Swift Current meeting provides update on Genesis Fertilizers project
Farmers received an update about a proposed urea fertilizer plant in Saskatchewan during an open house in Swift Current, Nov. 23.
This event was part of a series of six information meetings hosted by Genesis Fertilizers Limited Partnership between Nov. 20 and 27.
The initial meeting was in Brandon, Manitoba, and the remaining events were in Saskatchewan.
Genesis Fertilizers Vice President of Investor Relations Barrie Mann said the company held such meetings throughout the last couple of years to announce the project, but they felt it was time to provide an update.
“There’s been significant developments over the last few months as the project hits this critical stage of going into design and engineering,” he explained. “So we felt it was an important time to sit down and meet again with as many farmers as we could, make them aware of the progress and the different technologies that the plant is going to possess.”
The goal is to construct a fertilizer production facility at Belle Plaine, west of Regina, and to create a network of seven Western Canada distribution super centres. The initial 22,000 metric tonne super centre was constructed at Belle Plaine and the other two distribution facilities in Saskatchewan will be located at Tisdale and Unity.
Genesis Fertilizers is using a business model aimed at creating a vertically integrated and majority farmer-owned agribusiness.
“What makes this project very feasible is that it’s vertically integrated,” he said. “When the farmers are coming on board, they’re taking an ownership position based on the amount of fertilizer they use in their farm. So they own that per cent of the plant.”
The closed-loop system provides certainty to farmer-owners, because their urea purchases are from a facility they own and it ensures a stable production target that improves operating margins.
“When profits are made, those profits are returned back to the ownership group,” he said. “But the ownership group also happens to be the customer group. So their net price at the end of the day is as close to that manufacturing cost as the model allows. They truly become a manufacturer, but they’re also the consumer. And your net back is great, because you’re shipping it from the plant basically out the back door to the customer.”
The company aims to attract farmer-investors from across Canada and not only the three prairie provinces.
“People can still invest as farmers and not physically take the fertilizer,” he noted. “They can still become an owner, take the profits, use that to offset their fertilizer cost locally, if they’re in Ontario, Quebec or British Columbia. If they’re out of reach of those super centres, they would just have ownership and receive those profits.”
The manufacturing facility at Belle Plaine will produce 700,000 metric tonne of fertilizer per year, of which 525,000 metric tonne (75 per cent) will be sold directly to farmers based on the number of tonnes they use in their operations. The remaining 175,000 metric tonne (25 per cent) will be sold on the open market.
Mann noted that the Genesis Fertilizers manufacturing facility will increase the production capacity in Canada during a time when the demand for urea is increasing.
“The gap between the amount that Canada produces and the amount that Canada requires is growing,” he said. “We’re only going to be about 10 per cent of the market. We’re just filling the gap. The current shortfall is what this plant will take over. So it’s not displacing any of the current market share. We’ll probably just end up displacing some of those imports that come from overseas.”
The availability of over $625 million of investment incentives from the Government of Saskatchewan influence the decision by Genesis Fertilizers to locate the urea plant at Belle Plaine.
“It’s in the form of programs that are legislated that we’re going to be able to take advantage of,” Mann said. “Some of them are programs that you can turn into cash relatively quickly. The vast majority of them are very fiscally responsible, which means that those benefits occur as the plant is in operation and they’re mostly longer-term tax incentives, but that money stays in the company and it gets converted to cash and back to the shareholders.”
The Belle Plaine site offers several other advantages for the construction and operation of a urea plant. It is in an established industrial corridor near Regina with ready access to water, electricity and natural gas. There is an excellent road network, including the nearby Trans-canada Highway, and both national railways are in direct proximity to the site.
The total project cost for the construction of the urea plant and the seven distribution centres will be an estimated $1.7 billion, of which the manufacturing plant will be about $1.5 billion.
The intention is to start construction of the urea plant in early 2025 with an estimated 32-month construction period. The plant design is based on the latest urea production technologies in the world.
Genesis Fertilizers is partnering with thyssenkrupp Industrial Solutions, which has built 130 fertilizer plants around the world. It has a lot of experience in the design and construction of ammonia and urea plants. State-of-theart catalysts for ammonia production will be supplied by Johnson Matthey and the urea synthesis technology is provided by Stamicarbon, which is a division of Maire Tecnimont Group.
Mann emphasized that Genesis Fertilizers is following a cautious and step-bystep approach to his major project.
“We can’t afford to make any mistakes,” he said. “So we’ve hired and put the people in place that are going to ensure that the project is done right and it’s done as cost effective as possible. … There are no shortcuts. They have a system that they use to build every one of these plants and they just follow that. So that’s the professionals doing their job. The Genesis team will continue to do the work that we need to do with farmers and raise the capital, and we look forward to starting construction.”