfa
Cotton
Canola
Potato
Soybean
Ammonia, UAN, Ammonium Sulfate, Urea & Ammonium Thiosulfate
6
Wheat
Attractive Product Margins
•
•
Ammonia margins have improved with the structural change in pricing of natural gas
Ammonium Sulfate margins have been relatively stable through several ammonia cycles
$1,000
$800
(US$ / short ton)
Ammonia Corn Belt Margin(1)
$600
$400
Ammonium Sulfate Margin
Southern Plains(2)
$200
$0
2005
2006
2007
2008
2009
2010
2011
2012
Source: Green Markets, Bloomberg September 17th, 2012.
(1)“Corn Belt Margin” is calculated by subtracting the product of 35 times the spot price of Henry Hub Natural Gas from the Mid Corn Belt FOB Ammonia
price.
(2)“Raw Material Margin” is calculated by subtracting 25% of the price of Tampa FOB Ammonia and 25% of the price of Sulfur Central Florida from the
price of Southern Plains FOB Ammonium Sulfate.
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Growth Opportunities
Future growth opportunities at both facilities
•
East Dubuque Facility
˗
Ammonia capacity and storage expansion: Completion expected 4Q13
•
•
Pasadena Facility
˗
Ammonium sulfate debottlenecking project: Completion expected in 2H14
•
•
~23% production increase
20% capacity increase
˗
Cogeneration opportunity
˗
Terminalling opportunity
Potential acquisition opportunities in fertilizer
and related industries
˗
Acquisition criteria:
•
•
•
A significant portion of income qualifies for MLP treatment
Assets we know how to operate and would provide geographic
diversification
EBITDA in the range of $20-$50M
As of 10/8/12
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East Dubuque Facility
Location, Location, Location
•
Customers within 200 mile radius
of facility
Dakota Gasification Company (Beulah, ND)
Niota, IL
Green Valley (Creston, IA)
•
Koch (Ft. Dodge, IA) Our Facility (East Dubuque, IL)
CF (Port Neal, IA)
Core market: IL, IA and WI
Koch (Beatrice, NE)
Acres of corn
Koch (Dodge City, KS)
•
Nitrogen fertilizer consumption in
our market area exceeds
production by:
Not Estimated
PCS (Lima, OH)
CVR (Coffeyville, KS)
CF (Woodward, OK)
Terra Nitrogen (Verdigris, OK)
Koch (Enid, OK)
El Dorado (Cherokee, AL)
<10,000
10,000–24,999
CF (Yazoo City, MS)
El Dorado (El Dorado, AR)
25,000–49,999
50,000–99,999
Mosaic (Donaldsonville, LA) CF (Donaldsonville, LA)
˗
Ammonia: ~4.0x
˗
UAN: ~1.4x
100,000–149,999
Potash Corp. (Geismar, LA)
150,000>
Nitrogen Fertilizer
Facilities
IL, IA, WI Nitrogen Consumption
•
Ammonia and UAN consumption
in IL, IA and WI have increased
by 20% and 14%, respectively,
since 2000
(Thousands of Product Tons)
2,500
UAN
2,000
1,500
Ammonia
1,000
500
0
2000
Source: Blue Johnson and USDA
10
2002
2004
2006
2008
2010
Location Provides High Avg. Net Sales Prices
•
Prices in Mid Corn Belt are higher than other regions due to cost of freight and
proximity to customers
•
Freight costs from Gulf Coast into Mid Corn Belt typically $80 - $120 / ton for
ammonia and $35 - $50 / ton for UAN
•
Our customers typically pick up product from our facility by truck
1st , 2nd, & 3rd Qtr. 2012 Ammonia Sales Prices Per Ton
Average Annual Net Ammonia Sales Prices Per Ton1
4-Yr
Avg.
$558
$800
726
$600
4-Yr
Avg.
$441
4-Yr
Avg.
$448
588
539
$673
514
$478
$436
365
332
$568 $578
$518
$517
486
467
377
$613
$600
514
473
$695
$620
579
472
$400
$800
4-Yr
Avg.
$380
$458
$383
$400
316
304
252
$200
$200
$0
$0
Rentech Nitrogen
Partners
2008
2009
Terra Nitrogen
2010
CVR Partners
RNF
Potash Corp.
1st Qtr. Ammonia Price
2011
TNH
CVR
2nd Qtr. Ammonia Price
POT
3rd Qtr. Ammonia Price
(1) CF Industries and Agrium only report their respective average gross sales prices per ton of ammonia. Reported weighted average gross sales price per ton of ammonia
for the three years ended September 30, 2011 was $509 and $450 for CF Industries and Agrium, respectively.
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Strong Margins: Low Input Costs
• Natural gas typically represents approximately 50% of our cost of goods sold
• Fertilizer prices have increased while natural gas prices have declined in the
U.S., increasing margins
• Low fixed costs; no need to maintain a fleet of trucks or railcars
• 3Q12 gross margin of 58%, up from 33% in 3Q11
U.S. Natural Gas Prices vs. Western Europe1
Ammonia vs. Natural Gas2
Natural Gas Price ($ per MMBtu)
Ammonia Price ($ per ton)
Natural Gas Prices ($/MMBtu)
$18.00
Natural Gas Cost ($ per MMBtu)
$1,200
$16
$16.00
$14
$1,000
$14.00
$775
$10.60
$12.00
$800
$10
$10.00
$600
$8.00
$6.00
$4.00
$6
$3.41
$200
$2.00
$0.00
Jan-07
$8
$400
$3.34
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
$0
2001
Henry Hub
2002
2003
2004
2005
2006
2007
2008
2009
National Balancing Point (NBP)
Ammonia
Source: Green Markets, Bloomberg
1 European prices converted from GBP/Therm to $/MMBtu, based on daily exchange rate
Historical Sources: NBP Weekly Spot Rate, Henry Hub Weekly Spot Rate
Nat Gas
Source: Green Markets, Bloomberg
2
12
$4
$2
$0
Jan-13
$12
Ammonia and Natural Gas pricing through January 2013
2010
2011
2012
Current View
We currently have a different view than the USDA:
•
Corn acres will be similar to last year; approx. 96M acres
•
Drought conditions will continue in the western corn belt
•
Yield recoveries of 150 – 155 bu/acre; not 163.6 bu/acre
•
Don’t see world recovery of inventories in one year; will take multiple years
•
Expect corn prices to range between $5 - $7/bu; not at $4.80/bu
• Dec. 2013 is currently $5.56; Dec 2014 is $5.45
• China placed an order for new crop corn, willing to pay $5.50/bu
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Completed Urea/DEF Expansion
Completed urea/DEF expansion: Increased capacity and created new
product line
• Increased urea production capacity by 15% or 21,900 tons annually
• Additional tons to be used for DEF production; Net U.S. DEF demand expected
to exceed 1.3 billion gallons in 20191
• Installed mixing, storage, & load-out equipment for DEF production
• Long-term contract with Yara for sale and distribution of DEF based on index
pricing
• Completed in 4Q12; Total capex of approximately $7M
Estimates as of 1/15/13
1 Engine Manufacturers Association
14
Future Growth Opportunities
Ammonia Capacity & Storage Expansion: Completion expected in 4Q13
• Increasing ammonia production capacity by 23% or 70,000 tons annually,
bringing total ammonia production capacity to 370,000 tons
• Increasing on-site ammonia storage capacity by 20,000 tons, bringing total onsite storage to 60,000 tons
• Increasing ammonia loading capacity by 50%
• Total capex approx. $100 million based on FEED engineering by Black &
Veatch; financed with multiple draw capex facility
Estimates as of 8/10/12
15
Pasadena Facility
Facility Acquisition: Rentech Nitrogen Pasadena
• Rentech Nitrogen acquired Agrifos’ fertilizer production facility in
Pasadena, TX in 2012
˗
˗
˗
˗
Largest producer of synthetic granulated ammonium sulfate in North
America
Strategically located in the Houston Ship Channel
Majority of sales in U.S. and Brazil
Acquisition closed November 1st, 2012
• Expected to provide incremental cash flow1
˗
˗
EBITDA expected to be approx. $25 million in 2013, before one-time
integration costs
Accretive to per unit cash distributions beginning in 2013
• Diversifies the products, markets, location, and raw materials of our
East Dubuque Facility
1An
explanation of EBITDA, a non-GAAP financial measure, and a reconciliation of projected EBITDA to operating income is included in our press release dated 11/1/2.
17
Location, Location, Location
Rentech Nitrogen Pasadena plant site is located
on approximately 85 acres in Pasadena, Texas
•
6,200 feet of Houston Ship Channel frontage
•
2 deep-water docks, providing access for international deliveries
˗
˗
˗
•
Low-cost barge access to the Mississippi waterway system
Access to key waterways for international deliveries
Significant supply of raw materials in the immediate vicinity
Rail service by BNSF and Union Pacific
˗
˗
•
Ammonium Sulfate Granulator Plant
Advantage for distributing product west of the Mississippi
Unit trains allows for favorable transportation costs
Sulfuric Acid Plant
Easy access to several interstate highways
Deep-Water Dock
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Pasadena Facility’s Products Overview
Primary Product: Ammonium Sulfate
•
AS is a heavily utilized dual-nutrient fertilizer product: 21% nitrogen /
24% sulfur
•
•
•
•
High quality solid fertilizer sold at premium pricing
Multiple crop application including soybeans, wheat,
canola and alfalfa
Less seasonable variability than Corn Belt ammonia and UAN
Usually applied via broadcast blended application
Secondary Products: Sulfuric Acid and Ammonium Thiosulfate
Sulfuric Acid
•
•
33% sulfur / 65% hydrogen
Made directly from elemental sulfur and suitable for most industrial applications
Ammonium Thiosulfate
•
•
•
•
Co-product of the sulfuric acid production process: 12% nitrogen / 26% sulfur
Liquid fertilizer, typically combined with UAN
Helps increase nitrogen use efficiency in crops
Typically applied via spraying or drip system
Note: Revenue represents year to date sales from January 1 - October 31, 2012.
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corn, potatoes, cotton,
Rentech Nitrogen Pasadena’s High Quality AS Product
• Rentech Pasadena produces and sells a premium product in an industry dominated by lower quality
material
˗ Synthetic granulated AS product combines sulfuric acid and ammonia
˗ Majority of AS produced worldwide is a lower grade by-product of the caprolactam production process
• Only 20%-25% of AS production worldwide is of similar quality
• Physical characteristics and benefits of Rentech Pasadena’s AS product include:
˗ Sized to the specifications of other nitrogen, phosphate and potash fertilizer products
˗ Less segregation during the blending process
˗ Improved stability and enhanced shelf life
˗ Reduced caking during transportation and storage
Ammonium Sulfate as By-Product of
Caprolactam Production Process
RNF’s Ammonium Sulfate
Granular Material
20
Direct Application Coarse (Mid-Granularity)
Rentech Nitrogen Pasadena:
Major AS Producer in North America
Top 5 Ammonium Sulfate Producers in North America:
Total AS Production
Synthetic AS Production
Company
(synthetically & by-product)
Annual
Production (tpy)
Company
Annual Production
(tpy)
1
~575K
1
~1,850K
2
~385K
2
~725K
3
~215K
3
~575K
4
~140K
4
~385K
5
~25K
5
~315K
Source: Blue Johnson, except for Agrifos’ production, which is stated at nameplate capacity.
All producers listed produce ammonium sulfate for agricultural sale except for GAC Chemical Corporation which produces ammonium sulfate for industrial use.
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Historical Ammonium Sulfate Pricing & Margin
Ammonium Sulfate Prices and Margin Over Raw Materials
($ per short ton)
$500
$450
$400
$350
$300
$250
$200
$150
$100
$50
$0
1/3/2005
1/3/2006
1/3/2007
1/3/2008
1/3/2009
Ammonium Sulfate (Southern Plains)
1/3/2010
1/3/2011
1/3/2012
Margin over raw materials
Source: Green Markets
Notes on margin over raw materials calculation:
• Includes 25% of the indexed price of ammonia and 25% of the indexed price of sulfur.
• Reflects Tampa Ammonia and Central Florida sulfur indexed prices.
A $1/ton increase in ammonia pricing results in a $0.25/ton increase in ammonium sulfate raw materials cost
22
Future Growth Projects
•
Ammonium Sulfate Debottlenecking Project: Pre-financed through new debt
capacity1
˗
Plan to begin work in 2013 to increase AS capacity by 20% from 1,750 tpd to 2,100 tpd
• Engineering studies completed
• Additional production should contribute to distributions in 2H14
• SA available for sale (lowest margin product) will decline by over 50% to increase AS production (highest
margin product)
•
Potential Cogeneration Project: May be financed through accordion feature of new
debt facilities2
˗
˗
•
Can install steam turbine and use steam currently being vented from SA plant to produce
baseload power
Facility could consume some of the power generated (electricity expense declines) with
remaining power exported and sold in deregulated TX market (revenue generation)
Potential terminalling of fertilizer or other products using existing assets, deep
water docks and bulk solid and liquid storage capacity
Estimates as of 11/1/12
1Included in our financing package for this transaction.
2Accordion feature of debt financing package for this transaction requires additional lending commitments.
23
Financial Forecast and Summary
Consolidated RNF Pro Forma Revenue & Gross Profit by
Major Product
Revenue by Major Product
Gross Profit by Major Product
Ammonium Thiosulfate
Ammonium Thiosulfate
Sulfuric Acid
Sulfuric
Acid
Nitric Acid
Ammonium
Sulfate
Ammonia
Ammonia
UREA - Granulated &
Liquor
Ammonium Sulfate
UAN
UAN
UREA Granulated &
Liquor
Nitric Acid
25
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Snapshot: Rentech Nitrogen Partners, L.P.
Rentech Nitrogen Partners, L.P. (NYSE: RNF)
Market Capitalization1:
$1.45B
Cash: $55.5M
Liquidity:
Debt Capacity: $300M
Debt outstanding as of 11/1/12: $182M
Payout 100% of cash available for distribution
Distribution:
2012 distribution of $128M or $3.30 per unit2
Current Yield1:
~ 9%
Tax Shield3:
60% through 12/31/13
Rentech, Inc. (NYSE MKT: RTK) & owner of 60% of units
General Partner:
No parent IDRs
Non-economic general partner
1As
2As
3As
of 2/22/13
of 1/24/13
contained in RNF’s prospectus dated 11/3/11
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Rentech Nitrogen: Diversified Fertilizer Company
•
Ammonia Hedge
•
The Pasadena facility buys approximately the same amount of
ammonia as East Dubuque sells
Captures ammonia premium between Tampa and Corn Belt
˗ Pasadena plant purchases ammonia based on lower Tampa prices
and East Dubuque sells ammonia at higher Corn Belt prices
Attractive Product
Margins
•
•
•
Ammonia margins benefit from the structural change in natural gas
Ammonium sulfate margins have been relatively stable through
ammonia cycles
Ammonium sulfate prices historically correlate with prices of
ammonia and sulfur
Diversified Crops &
Markets
•
•
•
Corn, soybeans, potatoes, cotton, canola, alfalfa, and wheat
Broad geographic coverage including Brazil
Demand is spread throughout the year
Multiple Locations
•
•
Multiple locations mitigate impact of any site-specific events
Diversified location and products provide alternative revenue
streams
•
East Dubuque Facility
Future Accretive Growth
Opportunities
˗ ~23% ammonia production capacity increase & storage expansion
•
Pasadena Facility
˗ 20% increase in AS capacity through debottlenecking project
˗ Cogeneration and terminalling opportunities
27
Rentech Nitrogen Partners, L.P.
Goldman Sachs Seventeenth Annual
Agribusiness Conference
Hunt Ramsbottom, CEO
February 26, 2013