Fertiliser and explosives maker, Incitec Pivot Limited (IPL) has finally found a deal to keep its Gibson Island in Brisbane open.
The new gas supply deal will keep the fertiliser plant open until at least the end of 2022. The deal has also seen the company make a slight upgrade to its financial year guidance.
Australia Pacific LNG (part owned by Origin Energy) will supply gas to the Queensland plant, near the Port of Brisbane, from April 1, 2020, until December 31, 2022, securing 450 jobs at the Incitec Pivot plant.
“IPL and Central Petroleum continue their exploration of potential gas supply from gas tenement acreage in Queensland, as announced on 25 June 2018, which may provide a gas supply source for the plant beyond 2022,” the company said yesterday.
The gas will come from an area of Queensland near Chinchilla that the government said gas produced can only be used for the supply of gas to the domestic market and not exported.
Incitec Pivot CEO Jeanne Johns said the Queensland government had taken significant steps to resolve current gas market issues, including through its domestic-only gas policy initiative.
“We are pleased that, with the support of the Queensland government, we have been able to partner with Australia Pacific LNG, and our longstanding gas transport provider APA Group … to obtain affordable gas to continue to operate the Gibson Island plant.”
Ms. Johns said yesterday that securing the gas supply agreement and other commercial arrangements provided a future for workers on Gibson Island, and supported Incitec Pivot’s customers, suppliers and shareholders.
As a result of the deal, IPL said earnings before interest and tax in the financial year 2020 are expected to increase by about $5 million over previous forecasts, assuming a urea price of $US280 per tonne and a foreign exchange rate of $US0.69.
That includes the impact of a major turnaround required to allow the operation of the plant until December 2022. The turnaround was expected to occur in early next year, take about two months and cost about $60 million.
The cost of the turnaround will be depreciated over three years, with gas supply from Australia Pacific LNG to begin following the turnaround.
Incitec said it had also signed a three-year extension to an existing gas transportation agreement with APA Group, until January 1, 2023.
IPL shares rose 0.6% yesterday to end at $3.34.