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Gold/Mining/Energy : Gasification Technologies

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From: Dennis Roth	4/16/2011 4:05:10 PM
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Credit Suisse initiated coverage of CVR Energy, Inc (CVI) with an an Outperform rating and a $30 target price. CVI is a mid-Continent refiner that owns and operates the only nitrogen fertilizer plant in North America that utilizes a pet coke gasification process in the production of nitrogen fertilizers. Here's an excerpt from the report. Fertilizer - Well Positioned and Cost Competitive CVI owns and operates the only nitrogen fertilizer plant in North America that utilizes a pet coke gasification process in the production of nitrogen fertilizers (this process provides a feedstock cost advantage vs. natural gas based producers). The plant currently has a 1,225 ton-per-day ammonia unit, a 2,025 ton-per-day UAN unit and a 84mmscfpd gasifier complex. The majority of ammonia produced by the fertilizer plant is upgraded to UAN, which is a major contributor to the segment’s profitability as it generates a greater value than ammonia. CVI recently spun the fertilizer business out into an MLP (UAN). UAN is trading on 7.4x our forecast EBITDA for this segment. Fertiliser fundamentals are strong due to low crop inventories. The marginal supplier of urea uses oil-linked natural gas prices (Ukraine). A combination of high expected oil prices and low crop inventories suggests a strong fertilizer market for CVI in coming years. CVI’s fertilizer business has two key advantages: Low input costs: CVI’s production process does not use natural gas. Although it has a higher fixed cost, there are only small variations in variable input costs. The process is competitive with natural gas based producers down to $4.00/MMBtu. Although US natural gas prices are weak, the marginal global producer e.g. Ukraine uses oil linked natural gas as an input cost, lending US based producers an advantage. Location: CVI is based in the heart of the agricultural heartland, lowering customer logistic costs. ==== On Wednesday, April 13th they finished an IPO of their nitrogen fertilizer business as an MLP, CVR Partners which trades under the the symbol UAN. I've long held shares of CVR Energy, Inc (CVI) but hold none of the new MLP UAN and don't know too much about the UAN MLP. The CS report on CVR Energy is 33 pages and contains 37 exhibits. Download Link: sendspace.com

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