Incitec Pivot (ASX:IPL) subsidiary signs urea offtake agreement

• Incitec Pivot (IPL) subsidiary Incitec Fertilizers has entered into a urea offtake agreement with Perdaman Chemicals and Fertilisers
• Under the 20-year agreement, the company will take up to 2.3 million tonnes of granular urea fertiliser a year from Perdaman
• The fertiliser will be supplied from Perdaman’s proposed urea plant, which it hopes to finish constructing in 2025
• This will allow Incitec Fertilisers to secure a long-term domestic supply of urea for both Australian and international markets
• Incitec Pivot is up 1.7 per cent and trading at $2.70 per share

Incitec Pivot (IPL) subsidiary Incitec Fertilizers has entered into a urea offtake agreement with Perdaman Chemicals and Fertilisers.

Incitec Pivot manufactures, markets, and distributes a range of industrial chemicals, fertilisers, and explosives chemicals. The company is the largest supplier of fertilisers in Australia and the second-largest supplier of explosives products and services in the world.

Its subsidiary, Incitec Fertilizers primarily provides high-quality fertilisers for the agricultural industry. Under the subsidiary’s 20-year offtake agreement, the company has committed to taking up to 2.3 million tonnes of granular urea fertiliser per year from Perdaman. 

This urea fertiliser is expected to come from Perdaman’s proposed urea plant in Karratha, Western Australia. As the plant is not yet build, the offtake agreement is subject to Perdaman obtaining the financing for construction of the new plant. 

This in turn depends on Perdaman also finalising gas supply arrangements and obtaining various environmental and other regulatory approvals for the plant. If all of these conditions are met, Perdaman expects that construction of the plant will be completed by the end of 2025.

For Incitec Fertilizers, this agreement provides the subsidiary with the opportunity to secure a competitive, long-term domestic supply of urea. The company will likely use the supply of urea for its Australian customers, as well as for expansion of sales in its growing global markets.

Incitec Pivot’s Managing Director and CEO, Jeanne Johns, commented on the offtake agreement.

“The investment by Perdaman in a new, world-scale plant will make it one of the most energy efficient plants in the world utilising low emissions technology,” she said.

“We are pleased to support such a significant domestic manufacturing project that will use Australian gas to produce urea fertiliser, essential for our Australian and international agricultural markets,” she added.

Incitec Pivot is up 1.7 per cent, trading at $2.70 per share at 3:17 pm AEST.