Chemical Week • July 3/10 • Yara stalls clean ammonia IPO, eyes capacity closures in Europe

Yara International ASA has delayed plans to launch an IPO for its clean ammonia business by up to two years, saying the current valuation of the business does not reflect its “project portfolio attractiveness.”

The company is also underway with an assessment of its ammonia production footprint in Europe, including potential capacity closures, to ensure it is “fit for the future,” it said.

In a statement ahead of its annual strategy day for investors held on June 26, Yara confirmed “the viability of a potential minority divestment” in the clean ammonia business, named Yara Clean Ammonia (YCA). “However timing will be postponed as the YCA project portfolio attractiveness surpasses its current market valuation, and major capital outlays are planned from 2025 onwards,” it said.

The clean ammonia business is well positioned for growth with a competitive advantage in developing profitable upstream expansion, said Svein Tore Holsether, CEO of Yara. This will create demand pull from new applications and integrate the value chain to scale up the business, he said.

In a presentation at the strategy day, Yara stated that its clean ammonia business project portfolio had been boosted by the establishment of the US Inflation Reduction Act (IRA), “enabling highly profitable decarbonization of Yara in Europe, and utilizing [its] global ammonia position.”

The presentation said the planned IPO was being postponed by 1-2 years due to the portfolio’s attractiveness and an “improved market outlook for new ammonia applications in shipping.” It added in the presentation that alternative YCA ownership and/or funding routes “remain under evaluation.”

In a presentation slide on its ammonia position in Europe, Yara said it is “actively assessing its portfolio to ensure a fit-for-future footprint.” The company currently puts its ammonia production capacity in Europe at 4.8 million metric tons per year (MMt/y) and estimates total European consumption at 5.8 MMt/y. “Yara has a future optionality to consider closing some EU ammonia production capacity, with our terminal structure in Europe representing a strong competitive advantage,” it said. The flexibility of Yara’s ammonia position was demonstrated in 2022, and the current value of its European ammonia assets “is limited,” it said. The company estimates the value of these assets at $500 million.

A separate slide states that Yara’s US ammonia investments will be complementary to its European footprint, and that “70% of Yara’s assets in Europe are flexible on ammonia source.”

Yara also stressed its “ambition to grow its clean ammonia operations by investing in blue ammonia capacity in the US.” Coupling these investments with its global ammonia position, the company can “profitably decarbonize its premium product operations in Europe while also diversifying its energy position,” it said.

Yara is targeting annual net average capital expenditure of up to $1.2 billion in real terms, and a fixed cost target to beat inflation in core business, excluding special items and write-downs/one-off effects, it said. Yara’s strategic framework will guide capital allocation in the next 2-3 years, with the company aiming to increase its focus on divesting noncore assets and follow a conservative M&A strategy that will focus on “smaller bolt-on acquisitions, while staying open to highly attractive and accretive growth opportunities,” it said.

The IRA makes the US “a highly attractive location to produce decarbonized ammonia,” it said. “Exporting this decarbonized ammonia from the US to the European market, matched with the flexibility of Yara’s European production assets, enables cost-effective decarbonization of fertilizer production. These are highly attractive investments,” said Holsether. Yara’s plans for a clean ammonia IPO were first announced in May 2022.