CF Industries UK: why do we need fertiliser plants for CO2 production, who is Tony Will, and share price

The US company’s Teesside plant is set to reopen after a government bailout - but the Cheshire location will remain closed

Downing Street said it had stepped in to assist CF Fertilisers due to the “unique situation” surrounding CO2 production.

Only one of the closed CF Fertilisers plants will reopen after a government-brokered deal which could run into tens of millions of pounds.

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The firm had closed its plants in Teesside and Chesire. The plant in Billingham Teesside will reopen.

The deal brokered by Business Secretary Kwasi Kwarteng will see the UK Government provide “limited financial support” towards CF Fertilisers running costs in order to prevent a food supply shortage at Britain’s supermarkets.

The agreement will be in place for three weeks while the “CO2 market adapts” to the surge in global gas prices, according to the Department for Business, Energy and Industrial Strategy (Beis).

Mr Kwarteng had been involved in discussions with the firm’s president Tony Will over the past few days.

Why did the firm have to shut down two of its bases?

CF Fertilisers is a global manufacturer of hydrogen and nitrogen products. The closure at two of the firm’s fertiliser plants – which produce CO2 as a by-product – was a result of the increase in gas prices.

In a statement the firm had said it was halting operations at both its Billingham, Teesside, and Ince, Cheshire complexes due to “high natural gas prices”.

Who is Tony Will?

Mr Will has served as the president and chief executive officer and as a member of the board of directors of CF Industries Holdings, Inc. since January 2014.

He joined the firm in 2007 as the company’s first vice president, corporate development.

The firm’s share price as of today is $50.45.

CF Fertilisers produces around 60% of UK’s CO2, used primarily by the food sector but also in the health and nuclear industries.

What support did the government offer?

Business secretary Kwasi Kwarteng told Sky the government would not be “throwing taxpayers’ money at companies which have been, let’s face it, badly run.” (Pic: Getty)

The Department for Business, Energy and Industrial Strategy said the “exceptional short-term arrangement” with the US-owned firm would allow the company to immediately restart operations and produce CO2 at its Billingham plant in Teesside.

Downing Street said it had stepped in to assist CF Fertilisers due to the “unique situation” surrounding CO2 production.

Asked whether taxpayer bailouts should be going to a firm owned by a US millionaire, a spokesman for the Prime Minister said: “This is an exceptional short-term arrangement given what we have seen over the course over the last week or so in terms of the issues the lack of CO2 is causing to the industry.

“It is a unique circumstance where we have seen other companies that provide the same product be in maintenance, so we will take three weeks to find a market solution.”

Pressed on why the Government had not disclosed the exact amount of financial support promised to the fertiliser manufacturer, the spokesman said: “These matters are commercially sensitive. We will obviously set out any details as we always do under transparency laws.”

Kwasi Kwarteng set out why he had put a three-week limit on support for CF Fertilisers.

The Business Secretary told MPs: “In a critical intervention like that you have to have a way of exiting the arrangement.

“It’s not a case of just trying to nationalise it or supporting it indefinitely.

“That’s why I think in a critical period we needed a very short-term arrangement.

“I’m confident that we can get other sources of CO2 in that period, there was an immediate crisis and the deal that we reached solved the immediate problem.”

Why is only one plant reopening?

On why CF Fertilisers was only restarting operations at one of its two closed plants, a spokesperson for the prime minister said: “We believe the Billingham plant will provide enough CO2 to supply our needs.

“My understanding is workers were on site and start-up has commenced, and we would expect it to take 48 hours to produce CO2 for the market.”

The restart of the ammonia plant will produce CO2, a byproduct of the ammonia production process, for the UK market.

Tony Will, president and chief executive officer, CF Industries Holdings, Inc. said: “We want to thank The Honorable Kwasi Kwarteng, Secretary of State for Business, Energy and Industrial Strategy, and his entire staff for working tirelessly to bring about this agreement enabling restart of the plant and averting a potential CO2 supply disruption impacting many industries, including food and beverage availability to UK consumers.

“We look forward to working with Secretary Kwarteng and the UK government on developing a longer-term solution, including the development of alternative suppliers of CO2 for the UK market.”

What impact will the deal have and what will it cost?

Environment Secretary George Eustice said the Government had to act to subsidise CF Fertilisers in order to protect food supplies.

Mr Eustice told Sky news: “The truth is if we did not act then, by this weekend, or certainly by the early part of next week, some of the poultry processing plants would need to close and then we would have animal welfare issues – because you would have lots of chickens on farms that couldn’t be slaughtered on time and would have to be euthanised on farms, we would have a similar situation with pigs.

“There would have been a real animal welfare challenge here and a big disruption to the food supply chain, so we felt we needed to act.”

The deal to restart carbon dioxide production could cost taxpayers “tens of millions” of pounds.

Mr Eustice told Sky News: “Lawyers are still working on those final details.

“It’s going to be into many millions, possibly the tens of millions, but it is to underpin some of those fixed costs.”

He added: “It’s going to be temporary … at the end of the day we need the market to adjust.

“The food industry know that there is going to be a sharp rise in the cost of carbon dioxide, probably going from something like £200 a tonne eventually up to closer to £1,000 a tonne, so a big, sharp rise.”

Mr Eustice said there had been a “perfect storm” caused by two plants in the UK and Norway being closed for maintenance at the same time as CF Fertilisers suspended operations of its two factories due to high energy costs.

What is is involved in the production of ammonia?

The main industrial procedure for production of ammonia is called the Haber process, or the Haber-Bosch process.

It is mainly used to produce fertiliser. However during World War I it was used in the German war effort to get ammonia for explosives.

Could the CO2 crisis cancel Christmas?

Environment Secretary George Eustice said the deal to safeguard CO2 supplies would help ensure “Christmas is safe” although the food industry still faced problems.

Firms are expected to see CO2 supplies return on Thursday.

Mr Eustice said that companies will however have to accept a major hike in CO2 rates, which could increase fivefold from £200 a tonne to £1,000.

He stressed that the surge in prices would not be a “major impact on food prices” for consumers due to its small proportion of overall costs.

Poultry industry figures had warned that supplies of turkeys could be hit by a shortage of CO2.

Mr Eustice told LBC Radio: “Christmas is safe, of course. But there are challenges in the food supply chain, I’m not denying that.

“The lack of labour availability, pressures on logistics – all of these are causing some stresses.

“It does mean that in some areas the degree of choice in some supermarkets is down slightly on what it would normally be.

“But we are working with the industry to make sure that we get all the food that we need on the shelf for those all-important weeks running up to Christmas.”

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