Incitec Pivot flags $70m Gibson Island shutdown bill in absence of affordable gas deal

Incitec Pivot says, absent an affordable gas deal, the closure of its Gibson Island fertiliser plant will cost about $70m.

18/10/2018: Incitec Pivot workers (L-R) Biplab Halder, Steve McGuire and Michel workers inside Incitec Pivot's Gibson Island ammonia plant, Murarrie, Brisbane .The plant can't find any gas supplies for 2020-21 which may force the facility to shut down. Lyndon Mechielsen/The Australian

Fertiliser and explosives maker Incitec Pivot says closing the Gibson Island fertiliser plant in Brisbane will cost about $70 million, if it cannot get cheap gas to continue its operation in the next year.

The estimate, revealed in the company’s (IPL) annual report, is up from a previous estimate of $50m, but has come with a jump in the expected land value of the site, which would offset the costs.

Gibson Island needs gas at well-below market rates after interim contracts expire at the end of next year, if the plant and the 2000 jobs Incitec says it supports are to survive.

“We are continuing to explore economic bridging gas supply for 2020 and 2021 and will leave no stone unturned to try to secure the future of the plant,” Incitec managing director Jeanne Johns said.

Incitec said that if “economically viable” gas cannot be secured beyond the end of next year, it will probably close the plant.

An interim gas deal with Central Petroleum for 2019 will see costs increase by $50m.

A year ago, Incitec chief financial officer Frank Micallef said closure would cost $50m and that the land was thought to be worth between $40m and $55m.

Today, Incitec issued new estimates.

“In the event that Gibson Island’s manufacturing operations were to cease, the latest estimate of closure costs is approximately $70m,” Incitec said in its annual report.

“Proceeds from the sale of excess land at Gibson Island, that could be available for sale in the event of a plant closure, are estimated at approximately $60m depending on the ongoing operational requirements at the site.”

Ms Johns said the company’s broader outlook was positive.

“We look towards the 2019 financial year with confidence, as our businesses are well positioned in key markets,” she said.

“There is more upside from leveraging our premium technology in the US and we are building upon our reputation for innovative technology solutions with customers throughout the Asia Pacific. The business is well placed to benefit from the continued execution of our strategy as well as improved conditions across our markets.”

Ms Johns, who took over from former chief executive James Fazzino in November last year, received total remuneration of $3.67 million during Incitec’s 2018 financial year, which ended on September 30.

Incitec will hold its annual general meeting in Melbourne on December 20.