I listened to it and (while it was well staged) loved what I heard being reinforced wrt to licence requirements at path forward.
How stubborn will IPL be? Taken from the April 2020 Strategic Review Process
which goes on to basically say no one interested in buying the Fertilisers business, demerger (as standalone company I guess) opportunity in current market not feasible and so the right outcome
What is one of the main problems for IPL ... Gibson Island Urea Manufacturing cost of gas supply ... exactly what Justyn was saying on the interview. IPL has supply at decent rate (below $6/GJ) but at say 25GJ to make a tonne of Urea their input cost is $150/tonne and ours is well ... ~$26.50/tonne
Now this might be semantics .. but IPL said the focus on core operations as an industry leader in SUPPLY of fertilisers AND SERVICES ...
they did not say manufacture!IPL went down this path in 2010 with Perdaman Chemicals & Fertilisers (looks like a dodgy group reading some POVs)
That deal went pear shaped
Interestingly Perdaman still trying to get into the Urea game now still with
(a) Woodside
https://www.perthnow.com.au/business/gas-deal-boosts-43b-urea-factory-in-pilbara-ng-b88817559zand also
(b) Santo Narrabri Gas Project
advertisingnotallowed/business/business-display/doubts-over-viability-of-new-mining-and-gas-projects,13117Good read that one .. own both WPL & STO ... why would they bother with this group.
Anyway the point is OFFTAKE AGREEMENT as was stressed by JustynIPL has the distribution system in place and customer relationships ... but high cost of product. Back in 2010 they were happy to pay Perdaman $12B for 2Mtpa of Urea for 20 years ... or unit avg of $300/tonne ... don't know if US$ or AUD$ but it doesn't matter in this case as back then Aussie dollar was around parity ... so call it US$300/tonne
IPL's gas contract with APLNG ends DEC 2022. Gibson Island Urea becomes uneconomic to produce ... say its $8/GJ and at best at 25GJ to 1 tonne of Urea their input cost of raw material is $AUD200/tonne (~US$150 assuming FX=0.75) and that's before their operating costs.
LCK could offer IPL a 20% Equity Stake in the LCEP in exchange for guaranteed supply of 300,000 tonnes Urea per year (which replaces entirely their own production) for one off payment of AUD$100 x 300,000 x 20 = $600M cash (this payment covers point 3 below)
LCEP production 1,000,000 tonnes per annum 80% equity LCKE and 20% IPL
1. 300,000 tonnes Guaranteed Offtake LCKE sale to IPL at AUD$300/tonne from LCKE share ($90M/pa of cash flow)
2. 500,000 tonnes remain available for LCKE to sell
3. 200,000 tonnes belongs to IPL (their 20%) to do with what they like (in addition to the 300,000 they buy each year)
This would cost IPL 20x$90M + $600M = $2.5B for 500Ktpa (10Mt over 20 years) ... or just $250/tonne ...
If IPL is selling at $400/tonne that's $150/t profit ... or $1.5B ... 60% return is not too bad ...yes its rough and haven't discounted any of the cash flows ... just an exercise to show what is possible I guess.
Multiple interested parties says Justyn
(20min delay)