Q1 2024 CF Industries Holdings Inc Earnings Call
[music].
Good day, ladies and gentlemen.
Operator: and welcome to CF Industries' first quarter of 2020. All participants will be in the listening area.
Welcome to CF Industries' first quarter of 2024.
All participants will be in the listen only mode.
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Operator: Transcripts by Transcription Outsourcing, LLC. We will facilitate a question and answer session towards the end of the presentation. Please pause the question at any time. Press the star, then 1 on your touch screen.
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Martin A. Jarosick: I would now like to turn the presentation over to the host for today, Mr. Martin Jarosick with CF Investor Relations. Good morning, and thanks for joining the CF Industries Earnings Conference call. With me today are Tony Will, CEO; Chris Bohn, Executive Vice President and Chief Operating Officer; and Bert Frost, Executive Vice President of Sales, Market Development, and Supply Chain. CF Industries reported its results for the first quarter of 2024 yesterday at On this call, we will review the results, discuss our outlook, and then host a question and answer session.
I would now like to turn the presentation over to the host for today, Mr. Martin <unk> with CF Investor Relations. Sir. Please proceed.
Martin: Good morning, and thanks for joining the CF Industries earnings Conference call with me today are Tony will CEO, Chris Bohn Executive Vice President and Chief operating Officer, and Bert Frost Executive Vice President of sales market development and supply chain.
Martin: You have industries reported its results for the first quarter of 'twenty 'twenty four yesterday afternoon on this call. We'll review the results discuss our outlook and then host a question and answer session.
Martin A. Jarosick: Statements made on this call and in the presentation on our website that are not historical facts are forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any statement.
Martin: Statements made on this call and in the presentation on our website that are not historical facts are forward looking statements.
Martin: Payments are not guarantees of future performance and involve risks uncertainties and assumptions that are difficult to protect therefore actual outcomes and results may differ materially from what is expressed or implied in any statements.
Martin A. Jarosick: More detailed information about factors that may affect our performance may be found in our filings with the FDIC, which are available on our website. Also, you'll find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website. Now, I'd like to introduce Tony Will, our President and CEO. Thanks, Martin. And good morning, everyone.
Martin: More detailed information about factors that may affect our performance may be found in our filings with the SEC available on our website.
Martin: Also you will find reconciliations between GAAP and non-GAAP measures in the press release the presentation posted on our website now.
Martin: Now, let me introduce Tony will our president and CEO.
Tony Will: Yesterday afternoon, we posted results for the first quarter of 2024, in which we generated adjusted EBITDA of $460 million. Our performance reflects a challenging quarter for our production network. Plant outages caused by severe cold in January, as well as other unplanned downtime, resulted in a significant loss of production and maintenance activity. However, even with the production outages and associated expenses, our business generated strong cash flow for the quarter. Net cash from operations for the first quarter was $445 million, and free cash flow was approximately $200 million.
Tony Will: Thanks, Martin and good morning, everyone yesterday afternoon, we posted results for the first quarter of 'twenty 'twenty four in which we generated adjusted EBITDA of $460 million.
Tony Will: Our performance reflects the challenging quarter for our production network.
Tony Will: Plant outages caused by severe cold in January as well as other unplanned downtime resulted in a significant loss of production and maintenance activity.
Tony Will: Even with the production outages and associated expenses, our business generated strong cash flow for the quarter net cash from operations from the first quarter was $445 million and free cash flow was approximately $200 million.
Tony Will: Longer term, we expect the global energy cost structure to continue to provide significant margin opportunities for our North American production network and for clean energy to provide a growth platform for the company. As a result, we expect to have significant free cash flow available to both invest in growth and return capital to shareholders. We remain focused on disciplined investments in clean energy that offer returns well above our cost of capital.
Martin: Longer term, we expect the global energy cost structure to continue to provide a significant margin opportunities for our North American production network and for clean energy to provide a growth platform for the company.
Martin: As a result, we expect to have significant free cash flow available to both invest in growth and return capital to shareholders.
Martin: We remain focused on disciplined investments in clean energy that offer returns well above our cost of capital. These include de carbonization projects within our existing network and potential new low carbon ammonia capacity.
Tony Will: These include decarbonization projects within our existing network and potential new low-carbon ammonia capacity. We also remain committed to returning capital to shareholders through our dividend and share repurchase programs. In the first quarter, we returned $445 million, including repurchased and $4.3 million shares.
Martin: We also remain committed to returning capital to shareholders through our dividend and share repurchases in the first quarter, we returned $445 million, including repurchasing four 3 million shares we have approximately $2 $2 billion remaining on our current share repurchase authorization, which we intend to complete by the end of next year.
Bert A. Frost: We have approximately $2.2 billion remaining on our current share repurchase authorization, which we intend to complete by the end of next year. With that, let me turn it over to Bert, who will discuss the global nitrogen market conditions in more detail. Thanks, Tony.
Martin: With that let me turn it over to Bert who'll discuss the global nitrogen market conditions in more detail.
Bert A. Frost: The global nitrogen market has experienced rapidly changing dynamics throughout 2024, including in North America. Spring application season began earlier than normal in late February, with demand for ammonia applications brought forward from the second quarter into the first, or whether the end of March subsequently stalled field work and fertilizer purchases, with the region now on a normal application and planting pace. Overall, we expect nitrogen demand in North America to be positive, with approximately 91 million acres of corn planted.
Bert A. Frost: Thanks, Tony the global nitrogen market has experienced rapidly changing dynamics throughout 2024, including in North America. This.
Bert A. Frost: The spring application season began earlier than normal in late February with demand for ammonia applications brought forward from the second quarter into the first.
Bert A. Frost: Poor weather at the end of March subsequently stalled field work and fertilizer purchases with the region now on a normal application and planting pace.
Bert A. Frost: Overall, we expect nitrogen demand in North America to be positive with approximately 91 million acres of corn planted.
Bert A. Frost: Good soil moisture supports higher application rates than in previous years, and Farm Economics remains constructive, though weaker than the record highs from previous and recent years. We believe the spring ammonia season will see fewer tons of ammonia applied this year.
Bert A. Frost: Good soil moisture supports higher application rates than in previous years, and farm economics remain constructive, but weaker and the record highs from previous than recent years.
Bert A. Frost: We believe the spring.
Bert A. Frost: <unk> season, we'll see fewer tons of ammonia applied this year. However, total ammonia application volumes for the fertilizer year, which runs from July 2023 through June 2024 should be comparable to previous years, given the strong fall ammonia season.
Bert A. Frost: However, total ammonia application volumes for the fertilizer year, which runs from July 2023 through June 2024, should be comparable to previous years, given the strong fall ammonia season. As the pace of spring application season has normalized, the lineup for urea and UAN imports for the region has grown. These tons will be necessary to meet expected demand given low inventories in the region to start the year and production disruptions in January. Even with the imports, we expect that inventory in the North American Nitrogen Channel across all products will be low at the end of the day.
Bert A. Frost: As the pace of spring application season has normalized the lineup for urea in UA in imports for the region has grown.
Bert A. Frost: These terms will be necessary to meet expected demand given low inventories in the region to start the year and production disruptions in January.
Bert A. Frost: Even with the imports we expect that inventory in the North American nitrogen channel across all products will be low at the end of the season.
Bert A. Frost: This activity is occurring as the global nitrogen market supply position has loosened, leading to lower global prices than we saw earlier this year. Lower imports of urea to India, including the impact of volumes taken in the recent tender, lower than expected deferred demand in Europe and other countries, and good production from the Arab Gulf and North Africa all play a role.
Bert A. Frost: This activity is occurring as the global nitrogen market pause their supply position has loosened.
Bert A. Frost: Leading to lower global prices that we saw earlier this year.
Bert A. Frost: Lower imports of your Ria to India, including the impact of lower volumes taken in the recent tender lower than expected deferred demand in Europe and other countries and good production from the Arab Gulf in North Africa, All played a role.
Bert A. Frost: We do not believe demand during the spring season in North America will resolve to lengthen the global nitrogen market by itself. As North America hits its traditional pricing reset in the summer, Brazil, India, and China will provide the most important signals regarding the state of the market. We project that urea consumption and imports in Brazil will grow in 2024, maintaining that country's status as the world's largest importer of urea. India will remain a major importer of urea, though they have lower requirements today, reflecting their commitment to increasing domestically produced urea. China continues to prioritize low fertilizer prices for its farmers, with export restrictions playing a significant role in that effort.
Bert A. Frost: We do not believe demand during the spring season in North America resolve the length and the global nitrogen market by itself.
Bert A. Frost: As North America hits, its traditional pricing reset in the summer, Brazil, India, and China will provide the most important signals regarding the state of the market.
Bert A. Frost: We project that urea consumption and imports in Brazil will grow in 2020 for maintaining that country's status as the world's largest importer of urea.
Bert A. Frost: India will remain a major importer of urea.
Bert A. Frost: They have lower requirements today, reflecting their commitment to increase domestically produced urea.
Bert A. Frost: China continues to support to prioritize low fertilizer prices for their farmers with export restrictions playing a significant role in that effort.
Christopher D. Bohn: We expect China to export approximately 4 million metric tons of urea this year, but actual volumes will depend on the timing and duration of when exports are allowed. Even with these sources of near-term uncertainty, North American producers remain firmly positioned on the low end of the global cost curve. Foreign energy curves continue to show spreads between North America and Europe, which is home to the industry's marginal, high-cost production, remaining wider than historical averages. As a result, we expect attractive margin opportunities for our network in the near and longer term. With that, let me turn the call over to Chris.
Bert A. Frost: We expect China to export approximately 4 million metric tons of urea this year, but actual volumes will depend on the timing and duration of when exports are allowed.
Bert A. Frost: Even with these sources of near term uncertainty North American producers remain firmly positioned on the low end of the global cost curve forward energy curves continue to show spreads between North America, and Europe, which is home to the industry's marginal high cost production remaining wider than historical averages.
Bert A. Frost: As a result, we expect attractive margin opportunities for our network in the near and longer term.
Bert A. Frost: With that let me turn the call over to Chris. Thanks, Bert for the first quarter of 2024. The company reported net earnings attributable to common stockholders of approximately $194 million or $1 <unk> per diluted share EBITDA was $488 million and adjusted EBITDA.
Christopher D. Bohn: Thanks, Bert. For the first quarter of 2024, the company reported net earnings attributable to common stockholders of approximately $194 million, or $1.03 per diluted share. EBITDA was $488 million, and adjusted EBITDA was approximately $460 million.
Christopher D. Bohn: <unk> was approximately $460 million.
Christopher D. Bohn: The production outages that we experienced earlier this year affected our results in two significant ways. Maintenance expenses were approximately $75 million higher in the first quarter of 2024 compared to the first quarter of 2023. Additionally, we had approximately 160,000 fewer tons of ammonia available to upgrade in the quarter compared to the same quarter last year. This equates to approximately 275,000 tons of urea that we would otherwise have been able to produce and sell at higher margins.
Christopher D. Bohn: The production outages that we experienced earlier this year affected our results in two significant ways.
Christopher D. Bohn: Maintenance expenses were approximately $75 million higher than the first quarter of 2024 compared to the first quarter of 2023. Additionally, we had approximately 160000 fewer tons of ammonia available to upgrade in the quarter compared to the same quarter last year.
Christopher D. Bohn: This equates to approximately 275000 tons of urea that we would otherwise have been able to produce and sell at higher margins than.
Christopher D. Bohn: The production issues were contained to the first quarter, and our network is operating at our typical high utilization rates today. We believe and currently project that gross ammonia production for 2024 will be approximately 9.8 million tons, which reflects normal acid utilization rates moving forward. Our forecast for 2024 capital expenditures remains approximately $550 million. Capital expenditures were higher in the first quarter of 2024 compared to the first quarter of 2023, primarily due to a large planned turnaround event.
Christopher D. Bohn: The production issues were contained to the first quarter and our network is operating at or typical high utilization rates today.
Christopher D. Bohn: We believe we currently project that gross ammonia production for 2024 will be approximately $9 8 million tonnes, which reflects normal asset utilization rates moving forward.
Christopher D. Bohn: Our forecast for 2020 for capital expenditures remains approximately $550 million.
Christopher D. Bohn: Capital expenditures were higher in the first quarter of 2024 compared to the first quarter of 2023, primarily due to a large planned turnaround of that.
Christopher D. Bohn: We are making continued progress on our clean energy initiatives. Commissioning activities for our green ammonia project are nearing completion. We intend to purchase 45E compliant renewable energy certificates to pair with the startup of the electrolyzer to enable green ammonia production and maximize the value of the hydrogen production tax credit. Additionally, construction of the Carbon Dioxide Dehydration and Compression Unit at Donaldsonville is progressing well.
Christopher D. Bohn: We are making continued progress on our clean energy initiatives commissioning activities for green ammonia projects are nearing completion, we intend to purchase 45 be compliant renewable energy certificates to pair with the startup of the electrolyze or to enable green ammonia production and maximize the value of the.
Christopher D. Bohn: Jim production tax credit.
Christopher D. Bohn: Additionally, construction of the carbon dioxide dehydration and compression unit of Donaldson Bill is progressing well.
Christopher D. Bohn: We believe it will be ready for start-up in 2025, at which point our partner, ExxonMobil, will be able to begin transportation and permanent sequestration of up to 2 million tons of CO2 from the facility per year. This will not only significantly reduce our carbon emissions but also enable low-carbon ammonia production and generate substantial 45Q tax credits. Our evaluation of low carbon ammonia capacity growth continues with potential partners in offtake. We have made additional progress on our autothermal reforming ammonia plant and flue gas capture feed study.
Christopher D. Bohn: We believe it will be ready for start up in 2025 at which point our partner Exxonmobil will be getting to Trent will be able to begin transportation and permanent sequestration of up to 2 million tonnes of cotwo from the facility per year.
Christopher D. Bohn: This will not only significantly reduce our carbon emissions, but also enabled low carbon ammonia production and generate substantial 45 acute tax credits.
Christopher D. Bohn: Our evaluation of low carbon ammonia capacity growth continues with potential partners and off takers.
Christopher D. Bohn: We have made additional progress on our auto.
Christopher D. Bohn: Thermal reforming ammonia plant and flue gas capture feed studies.
Tony Will: These should be complete before the end of the year and will be an important component of our final investment. We continue to emphasize a disciplined approach based on the return profile of new capacity, the technologies needed to meet customers' carbon intensity requirements, and global demand. With that, Tony will provide some closing remarks before we open the call to Q&A. Thanks, Chris.
Christopher D. Bohn: This should be complete before the end of the year and will be an important component of our final investment decision. We continue to emphasize disciplined approach based on the return profile of new capacity the technologies needed to meet customers' carbon intensity requirements and the global demand outlook.
Christopher D. Bohn: With that Tony will provide some closing remarks before we open the call to Q&A.
Tony Will: Before we move on to your questions, I want to thank everyone at CF Industries for their hard work during the difficult first quarter of 2024. In particular, the team did an outstanding job restoring our network to full utilization rates, and, most importantly, doing so safely. Our 12 month recordable incident rate at the end of the quarter was 0.36 incidents per 200,000 labor hours, significantly better than the industry average.
Tony Will: Thanks, Chris before we move on to your questions I want to thank everyone at CF industries for their hard work during the difficult first quarter of 2024 in particular the team did an outstanding job restoring our network to fold utilization rates and most importantly, doing so safely or.
Tony Will: Our 12 month recordable incident rate at the end of the quarter with 0.36 incidents per 200000 labor hours significantly better than industry averages.
Operator: Despite the challenges we faced earlier this year, we believe CF Industries is well positioned for the years ahead. In the near term, the global energy cost structure remains favorable to our North American production network. Longer term, disciplined investments in low-carbon ammonia production provide a robust growth platform for the company. Taken together, we expect to drive strong cash generation and continue to create substantial value for long-term shareholders. With that, operator, we will now open the call to your questions. We will now begin the question and answer session. If you would like to ask a question, you may press the star, then 1 on your touch screen.
Tony Will: Despite the challenges we faced earlier this year, we believe CF industry is well positioned for the years ahead.
Tony Will: In the near term the global energy cost structure remains favorable to our North American production network longer term disciplined investments in low carbon ammonia production provide a robust growth platform for the company.
Tony Will: Taken together, we expect to drive strong cash generation and continuing to create substantial value for long term shareholders.
Speaker Change: With that operator, we will now open the call to your questions.
Speaker Change: Thank you.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May press Star then one on your attached on phone.
Speaker Change: We will pause momentarily for our roster to assemble.
Christopher S. Parkinson: The first question comes from Chris Parkinson, with Wolfson. Good morning, everyone. Tony, it's been a while since I think anybody's asked you this, but what are your latest thoughts across the organization on the global cost curve? I mean, obviously, it seems things have very much normalized in Europe. You know, obviously, you have this back and forth debate on terms of timing in Chinese markets. And then, obviously, there's been a lot going on in India as well.
Speaker Change: The first question comes from Chris Parkinson with Wolfe Research. Please go ahead.
Christopher S. Parkinson: So when you put all these things together, once again, I don't think anybody's really focused on this for years and years, you know, what CF is, you know, the latest and greatest on how we should be thinking about this over the next year or two. Thank you.
Christopher S. Parkinson: Good morning, everyone. Tony it's been awhile since I think anybody's asked you this but what are your latest thoughts across the organization on the global cost curve I mean, obviously it seems things are very much normalized in Europe. It seems you know obviously you have this back and forth debate in terms of timing on Chinese markets and then obvious.
Speaker Change: There's been a lot going on in India as well so when you put all these things together once again I don't think anybody is really focused on this for years and years.
Tony Will: <unk> latest and greatest on how we should be thinking about this over the next year or two thank you.
Tony Will: Yeah, Chris, I think that we believe going forward, there are some significant challenges for a number of the production facilities in Europe, and our expectation is that utilization rates there will continue to be challenging, and we would expect some of those assets to permanently close. So I think that the combination of some challenges in Europe and other places in the world, Trinidad, you know, is both running out of gas.
Speaker Change: Yes, Chris I think that.
Speaker Change: We believe going forward there are some significant challenges for a number of the production facilities in Europe, and our expectation is that utilization.
Speaker Change: Utilization rates, there will continue to be.
Speaker Change: Challenging and we would expect some of those assets to permanently close so I think that the combination of some.
Speaker Change: Some challenges in Europe and in other places in the World Trinidad is as both running out of gas with gas cost climbing as each of the existing.
Tony Will: And with gas costs climbing as each of the existing contracts rolls off, you've got challenges in parts of Asia and Latin America as well. You look at all of that, and you see somewhat of a tightening of the existing production network. You combine that with the fact that there is not enough new production under construction at the moment to meet the traditional growth in normal applications, and we see a tightening of the S&D balance going forward with Europe and Asia being at the fairly high end of the cost curve.
Speaker Change: Contracts rolls off you've got.
Speaker Change: Challenges in parts of Asia, and Latin America as well.
Speaker Change: Look at all of that and you see a.
Speaker Change: Somewhat of a tightening out of the existing production network.
Speaker Change: Combine that with the fact that.
Speaker Change: There is not enough new production under construction at the moment to meet the traditional.
Speaker Change: Growth in normal applications, and we see a tightening of.
Speaker Change: The <unk> balance going forward with Europe, and Asia being at a fairly high end of the cost curve and so there'll be periods of time, where we need to bid some of that production in just to meet global demand. So I think it provides a very constructive backdrop for our north American focused production now.
Tony Will: And so there will be periods of time where we need to bid some of that production in just to meet global demand. So I think it provides a very constructive backdrop for our North American-focused production network, and we remain excited about what the long term holds for us and even the near term, for that matter. And just a real quick follow-up, and I apologize for the ultra-short-term question, but, you know, obviously, your organization had to go through a lot during the first quarter.
Speaker Change: Work and we.
Speaker Change: Main exceed.
Speaker Change: Excited about what the long term holds for us and even in the near term for that matter.
Speaker Change: Got it and just a real quick follow up and I apologize for the ultra short term question, but.
Speaker Change: Obviously your organization that gives you a lot during the first quarter can you just give us kind of a just one additional update on just how we should be thinking about where you stand operationally.
Tony Will: Can you just give us kind of a – just one additional update on just, you know, how we should be thinking about, you know, where you stand operationally? You know, I assume Bert's team had to move a lot of products sub-optimally towards the end of the quarter. You know, when we think about the process back to normality, are we basically already there yet? And, you know, can you instill confidence that we should just be focusing on market pricing right now? Or, you know, how should we be ultimately thinking about your pathway forward for the remainder of 2024? Thank you.
Speaker Change: <unk> team had to move a lot of product sub optimally you had towards the end of the quarter.
Speaker Change: When we think about the process back to normality or are we basically already there yet and we can do.
Speaker Change: You can instill the confidence that we should just be focusing on market pricing right now or how should we be ultimately thinking about your b a pathway forward for the remainder of 2024. Thank you.
Christopher D. Bohn: Yeah, I think, as you look at the first quarter, as Chris said, there were kind of two primary factors that impacted us. One was, you know, because we had significant outages, both weather-related and other downtimes. We ended up with less production of ammonia, and we have existing industrial ammonia contracts that obligate us to kind of meet those needs first. And Wagaman was one of the facilities that experienced some downtime in the corridor.
Speaker Change: Thank you.
Speaker Change: As you look at the first quarter as Chris said, there was kind of two primary factors that impacted us one was.
Speaker Change: Because we had.
Speaker Change: Significant outages both weather related.
Speaker Change: Other.
Speaker Change: Downtime, we ended up with less.
Speaker Change: <unk> of ammonia and.
Speaker Change: We have existing industrial ammonia contracts that obligate us to kind of meet those needs first and.
Speaker Change: <unk> was one of the facilities that experienced some downtime in the quarter and so we had to make sure that we were meeting the.
Christopher D. Bohn: And so we had to make sure that we were meeting the customer commitment out of that facility and other industrial customers as well. And so what that meant was, as Chris mentioned, there was ammonia that we were producing that normally we would have upgraded to urea and or UAN that we needed to ship out as industrial ammonia, which generally is at a bit of a lower margin than agricultural ammonia or ag-based urea.
Speaker Change: The customer commitments out of that facility and other industrial.
Speaker Change: Customers as well and so what that meant was as Chris mentioned, there was ammonia that we were producing that normally we would have upgraded to urea and <unk> and that we needed to ship out as industrial ammonia, which generally is.
Speaker Change: A bit of a lower margin than agricultural ammonia or or AG based urea UAS. So.
Christopher D. Bohn: So the, you know, the loss of production was both the opportunity cost of loss of absolute tons but also the opportunity cost associated with not being able to upgrade the product for higher margin urea than we normally would. As Chris mentioned, we were able to go ahead and get the plants back up and running and have been running sort of at normal operating utilization rates. Chris, the only additional thing I would add to what Tony said is, you know, not only that it were discrete production issues contained in Q1, but also where the product mix was being produced.
Speaker Change: The loss of production was both.
Speaker Change: The opportunity cost of loss of absolute tons, but also the opportunity cost associated with being not being able to upgrade product for higher margin urea then than we normally would.
Speaker Change: As Chris mentioned, we were able to go ahead and get the plant back up and running and had been running sort of at.
Speaker Change: At normal operating utilization rates.
Speaker Change: At the beginning of the quarter and so we're back to kind of normal operations and therefore, I think what's been transpiring in the way of spot pricing is appropriate for.
Speaker Change: Our volumes as appropriate for the second quarter, Chris the only additional thing I would add to what Tony said is not only that it was discrete production issues contained to Q1, but also where the product mix was being produced we had incremental distribution costs that went over and above the margin.
Christopher D. Bohn: We had incremental distribution costs that went over and above the margin loss that Tony spoke about, and also the $75 million approximate higher maintenance expense. So it was a pretty tough quarter from that, but all that, as he said, is, you know, sort of in the rear view mirror, and our distribution and production assets are back to their historical level. Thank you so much.
Speaker Change: So Tony spoke about and also the $75 million approximate higher maintenance expense. So it was a pretty tough quarter from that but all of that as he said is sort of in the rearview mirror and.
Speaker Change: Distribution and production assets are back to their historical levels.
Speaker Change: Thank you so much.
Speaker Change: Thank you.
Joel Jackson: The next question comes from Joel Jackson of BMO Capital. Hi, good morning.
Speaker Change: The next question comes from Julian Jackson with BMO capital markets. Please go ahead.
Bert A. Frost: Just a couple things you can maybe ask. Sorry, answer. Are you really open for Q2 here for gas? Maybe talk about, you know, we've seen prices come down well below $2. Where are you standing there for Q2 into Q3.
Joel Jackson: Hi, good morning.
Joel Jackson: Couple of things you can maybe ask I'm sorry.
Joel Jackson: Are you really open for Q2 here for gas, maybe talk about where we've seen obviously prices come down a level of <unk>, where.
Joel Jackson: Where are you standing as of Q2 into Q3, and then you talked about $9 8 million tons of gross ammonia production 24, what is your view that what you can do in 2025 gross ammonia production was.
Joel Jackson: Probably some improvement the wagon minute feedback issues in Q1 behind you.
Bert A. Frost: And then you talked about 9.8 million tons of gross ammonia production in 2024. What is your view of what you can do in 2025 for gross ammonia production, with hopefully some improvements at Wagamon and these issues from Q1 behind you? Joel, good morning.
Joel Jackson: Hey, Joe Good morning, this is Bert and on gas, yes, we are wide open and we do have fixed contracts that are gas based that will fix in the beginning of the month and we do have basis that we've covered it in places more of a winter item will have some Q1 gas purchases trail into Q2.
Bert A. Frost: This is Bert, and on GASP, yes, we are wide open, and we do have fixed contracts that are GASP-based that we'll fix at the beginning of the month, and we do have bases that we've covered in places more of a winter item. We'll have some Q1 GASP purchases trail into Q2, but in effect, the GASP values that you're seeing through the various hubs can bleed into your model, and that's what we're doing.
Joel Jackson: Too, but in effect the gas values that youre seeing and then through the various hubs you can bleed into our into your model and that's what we're doing.
Bert A. Frost: Yeah, from a production standpoint, Joel, I think you can look at 2025 and going forward, similar to what we had announced earlier this year, that sort of the circa 10 million tons of ammonia, gross ammonia production. And then, you know, based on where the margin potentials are, that's going to change the product mix related to the total product that we do. But give or take 100,000 tons on either side of that is generally where we look to produce. This question comes from Andrew Wong with RBC Capital. Hey, good morning.
Joel Jackson: Yes from a production standpoint Joel.
Joel Jackson: I think you can look at 2025 and going forward similar to what we had announced earlier this year.
Joel Jackson: The circa 10 million tons of ammonia gross ammonia production and then based on where the margin potentials are that's going to change the product mix related to the total product that we do.
Joel Jackson: Give or take 100000 tons on either side of that is generally where we look to produce.
Joel Jackson: Yeah.
Speaker Change: Thank you.
Speaker Change: The next question comes from Andrew Wong with RBC capital markets. Please go ahead.
Andrew D. Wong: Thanks for taking my question. So my first one is really on Blue Point. I understand the plan is to go with mostly sales that are based on a fixed margin type offtake. I'm just curious, how does the ammonia market pricing affect your thinking on the investment decision? Well, Andrew, as you know, once we make an investment decision, if we decide to move forward with it, it's going to be approximately four years between when that decision is made and when production commences.
Andrew D. Wong: Hey, good morning, Thanks for taking my question. So my first one is really on the plane.
Andrew D. Wong: Understand the plan is to go with most of the sales that are based on like a fixed margin type offtake.
Andrew D. Wong: I'm just curious how does the ammonia market pricing impact your thinking on that.
Andrew D. Wong: Thanks.
Andrew D. Wong: Well.
Andrew D. Wong: Andrew.
Andrew D. Wong: As you know.
Andrew D. Wong: Once we make an investment decision if we decided to move forward with it it's going to be approximately four years between when that decision is made and when production commences.
Andrew D. Wong: So, what's happening in the very near term in the market from a pricing perspective is an important starting point, but what you really need to do is project where we are four years from now and take a look at where we think the S&E balance will be at that time.
Andrew D. Wong: So what's happening in the very near term ammonia market from a pricing perspective.
Andrew D. Wong: It is an important starting point, but what you really need to do is project, where we are four years going forward and take a look at where we think the SNB balance will be at that time.
Tony Will: We do expect the S&E balance to tighten, you know, as I talked about earlier, both in terms of existing production capacity that will not be running at historic utilization rates, principally in Europe and some in Asia and Latin America, but also because the new capacity that is currently under construction doesn't meet traditional growth of, call it, one and Unknown Attendee, Jeffrey Zekauskas, Benjamin Isaacson, Richard Garchitorena, Aron And maybe just going on to clean the ammonia market and demand.
Andrew D. Wong: We do expect the S&P balanced to Titan.
Andrew D. Wong: As I talked about earlier, both in terms of existing production capacity that will not be running at historic utilization rates principally in Europe and.
Andrew D. Wong: And some in Asia, and Latin America, but.
Andrew D. Wong: Also because the.
Andrew D. Wong: The new capacity that is currently under construction doesn't meet traditional growth of call. It one 5% to 2% within the nitrogen markets, let alone any new applications for <unk>.
Andrew D. Wong: Clean ammonia going into either electricity generation or into.
Andrew D. Wong: Marine fuels or or some of the other applications that are beginning to develop so as we look forward a bit.
Andrew D. Wong: Development of.
Andrew D. Wong: Those new markets is an important input as well as just are assessed.
Andrew D. Wong: Assessment of where the <unk> balance is going to be on a global basis.
Andrew D. Wong: So again, where we are today is a starting point, but it's not really that useful in determining what the future is going to look like four to five years out.
Speaker Change: Okay, that's fair.
Andrew D. Wong: And maybe just going on to clean ammonia market and demand.
Tony Will: You know, it's been a few years now since we started talking about it, and it feels like things have started to develop over the past couple of years. So as we get closer and closer to some of these use cases that are, you know, maybe later in the 2020s into 2030, do you have a sense of how to quantify that demand? You know, let's say, by the time we get to 2030, and what would be the primary use cases by then? Would that still be coal firing and power generation, maybe Marines coming up a little bit faster? Just curious.
Andrew D. Wong: It's been a few years now since we started talking about it.
Andrew D. Wong: It feels like things I'm, sorry to just south of our past couple of years. So.
Andrew D. Wong: As we get closer and closer to some of these use cases that are.
Andrew D. Wong: Maybe later 2020 to 2030.
Andrew D. Wong: Samsung.
Andrew D. Wong: Quantify that demand so.
Andrew D. Wong: So, let's say by the time, we get to 2030 and what would be the primary use cases by then there'll be co firing and power generation, maybe marines coming up a little bit faster just curious.
Unknown Attendee: Unknown Attendee, Yeah, so there have been, I believe it's five power stations in Japan that have been kind of approved for conversion to be co-firing ammonia. Those include two from Jera and three others. And so the assessment of the volume of ammonia that would go into those applications, assuming only a 20% dosage rate, is about 2 million tons a year. So that's a pretty sizable increase in terms of demand, and that would be expected to be online by, you know, call it 2030, if not before.
Speaker Change: Yes so.
Speaker Change: There have been.
Speaker Change: I believe it's five power stations in Japan that have been.
Speaker Change: Kind of approved for conversion to be co firing ammonia.
Speaker Change: Those include two from <unk> and <unk>.
Speaker Change: And three others.
Speaker Change: So.
Speaker Change: The assessment of the volume of ammonia that would go into those applications, assuming only a 20% dosage right. It's about 2 million tons a year. So that's a pretty sizeable increase in terms of demand and that would be expected to be online by <unk>.
Speaker Change: 2030, if not before.
Unknown Attendee: Additionally, we see demand beginning to develop both in terms of marine and, you know, Eric can talk about some of the things that we're seeing in the way of using a decarbonized fertilizer product for certain applications in ag, not only for CPG companies but also to develop a traceable sustainable aviation fuel, as well as ethanol that will meet the California low-carbon fuel standard. That's exactly what Tony said.
Speaker Change: Additionally, we see demand beginning to develop both in terms of marine.
Speaker Change: But also broke can talk about some of the things that we're seeing in the way of using a decarbonize fertilizer products for certain applications in.
Speaker Change: In AG not only for CPG companies, but also to develop.
Speaker Change: Traceable.
Speaker Change: Sustainable aviation fuel as well as ethanol that will meet.
Speaker Change: The California, low carbon fuel standard ethics.
Unknown Attendee: In terms of the low carbon... value chain we see developing for ag and the pull through that will take place from the CPGs and consumers, but when you look at whether that be corn or wheat, Principal Consuming Crops for Nitrogen, as a low or no carbon ammonia is passed through corn to the ethanol plant, which is decarbonized. You have a very good upside for a decarbonized product coming from that corn value chain of starch, ethanol, and fructose, and the same thing with the wheat value chain. So we're working on that with several players, and more to come. That's great. Thank you very much.
Speaker Change: That's exactly that Tony in terms of the low carbon.
Speaker Change: Value chain, we see developing for egg and the pull through that will take place from the CPG and consumers.
Speaker Change: But when you look at.
Speaker Change: Whether that be corn or wheat, the principal consuming crops for nitrogen.
Speaker Change: As a low or no carbon ammonia is past pass through corn to the ethanol plant, which is decarbonize you have a very good upside for a decarbonize product coming from that core and value chain of starch ethanol fructose and the same thing with.
Speaker Change: The wheat value chain. So we are working on that with several players and more to come.
Speaker Change: That's great. Thank you very much.
Speaker Change: Okay.
Speaker Change: Thank you.
Adam L. Samuelson: We have the next question from Adam Samuelson. That's Adam Samuelson from Goldman Sachs. Yes, thank you. Good morning, everyone.
Speaker Change: We have the next question from Adam Samuel Sorry, Adam Samuelson with Goldman Sachs. Please go ahead.
Adam L. Samuelson: Yes. Thank you good morning, everyone.
Bert A. Frost: Maybe picking up on that last topic, Bert, earlier this week, the Treasury Department issued kind of the rules for the new 40B tax credit for sustainable aviation fuel, but the tax credit will change next year, but the rule that would presumably be somewhat applicable. And one of those requirements for ethanol to jet was the requirement to use climate smart agriculture, of which one of the requirements was the use of enhanced efficiency nitrogen fertilizer by corn growers.
Adam L. Samuelson: Maybe picking up on that last topic Bert there was earlier this week that the Treasury Department issued kind of the rules for the new 40, <unk> tax credit for.
Adam L. Samuelson: Sustainable aviation fuel.
Adam L. Samuelson: Tax rate will change next year, but the rule.
Adam L. Samuelson: Presumably.
Bert A. Frost: And I would just love to hear your perspective on kind of how disruptive that could be to the existing domestic nitrogen market. And how available enhanced efficiency nitrogen fertilizer, I know there's a bunch of things that fall under that. But what is that?
Adam L. Samuelson: The somewhat applicable in one of those requirements for ethanol to jet was the requirement.
Adam L. Samuelson: <unk> climate Smart agriculture of which one of the requirements was the use of enhanced efficiency nitrogen fertilizer bye bye corn growers and I would just love to hear your perspective on kind of how.
Adam L. Samuelson: Kind of disruptive that could be to the existing domestic nitrogen market.
Bert A. Frost: What could that do to domestic demand by product or form, both opportunity and risk, as you think about the CF now? I don't view it as a threat; I view it as an opportunity, because as the first mover with low-carbon ammonia, as the largest ammonia supplier to corn production in North America, that's just right up our wheelhouse. And so, working with the co-ops, CHS, Land O'Lakes, and others, as well as the ethanol producers, POET, ADM, CHS.
Adam L. Samuelson: And how available enhanced efficiency nitrogen fertilizer I know, there's a bunch of things that fall under that but how what does that.
Adam L. Samuelson: What could that do to domestic demand by product more form.
Adam L. Samuelson: Both opportunity and risk do you think about the CF network.
Speaker Change: I don't view it as a threat I view as an opportunity.
Speaker Change: Because of the first mover with low carbon and ammonia is the largest ammonia supplier too.
Speaker Change: Corn production in North America, that's just right up our wheelhouse and so working with <unk>.
Adam L. Samuelson: Co ops, CHS land, O' lakes, and others as well as the ethanol producers poet ADM CHS.
Bert A. Frost: Those are the people that will drive through their management area, and our area, our responsibility is as we started with the decarbonized product, but we have the pipeline through a terminal. It's traceable, it's producible, it's manageable, and so each of these steps, we're getting tighter and better, and that time frame that I would have thought was longer dated is, I would think, being pulled closer. And so there is some more development, and we'll be communicating this over the next quarters and years, but that's where I see this going, and, you know, climate smart agriculture, regenerative agriculture, precision agriculture, there are a lot of names for this, a lot of this is already being utilized, some of it incorporating, obviously, the seed companies and the crop protection, so our whole industry is working towards this future that's coming, That's helpful.
Adam L. Samuelson: Those are the people that will drive through their management area in our area of responsibility is.
Adam L. Samuelson: We started with Decarbonize product, but we have the pipeline through a terminal it's traceable, it's producible, it's been manageable and so each of these steps.
Adam L. Samuelson: We're getting tighter and better and that timeframe that I would've thought was longer dated.
Adam L. Samuelson: Think be being pulled closer.
Adam L. Samuelson: And so there is some more development, we'll be communicating this over the next quarters and years, but that's where I see this going in.
Adam L. Samuelson: Climate Smart agricultural regenerative agriculture precision agriculture, Theres a lot of names for this a lot of this is already being utilized some of that incorporating obviously the seed companies in the crop protection. So our whole industry is working towards this future thats coming and we're going to play a vital part of it.
Adam L. Samuelson: Yeah.
Bert A. Frost: And if I could just ask a follow-up on spring demand here, obviously, the ammonia side of things is more complete. Can you talk about where we are on UAN from a side-dress and top-dress perspective and when you start to think that in-season pull will really start to materialize? So we're just getting started. As we talked about, planting, product movement, and fieldwork did start early. It was a surprise in February and early March, but then the rainy, cold weather came through in March, delaying again fieldwork and applications and, and, and planting.
Adam L. Samuelson: Okay. That's helpful and if I could just ask a follow up on the spring demand here, obviously, the ammonia side of things is more is more complete can you talk about kind of where we are on UA and from us.
Adam L. Samuelson: My address and top trends perspective, and kind of when you start to think that in season, Paul will really start to materialize.
Speaker Change: So we're just getting started as we talked about planting and.
Speaker Change: Product movement and fieldwork did start earlier it was a surprise.
Speaker Change: In February and early March and then the rainy cold weather came through in March delaying again.
Bert A. Frost: Field work on applications and.
Bert A. Frost: And planting and now I would say where you are in a normal a good pace with very good soil moisture from the Texas Panhandle up through into Canada.
Bert A. Frost: And now I would say we are on a normal, good pace with very good soil moisture from the Texas Panhandle up through into Canada. So the UAN season really hasn't started yet. And we've been positioning product, utilizing our logistics team with additional toes of UAN through our terminals and our customers' terminals. And we expect that, and I would say now, and it should be fairly heavy because the opportunity, the upside, the pricing structure of where UAN is today compared against the price of corn on the forward for December, let's say $4.60, $4.70, it's attractive, and we would expect with All right. That's very helpful. I'll pass it on.
Speaker Change: So the UN season, really Hasnt started and where we've been positioning product.
Speaker Change: Utilizing our logistics team with additional toes of your uhm through our terminals and our customers' terminals and we expect that and I would say now going forward and it should be fairly heavy because they offer the opportunity the upside the pricing structure of where <unk> is today.
Speaker Change: Compared against the price of corn on the forward for December it, let's say $4 $64 70.
Speaker Change: It's attractive and we would expect with a lower volume of spring ammonia applied that will then move to UA in.
Speaker Change: Okay. That's very helpful. I'll pass it on thank you.
Speaker Change: Thank you.
Speaker Change: The next question comes from Steve Byrne with Bank of America. Please go ahead.
Operator: Thank you. The next question comes... Berne with Bank of America, please go ahead. Yeah, thank you. I'd like to continue that discussion there, Bert. You had production issues this year, and you had fewer imports into the US. China's exports of urea for the first couple of months were almost zero. We were thinking that, you know, there was going to be some strength going into the application season, but yet, over the last month, pricing has fallen. Just curious.
Speaker Change: Yeah.
Stephen V. Byrne: Yes. Thank you I'd like to continue that discussion there Bert.
Stephen V. Byrne: You had <unk>.
Operator: Production issues. This year, you had less imports into the U S.
Stephen V. Byrne: China's exports of urea. The first couple of months were almost zero.
Stephen V. Byrne: We were thinking that.
Stephen V. Byrne: There was going to be some strength going into the application season, but yet over the last month pricing has fallen just curious.
Bern: What do you think of that? Is there less application rates of nitrogen than maybe you expected? Or was there significant ammonia application in the fall that may have reduced some of the near-term demand? Or is this a shift towards UAN? Curious about your view of where that price trajectory on slide 8 goes. Yeah, welcome to my confusing world.
Speaker Change: What do you think of that.
Bern: <unk> been less application rates of nitrogen than maybe you expected or was there significant ammonia application in the fall that may have reduced some of the near term demand or is this a shift towards UAS curious of your view.
Where that.
Bern: Nice trajectory on slide eight goes.
Bert A. Frost: Because that is exactly what you've listed the dynamics that we deal with every day that really were confusing and then just pointing to the CF system of what Tony and Chris articulated with the difficulties with the weather and the production and the maintenance issues that created on the sales side, or at least the commercial side, different product allocation and movements. And I give a lot of credit to our logistics team for moving that product around.
Speaker Change: Welcome to my confusing world because that is exactly that you've listed the dynamics that.
Bert A. Frost: We deal with every day that really were confusing and then just pointing to the CF.
Speaker Change: System of what Tony and Chris articulated with the difficulties with the weather and the production and the maintenance issues.
Speaker Change: That created on the on the sales side or at least the commercial side different product allocation and movements and I give a lot of credit to our logistics team for moving that product around but yes. When you look at the overall market and I would have expected what you.
Bert A. Frost: But yes, when you look at the overall market, and I would have expected what you thought coming in, a strengthening market, or at least a firm market, but a lot of work has gone into detail on this, and you've really had some pullback in demand in some areas. I would say the EU, when you look at Italy, Germany, Belgium, France, on this year basis and on a fertilizer year both, a fall in demand along with Mexico, Philippines, and then this India tender that took place where they had a tender, had 3 million tons put into the tender, announced 750,000 tons of purchases with LOIs issued, and then canceled that, not canceled, but cut it to 350,000 tons, the traders and And so, what we would have thought was a tight inventory is probably a looser inventory. And the U.S. won't resolve the problem for that long.
Speaker Change: Thought coming in a strengthening market or at least a firm market.
Speaker Change: But.
Speaker Change: A lot of work has gone into detail. This and you really had some pullback in demand in some areas. So I would say the EU when you look at Italy, Germany, Belgium, France.
Speaker Change: This year basis and on a fertilizer year both.
Speaker Change: Fall of demand along with Mexico, Philippines, and then this India tender that took place where they had a tender had 3 million tonnes put into the tender announced 750000 tons of.
Bert A. Frost: Purchases with LOI is issued and then canceled that were not cancelled but cut it to 350000 tons of traders and producers that had positions allocated towards that then had to move that into the market and got aggressive and that coupled with some additional production coming on.
In different places, but also India, Russia, Iran and.
Nigeria coming back on production because of several places we're limited on gas.
Bert A. Frost: Probably overwhelmed a little bit the second quarter market.
Bert A. Frost: And so while we would have thought was tight inventory is probably looser inventory and the U S won't resolve that long, but lower prices to tend to incent additional demand so as we work through.
Unknown Attendee: But lower prices tend to incite additional demand. So as we work through Q2, I think we'll still be in the state where we are today, with pricing probably aligned plus or minus where we are today and working towards the back half of the year. Okay, thank you for that. And just a question on the green ammonia plant that you're commissioning. Just curious if you've signed any contracts for that product, and are any of your, you know, partners in Japan or South Korea interested in bringing green ammonia into their facilities? Or do they really prefer the blue?
Chris Bohn: Q2, I think we'll still be in the state that where we are today with pricing, probably align plus or minus where we are today.
Speaker Change: And work towards the back half of the year.
Bert A. Frost: Okay. Thank you for that and just a question on the.
The green ammonia plant that you are commissioning.
Speaker Change: So if you've signed any contracts.
Speaker Change: Our product in any of your.
Chris Bohn: Our partners in Japan, or South Korea interested in.
Speaker Change: Bringing green ammonia into their facilities or do they really prefer the blue.
Unknown Attendee: Unknown Attendee, Well, the volume is not really sufficient to be able to meet the application for co-firing. We're only going to be able to make about 20,000 tons a year. And even the smallest of the power stations is going to require somewhere in the neighborhood of 350,000. And because that is part of a broader program with some incentives provided by the government, you know, they are going to be, I think, focused on the most economically available decarbonized product, and so that's going to be a blue product as opposed to green.
Speaker Change: Well the volume is not really sufficient to be able to meet.
Unknown Attendee: The application for <unk>.
Unknown Attendee: Co firing.
Unknown Attendee: We're only going to be able to make about 20000 tons a year.
Unknown Attendee: And even the.
Unknown Attendee: The smallest of the power stations is going to require somewhere in the neighborhood of 350000 and because that is a.
Unknown Attendee: Part of a broader program with some incentives provided by the government.
Unknown Attendee: They are going to be I think focused on.
Unknown Attendee: The most economically available low, but decarbonize product and so that's going to be a blue product as opposed to green.
Unknown Attendee: But we are in conversations with a number of companies. Particularly, it's companies in Europe that are focused on the extremely low carbon attributes of the green product. And, you know, we need to begin making it and, very likely, building some level of inventory for probably half a year before we've got sufficient volume to be able to ship. So more to come on that, Steve, but you know, we're excited about being able to both start that plant up, as well as what the future holds for us. Yeah, we're looking at two options.
Unknown Attendee: But we are in conversations with a number of companies.
Unknown Attendee: Particularly companies in Europe that are focused on.
Unknown Attendee: Extremely low carbon attributes of the green product.
Unknown Attendee: We need to begin making it and very likely.
Unknown Attendee: Hi.
Unknown Attendee: Building some level of inventory for probably half a year before we've got sufficient volume to be able to ship so more to come on that Steve, but we're excited about being able to both.
Unknown Attendee: That that plant up as well as what the future holds for us.
Tony Will: Like Tony said, as we build inventory, that could be for a vessel to a customer that wants only zero carbon products, or it could go up to one of our terminals, which our terminals are about that size, where we could isolate an area with zero carbon ammonia, again, back to the corn value chain. So working on several different fronts at this time. Very good. Thank you. The next question comes from Josh Spector with UBA. Yeah, hi, good morning.
Speaker Change: And we're looking at two options like Tony said as we build inventory that could be for a vessel to a customer that wants to only zero carbon product or it could go up to one of our terminals, which our terminals are about that size, where we could isolate an area with zero carbon ammonia again back to the corn value chain. So working on several.
Joshua David Spector: Different fronts at this time.
Joshua David Spector: Very good thank you.
Joshua David Spector: Thank you.
Tony Will: The next question comes from Josh Spector with UBS. Please go ahead.
Joshua David Spector: So, I wanted to ask about all the projects you guys are evaluating. So, particularly, I guess, with JIRA converting to a JDA. How many separate plants are you now considering at this point?
Joshua David Spector: Yeah, Hi, good morning.
Joshua David Spector: So I wanted to ask on all the projects you guys are evaluating so, particularly I guess with jarrod converting to a J D. A.
Joshua David Spector: Many separate plants are you now considering at this point and I guess as you look at all these separate agreements.
Joshua David Spector: And I guess as you look at all these separate agreements, could that combine together to be more offtakes from a smaller number of plants? And would CF be interested in a very small stake and maybe more of an operator role? Or do you see yourself as requiring majority control over the facilities you built?
Joshua David Spector: Could that combined together.
Joshua David Spector: More off takes from a smaller number of plants and with CF be interested in a very small stake and maybe more of an operator role or do you see yourself as requiring majority control over the facilities you built.
Tony Will: Yeah, Josh, you know, while we're evaluating a couple of different projects, principally, what we're looking at is different technology pathways to get us to a very low carbon intensity solution. And realistically, at this time, we're focused on one plant as opposed to multiple plants. And doing the evaluation, as I said, should that be just a straight SMR, should it be an SMR with flue gas capture, should it be an ATR?
Speaker Change: Yes, Josh.
Joshua David Spector: While we are evaluating a couple of different projects principally what we're looking at is different technology pathways to get us to a very low carbon intensity solution.
Tony Will: And realistically at least at this time, we're focused on.
Tony Will: One one.
Tony Will: One plant as opposed to multiple plants.
Tony Will: And doing the evaluation as I said should that be just a straight <unk> should it be in <unk> with flu gas capture should it be an ATR kind of what's the right technology to deliver on both on Opex and Capex basis, the most competitive returns for us and our partners.
Tony Will: And on the second question about the role that we would play, I think we're, you know, open to a variety of different structures, some of which would have us with a majority control, and other structures might have us on an equal footing or even, as you say, more of an operator of the asset, but with a smaller equity participation. So, we're pretty open to different ways of structuring the agreements, and we're, you know, in those discussions at the same time as doing the technology evaluation, but we're really only looking at building one plant initially and seeing how the market develops, and then we'll make some decisions, you know, as that continues moving forward.
Tony Will: And.
Tony Will: On the second.
Tony Will: <unk> about the role that we would play I think we're we are open to a variety of different structures.
Tony Will: Some of which would have us with a majority control and other structures might have us.
Tony Will: On equal footing or even as you say more of an operator.
Tony Will: The asset, but with with a smaller equity participation. So we're pretty open to different.
Tony Will: Ways of structuring the agreements and we're in those discussions at the same time as doing the technology evaluation, but we're really only looking at building one plant initially and seeing how the market develops then we'll make some decisions as that continues moving forward.
Speaker Change: No. That's helpful. I guess just to clarify on my part I guess I'm thinking about the Mitsui JV announced earlier now Jarrod J D. A are.
Speaker Change: Are those just different tranches of the same plant those arent two separate plants youre looking at them.
Tony Will: You know, initially, they were different based on the type of technology, but certainly, it's our hope that we can find a way to have all of our partners participate in the same project and that be something that we can combine together and aggregate demand so that, you know, we have a home for more rather than fewer tons of the tons coming off of that project. I would also say, Josh, that all three of the feed studies that we have ongoing, the SMR, the ATR, and then the flue gas, all the partners that Tony just spoke of are all participants in those, even though the JDAs and the MOUs may look different.
Tony Will: Initially they were different based on the type of technology, but certainly it's our hope that we can find a way to have all of our.
Tony Will: Partners participate in the same project and that would be something that we can combine together in aggregate demand so that.
Tony Will: Where we are.
Tony Will: Have a home for more rather than fewer of the tons coming off of that that project would also say Josh at all three of those.
Tony Will: Feed studies that we have ongoing the SMA or the HR and then the flue gas all the partners that Tony just spoke of are all participants in that even though the J D. As in the MLR use may look different so all the partners are working collaboratively to determine.
Tony Will: What we need to do from a carbon intensity standpoint.
Tony Will: How does that influence the technology, we choose and as Tony said and that really.
Tony Will: So all the partners are working collaboratively to determine what we need to do from a carbon intensity standpoint, how does that influence the technology we choose, and, as Tony said, and then really the contract for difference and the economics that come out of that in the end. Lisa. The next question comes from Ben Isaacson with Scotiabank. Please go ahead. Thank you very much and good morning.
Tony Will: The contract for difference.
Benjamin Isaacson: The economics that come out of that NDA.
Benjamin Isaacson: Alicia Thank you.
Benjamin Isaacson: Thank you.
Tony Will: The next question comes from Ben Isaacson with Scotiabank. Please go ahead.
Benjamin Isaacson: Just one question for me. Tony or Bert, can you talk about the situation in Russia when it comes to nitrogen supply? If we break down ammonia, urea, and nitrates, where are we right now in terms of supply? Where have we come from, and where are we going?
Benjamin Isaacson: Thank you very much and good morning, just one question from me.
Benjamin Isaacson: Berke can you talk about the situation in Russia. When it comes to nitrogen supply if we breakdown ammonia urea and nitrates, where are we right now in terms of supply where we come from and where are we going and I'm also referring to the pipeline.
Speaker Change: That's being built right. Thank you.
Bert A. Frost: And I'm also referring to the pipeline that's being built right now. Thank you. Yeah, Ben, good morning.
Benjamin Isaacson: Yeah, Ben Good morning, this is Bert.
Bert A. Frost: This is Bert and, The situation in Russia is as cloudy and clear as it's ever been. So that's a little bit of a dichotomy, but it's difficult because there are some places in the world that will not accept Russian products, and so there are places that do. And the largest happens to be the United States, which is surprising given where we are geopolitically. But the other is the EU.
Speaker Change: The situation in Russia is as cloudy and clear as it's ever been.
Bert A. Frost: Thats, a little bit of a dichotomy, but.
Bert A. Frost: It's difficult because there are some places in the world that will not accept Russian product and so.
Bert A. Frost: There are places that are in the largest happens to be the United States, which is surprising with where we are geopolitical.
Bert A. Frost: But the other is the EU and so what has happened over the last.
Bert A. Frost: And so what has happened over the last years since the invasion has been just a reorganization of the distribution channel for Russian products. So a lot goes to Brazil, a lot goes to North America, or not even Canada, actually just the United States, and then to Europe. And so with the recent restrictions on ammonium nitrate, a lot of that was stored in St. Petersburg, and probably a decision as a reflection of some of the... [inaudible] And with ammonia, you're right. The pipeline that used to go through Ukraine was stopped during the war and has been stopped and probably is not operable today, usually goes through.
Bert A. Frost: Year since the invasion has been a just a re.
Bert A. Frost: The organization of the distribution channel for Russian product. So a lot goes to Brazil logos to North America, or not even Canada actually just the United States and then to Europe, and so with the recent restrictions on ammonium nitrate a lot of that was stored in St. Petersburg and are probably a decision.
Bert A. Frost: As a reflection of some of the.
Bert A. Frost: Capabilities of Ukraine's two caused disruptions they have canceled some of that movement or all of that movement out of those ports and our re organizing how there'll be able to export that has created a little bit of a shortage of ammonium nitrate in some markets.
Bert A. Frost: And with ammonia Youre right.
Bert A. Frost: <unk>.
Bert A. Frost: But the pipeline that used to go through Ukraine was stopped during the war and has been stopped and probably is not operable today also usually.
Bert A. Frost: And so they have developed a new export corridor through the port of Taman, and they're working to get the Togliatti tons out through that, that's a Black Sea port, and that we expect to happen probably in Q3. And so going from, let's say, half a million tons of exports out of the Baltics, we'll probably convert to a couple million tons, one and a half to two million tons, probably over the next year, and probably position that product in the Mediterranean, Morocco, and different places.
Bert A. Frost: So they have developed a new export corridor through the port of payment.
Bert A. Frost: They are working to get the <unk> tons out through that that's a black sea port.
Bert A. Frost: And that we expect to happen.
Bert A. Frost: In Q3, and so going from lets say a half a million tons of exports out of the Baltics will probably convert to a couple of million tonnes. One five to 2 million tons, probably over the next year and probably positioning that product in the Mediterranean Morocco in different places.
Bert A. Frost: UAN, a lot of that UAN they produce comes to NOLA and the East Coast, as well as Europe. And that's probably, looking at the statistics for the United States, UAN imports from Russia are up, from Trinidad they're down, but that balance of UAN is probably okay. And that's about it.
Bert A. Frost: Urea in UA and a lot of that uhm. They produce comes to NOLA in the east coast as well as Europe.
Bert A. Frost: That's probably looking at.
Bert A. Frost: <unk> for the United States urea and <unk> imports from Russia are up from Trinidad, they're down but that balance of of UAS.
Bert A. Frost: It's probably okay.
Bert A. Frost: I think what we're going to see out of Russia is trying to get those tons out. They put out some export restrictions, but I think those are manageable, and we'll see what happens going forward. Yeah, I mean, to tag along on that one just for a second. It's kind of shocking, and I think actually Yara made mention of this as well in their call, but what's kind of shocking is that there's been all of this focus on not funding the Russian war machine and not buying Russian gas, and yet the U.S. is arms wide open to take urea and UAN coming out of Russia, which is effectively just natural And so it's, you know, it's the U.S. that's funding the very, you know, war effort over there that, you know, it's condemning on the one hand.
Bert A. Frost: And that's about it I think we're going to see out of Russia is trying to get those tons out they've put out some export restrictions, but I think those are manageable and we will see what happens going forward yes.
Bert A. Frost: Yes.
Bert A. Frost: At tag along on that one just for a second.
Bert A. Frost: <unk>.
Speaker Change: It's kind of shocking.
Bert A. Frost: Actually.
Speaker Change: I made mention of this as well in their call, but it was kind of shocking as that.
Speaker Change: There's been all of this focus on.
Speaker Change: Not funding the Russian warm machine and not buying rush.
Speaker Change: Our Russian gas and yet.
Bert A. Frost: <unk>.
Speaker Change: The U S.
Speaker Change: His arms wide open to take urea in UAE.
Speaker Change: Coming out of Russia, which is effectively just natural gas thats been converted.
Speaker Change: So it's you know it's the U S is funding that vary.
Speaker Change: War effort over there that.
Speaker Change: On the one hand, it's condemn it so it's absolutely shocking, but I think that's not surprising given the political climate over here and the fact that we're in an election year.
Tony Will: So it's absolutely shocking, but I think that's not surprising given the political climate over here and the fact that we're in an election year. But you see some of that going on, I'd say, in Europe as well, where there's a lot of Russian nitrogen that's finding its way into Europe, and it's, you know, it's just supplanting what used to be gas. And maybe just a quick follow up on that. Can you talk about Ukraine? I mean, before the invasion, I think in 2014, Ukraine was a major exporter. And where do they stand right now?
Tony Will: But you see some of that going on I'd say in Europe, as well, where there's a lot of Russian nitrogen, that's finding its way into Europe and it's.
Tony Will: Just supplanting what used to be gas.
Bert A. Frost: Are they self-sufficient? Are they a net importer? So, it's actually, when you take into account the acres that are planted and applied and harvested against probably the previous, let's go back, maybe not 2014 as far back, but before the war, you got a loss of acres, obviously in the contested area, which is good agricultural land. But you have several plants that are offline, and the OPZ plant in Odessa that has been, they're trying to, I just read they' Although that one was struggling economically even, you know, well prior to the war.
Tony Will: And maybe just a quick follow up on that can you talk about youku.
Bert A. Frost: Ukraine, I mean before the invasion I think in 2014.
Bert A. Frost: Ukraine was a major exporter.
Bert A. Frost: And where do they stand right now or are they self sufficient or they are a net importer.
Bert A. Frost: So.
Bert A. Frost: It's actually when you take into account the acres that are planted and applied and harvested.
Bert A. Frost: Against probably the previous let's go back maybe that 2014 as far back but before the war.
Bert A. Frost: Got a loss of acres and obviously in the contested area, especially which is good agricultural land, but do you have several plants that are offline.
Bert A. Frost: And.
Bert A. Frost: Hope you Zed plant in Odessa that has been they're trying to I just read theyre trying to bring that back up although that one was struggling economically even well prior to the war so.
Bert A. Frost: So you know, that one has always been sort of up and down again. So there are gas questions on gas supply, and yes, they have imported product. And so it's a question of, I think, getting through the current crisis to see where we are coming out of it. Thank you very much. This question comes from Ben Theurer.
Bert A. Frost: That one has always been sort of up and down again. So there are gas questions on gas fly in and yes. They have imported product and so it's a question of of I think getting through.
Bert A. Frost: The current crisis to see where we are coming out of it.
Benjamin M. Theurer: Thank you very much.
Bert A. Frost: Okay.
Bert A. Frost: Thank you. The next question comes from Ben Theurer with Barclays. Please go ahead.
Benjamin M. Theurer: Barclays, thanks for taking my question. I just wanted to follow up a little bit on the global dynamics, and thanks for all the comments on Russia, but coming back to China and India to a degree. In your press release, you kind of alluded to China probably going to be back exporting some 4 million tons, and India being a little more aggressive on the internal supply, and you've talked about the tender and the implications. So if you think about those two markets, coupled with what you just said about Russia, how does that kind of level set the prices?
Benjamin M. Theurer: Hey, good morning, and thanks for taking my question just wanted to follow up a little bit on the global dynamics and thanks for all the comments on Russia, but coming back to China, and India to a degree. So in your press release, you kind of alluded to China, probably going to be back exporting some form.
Benjamin M. Theurer: Tons also India.
Benjamin M. Theurer: Being a little more aggressive on the internal supply and you've talked about the tender and the implications.
Benjamin M. Theurer: You think about those two markets coupled with what you just said on Russia, how does that kind of level set.
Benjamin M. Theurer: The pricing how do you think about pricing going forward in the medium term.
Bert A. Frost: How do you think about pricing going forward in the medium term when cost curves stick where they are right now, just given that potential supply out of China and India on top of the Russian you just mentioned? Well, the good thing is it's a global market. And you have, on the global market today, a lot of production and dispersed countries, and also a lot of consumption in dispersed countries. And with a growing population, a growing need to feed the world, and the benefits of nitrogen for pollution control, which are growing not only in DEF but in power generation, and with clean energy, you have demand. So today let's just take urea.
Bert A. Frost: Cost curve stick, where they are right now just given that potential supply out of China.
Bert A. Frost: And India on top of the Russian you just mentioned.
Bert A. Frost: Well the good thing is it's a global market and you have in a global market today.
Bert A. Frost: A lot of production and the dispersed countries and also a lot of consumption and disbursed countries and in a growing population a growing need to feed the world and.
Bert A. Frost: The benefits of nitrogen for pollution control, which are growing not only in <unk>, but in power generation.
Bert A. Frost: Today's urea market is about 55 million tons of globally traded urea on a vessel out of about 190 million tons of production. And so when you look at China and our number of 4 million metric tons of possible exports, that's less than 10%. You look at India, and India has been a major player in the importation of urea and the support of the global urea price.
Bert A. Frost: And with clean energy.
Bert A. Frost: Demand. So today, so let's just take urea today's urea market is about 55 million tons of globally traded on a vessel out of about 190 million tons of production.
Bert A. Frost: And so when you look at China and our.
Bert A. Frost: Number of 4 million metric tons of possible exports, that's less than 10%.
Bert A. Frost: If you look at India and then he has been a major player in the importation of urea and the support of the global urea price.
Bert A. Frost: But they're falling from imports of seven to nine million tons, and we're projecting 5.5 to 6.5. So that is being taken out of that global trade. But the countries that are growing, and Brazil is growing significantly, we project them to be 8 million tons. Just 15 years ago, that was around 3 million tons. So the countries that are increasing, Argentina, Australia, Brazil, Ethiopia, South Africa, Turkey, Thailand, those countries have grown this year in their urea consumption. The price of urea today, at around $300, is highly attractive for agricultural and production control.
Bert A. Frost: But they are falling from imports of seven to 9 million tonnes, and we're projecting five 5% to $6. Five so that is being taken out of that global trade.
Bert A. Frost: But.
Bert A. Frost: The countries that are growing in Brazil is growing significantly we project them to be 8 million tonnes.
Bert A. Frost: Just 15 years ago that was around 3 million tons.
Bert A. Frost: So the countries that are increasing Argentina, Australia, Brazil, Ethiopia, South Africa, Turkey, Thailand, those countries have grown this year and their urea consumption of the price of urea today at around $300 is highly attractive for agricultural Anne and production control.
Bert A. Frost: The challenge, I think, for India, or excuse me, for China going forward is the export controls that are in place. And the new controls are such that you have to have prepayment, a shipment date, a destination, a product price, and all that set up in a contract before applying for the CIQ application, and then prepayment has to take place before the cargo moves to port. So that's a very difficult transactional structure to have China, I think, even hit 4 million tons.
Bert A. Frost: The challenge I think for India, or excuse me for China going forward is the export controls that are in place and the new controls are such that you have to have prepayment a shipment date, a destination a product price and all of that set up in a contract before applying for the <unk> application.
Bert A. Frost: And then prepayment has to take place before the cargo moves support so that's a very difficult transactional structure to have China, I think even hit the 4 million tons.
Bert A. Frost: And so I think we're a little vague in our comments because the market is a little opaque right now as to how it's going to develop. But China, I think, will play in the international market once its spring season is over.
Bert A. Frost: So.
Bert A. Frost: I think we're a little vague in our comments because it's a little opaque right now in the market on how it is going to develop but China I think will play in the international market wants their spring season is over and then we will see how the pricing develops from there.
Bert A. Frost: And then we'll see how the pricing develops from there. And then just a quick follow-up on that industrial versus agricultural use, the impact you had in the first quarter, that shift towards lower profitability on the industrial use just because of fulfilling those contracts. Has that already normalized now that we're in early May?
Bert A. Frost: Okay, and then just a quick follow up on that industrial versus agriculture use the impact you had in the first quarter that shift towards the lower profitability on on the industrial use just because of fulfilling those contract has that already normalized now that we're like early may so that was really just a kind of a one time should we think about.
Christopher D. Bohn: So that was really just kind of a one-time thing, should we think about that volume balance to be more normal and not as skewed towards the raw ammonia because of the industrial? Yeah, as we talked about, a lot of the issues that occurred in Q1 were discrete to Q1, and that those are passed as both from a production and also a sales perspective. But as you mentioned, we did take 167,000 tons of what would normally have been upgraded to urea, which, as I said in my remarks, would be about 275,000 tons of urea.
Christopher D. Bohn: Volume balance to be.
Christopher D. Bohn: More normal than not as skewed towards the ammonia because of the industrial needs.
Christopher D. Bohn: Yes, as we talked about a lot of the issues that occurred in Q1 were discreet to Q1 and that those are past us both from a production and also a sales perspective, but as you mentioned.
Christopher D. Bohn: We did take a 167000 tons of what would normally have been upgraded to urea, which as I said in my remarks would be about 275000 tons of urea. So you see the urea decrease in sales and the increase we had pneumonia, but when you put that on a nutrient March.
Christopher D. Bohn: So you see the urea decrease in sales and the increase we had in ammonia. But when you put that on a nutrient margin basis of what the quarter was for industrial ammonia versus ag urea, you're looking at something that, you know, was almost about a $30 million margin impact. And that combined with that 75 million of approximate maintenance expense really is what set the quarter back. But again, I can't emphasize enough that those are discrete items in Q1. Okay, perfect. Thank you very much.
Christopher D. Bohn: And basis of what the quarter was for the industrial ammonia versus urea Youre looking at something that was almost about a $30 million margin impact and that combined with that $75 million of approximate maintenance expense.
Christopher D. Bohn: Really is what set the quarter back, but again Ken.
Christopher D. Bohn: Ken emphasized enough that those are discrete items the Q1.
Speaker Change: Okay perfect. Thank you very much.
Speaker Change: Thank you.
Richard Garchitorena: The next question comes from Richard Garchitorena with Wells Fargo; please go ahead. Great, thanks for taking my questions. I just wanted to ask about Wagaman.
Richard: The next question comes from Richard got get Arena.
Richard Garchitorena: Wells Fargo. Please go ahead.
Richard Garchitorena: Great. Thanks for taking my questions.
Richard Garchitorena: I just wanted to ask about wagon and you mentioned that the facility had some downtime from weather in January I was wondering if you can give an update in terms of how the ramp up has been since you closed the acquisition integration of that asset into your facilities.
Christopher D. Bohn: You mentioned that the facility had some downtime from weather in January. I was wondering if you could give us an update in terms of how the ramp-up has been since you closed the acquisition, integration of that asset into your facilities, and, you know, have you been able to get utilization rates up to sort of typical CF average levels, as it was maybe lower than that prior to your ownership? Yeah, you bet.
Christopher D. Bohn: Have you been able to get utilization rates up to sort of.
Christopher D. Bohn: Typical.
Christopher D. Bohn: Average levels.
Speaker Change: It was maybe lower than that prior too.
Speaker Change: To your ownership.
Christopher D. Bohn: So we, you know, we had an outage, and we took that opportunity to conduct the turnaround that was kind of scheduled for later in the year. And so we were able to take advantage of that downtime. But prior to that, and in fact, post-turnaround, we're operating at rates that reflect north of what nameplate capacity has been on that, you know, or is on that unit. And so that reflects kind of more traditional operating rates for CF across our network. And I'd say the integration has gone remarkably well. The, you know, the team at Wagaman has worked extremely well with the rest of the CF network.
Speaker Change: Yeah, you bet so we.
Christopher D. Bohn: We had an outage that we took that opportunity to conduct.
Christopher D. Bohn: The turnaround that was scheduled for later in the year and so we were able to take advantage of of that downtime, but prior to that and in fact.
Christopher D. Bohn: <unk> turnaround.
Christopher D. Bohn: We're operating at rates that reflect north of what nameplate capacity has been on that.
Christopher D. Bohn: <unk> is on that unit and so that reflects kind of more traditional operating rates.
Christopher D. Bohn: For <unk> Alfa across our network and I'd say the integration has gone remarkably well.
Christopher D. Bohn: The.
Christopher D. Bohn: And I think it's that kind of partnership and coordination that has led to some of the improvements we've made in terms of the on stream factor and the operating rate at the location. So we couldn't be more happy about the acquisition. And in fact, particularly at the value of it, given where new assets look like they're trading and what the cost of new construction is. So we're really pleased with adding Wagaman to the portfolio. Okay, great.
Christopher D. Bohn: The team at Wagaman has worked extremely well with the rest of the CF network and I think it's it's.
Christopher D. Bohn: That kind of partnership and coordination that has led to some of the improvements we've made in terms of on stream factor and operating rate at the location. So we couldnt be more happy about the acquisition and in fact, particularly at the.
Christopher D. Bohn: The value of it given where new assets look like they are trading in and what the cost of new construction. So we're we're really pleased with.
Christopher D. Bohn: Adding wag have ended up the portfolio.
Christopher D. Bohn: And then just on the press release on the JDA with JIRA, just curious in terms of, if capacity ends up being 1.4 million tons, Jira's procurement of 500,000 tons, so how should we think about that available 900,000 tons? Is that given Jira's going to be taking potentially a 48% stake, do they get some sort of percentage of that amount as well? Are you looking at potentially merchant sales, or are you looking to lock that up?
Speaker Change: Okay, Great and then just on the press release on the JV with Jarrod.
Christopher D. Bohn: I'm just curious in terms of so if capacity ends up being $1 4 million tonnes.
Christopher D. Bohn: Jarrod procurement of Pilar 1000 tons.
Christopher D. Bohn: How should we think about that.
Christopher D. Bohn: Available 900000 tons is that given <unk>, given would be thinking potentially of 48% stake they get surface antigen that amount as well or are you looking at.
Christopher D. Bohn: Essentially merchant sales or are you looking to lock that up.
Christopher D. Bohn: I know you had said earlier that, you know, you basically have four years from decision to production, so maybe you think about how much you want to get locked up before you get into that, you know, sort of development of that project. Thank you. Yeah.
Christopher D. Bohn: <unk> said earlier that.
Christopher D. Bohn: Four years from sort of decision to pre.
Christopher D. Bohn: <unk>. So maybe how you think about how much do you want to get locked up before you.
Christopher D. Bohn: When you get into that.
Christopher D. Bohn: Development of that project. So I think just starting the encouraging thing is about a half a million tons has has a home already for it as you mentioned with the next four years and that.
Christopher D. Bohn: So I think just starting, the encouraging thing is that about a half a million tons has a home already for it. And as you mentioned, the next four years, that provides a lot of opportunity to find basically sales for the remaining amount along with keeping a little bit for merchants. But the one thing with Jira is that 500,000 is just for one particular unit at their coal plant facility. They have multiple units they're looking at.
Christopher D. Bohn: That provides a lot of opportunity to find.
Christopher D. Bohn: Basically sales for the remaining amount along with keeping a little bit for merchant, but the one thing with <unk> is that 500000 is just for one particular.
Christopher D. Bohn: Unit.
Christopher D. Bohn: At their coal plant facility. They have multiple units. They are looking at in addition to that as you look at what's going on with the Jarrah tests right now, which is a commercial tests going on which is performing to expectations you could see other areas.
Christopher D. Bohn: In addition to that, as you look at what's going on with the Jira test right now, which is a commercial test going on, which is performing to expectations, you could see other areas that Jira has within Asia also converting to a 20 percent ammonia injection into the coal, along with some other additional players that are looking at it that Tony mentioned within Japan as well. So I think we're just in the, you know, the first few innings of where that demand side goes.
Christopher D. Bohn: <unk>.
Christopher D. Bohn: Within Asia also converting to a 20%.
Christopher D. Bohn: Ammonia injection into the coal along with some other additional players that are looking at it that Tony mentioned within Japan as well. So I think we're just on the.
Christopher D. Bohn: The first few innings of where that demand side goes, but I would say that we're very encouraged that we have a large portion of it already taken. Additionally, as Bert mentioned Youre, just seeing more and more activity.
Christopher D. Bohn: But I would say that we're very encouraged that we have a large portion of it already taken. Additionally, as Bert mentioned, you're just seeing more and more activity come along, whether it's through the power generation, the marine, or the sustainable aviation fuel, or even just on the legacy agricultural business where decarbonized product is going to have a home for, you know, from a supply standpoint.
Christopher D. Bohn: Come along whether it's through the power Gen and marine or the sustainable aviation fuel or even just on the legacy agricultural business, where decarbonize product.
Christopher D. Bohn: Is going to have a home for.
Christopher D. Bohn: From a supply standpoint, so we're pretty encouraged by what we have and what we're seeing going forward.
Christopher D. Bohn: Okay.
Speaker Change: Thank you.
Christopher D. Bohn: So we're pretty encouraged by what we have and what we're seeing going forward. The next question comes from Aron Ceccarelli with Baron. Hello, good morning. Thanks for taking my question. I wanted to ask you, in the scenario where you go ahead with both the Mitsui plant and the Jera one, or the combined one, how should we be thinking about your capital expenditure phasing for the next three to five years? Thank you
Christopher D. Bohn: The next question comes from Adam Ciccarelli with Diamond, but please go ahead.
Aron Ceccarelli: Hello, Good morning, Thanks for taking my question.
Aron Ceccarelli: I wanted to ask you in a scenario where you go ahead, we both did Mitsui plant and a general one or say a combined one how should we be thinking about your capital expenditure phasing for the next three to five years. Thank you.
Tony Will: Yeah, so as Chris mentioned in our last earnings call, the feed study for an SMR, a steam methane reformer, kind of a copy of Ammonia-6 at Donaldsonville, was about $2.5 billion, and then there would be roughly another $500 million for scalable infrastructure that could be leveraged against additional plants on site. So all in, for the first one, it would be circa $3 billion. Now that does not include, if it was required, flue gas capture, and we are still in the middle of a feed study to evaluate what it would look like to have an autothermal reformer or an ATR.
Aron Ceccarelli: So I think as Chris mentioned in our last earnings call.
Tony Will: The feed study for NSM, our steam methane reformer kind of a copy of ammonia six at Donaldson Bill was about $2 $5 billion and then there will be roughly another $500 million four.
Tony Will: Scalable.
Tony Will: Got.
Tony Will: Infrastructure that that could be leveraged against additional plants on site.
Tony Will: So all in for the first one it would be circa $3 billion now.
Tony Will: That does not include if it was required flue gas capture and we are still in the middle of a feed study to evaluate what it would look like to do in auto thermal reformer and ATR.
Tony Will: And so, you know, more to come in terms of... What the cost of a different approach or different technologies is, but if we had both, let's say, JIRA and Mitsui and CF kind of all aligned on one particular project, and it was a third, a third, a third. That would be, you know, kind of a billion per company to do the, the, um... The SMR spent over, call it a four-ish type of year.
Tony Will: And so.
Tony Will: More to come in terms of what.
Tony Will: The cost of a different approach or different technologies are but if we had both let's say <unk> and and <unk>.
Tony Will: Mitsui and CFS kind of all aligned on one particular project and it was a third a third a third of that would be.
Tony Will: And have a $1 billion.
Tony Will: For a company to do.
Tony Will: The.
Tony Will: The <unk> spent over call it four ish type of years.
Tony Will: Now, if it's, you know, if it's 50% for us and 50% for somebody else, then that increases to a billion and a half, you know, it just kind of scales appropriately. But it's in that order of magnitude, and it's spread over four to five years of cash outflow. So while it's, you know, a meaningful amount of cash compared to the amount of free cash that we're generating, we still have plenty of free cash available to be able to return cash to shareholders in the form of dividends and share repurchases.
Tony Will: Now if it's if it's 50% for us.
Tony Will: And 50% for somebody else then that increases to 1 billion has it just kind of scales appropriately, but it's in that order of magnitude and its spread over four to five years of <unk>.
Tony Will: Cash outflow so while it's.
Tony Will: A meaningful amount of cash compared to the amount of free cash that we're generating we still have plenty of.
Tony Will: Free cash available to be able to return cash to shareholders in the form of dividend.
Tony Will: Dividend and share repurchases, so it's not going to impede us from being able to execute.
Tony Will: So it's not going to impede us from being able to execute our return on capital program and other, you know, incremental growth opportunities that we have. Thank you very much. That is all the time we have for questions. I would like to turn the call back to Martin. Thank you everyone for joining us today, and we look forward to seeing you at upcoming conferences. Thank you for attending today's presentation. You may now disconnect.
Tony Will: Our return of capital program.
Martin: Other incremental growth opportunities that we have.
Martin: Thank you very much.
Martin: Thank you.
Martin: Ladies and gentlemen that is all the time, we have for questions for today.
Tony Will: I would like to turn the call back to Martin <unk> for closing remarks.
Martin: Thanks, everyone for joining us today, and we look forward to seeing you on at upcoming conferences.
Tony Will: Yes.
Martin: Thank you.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Tony Will: Yeah.
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