Background

Applies to Nitrogen based petrochemicals (ammonia, urea), other fertilizers (eg phosphates).

They are characterised by:

• Technically complex
• Significant equipment and material which may need to be imported
• Products usually sold on the open market
• Earns foreign exchange for the product which is sold on international markets.
• Production which usually increases rapidly to the design capacity where it stays for the duration of the project (see the diagram below).

 How Promoter handles Fertilizer Projects

It carries out a simple capital cost estimate based on up to ten plant in series or parallel.

Typical Project Cash Flows

The revenues are essentially constant in real terms over the life of the project.  However, two competing effects will change the shape.  If the local and more profitable market is increasing in size, then the revenues will increase over time.  However, if the commodity price is reducing in real times, then the revenues will decrease.  In practice, both effects play a part.

The first two or three years will typically show a utilization which is below the ultimate figure, as managers and operators become more familiar with and better able to operate the plant.

At the end of the project's life, the plant may be sold for scrap, providing additional cash flow to the project.