Agrium announces closure of Kenai nitrogen facility

Posted: Tuesday, September 25, 2007

Agrium Inc. announced today it is closing its Kenai nitrogen fertilizer operations due to a shortage of natural gas supply in Alaska's Cook Inlet. Agrium has diligently attempted to encourage development of natural gas supply and to negotiate contracts for 2008 and beyond. Despite these efforts, and after offering what it believed to be competitive prices and incentives, Agrium was unable to secure gas supply.

The facility produced about 325,000 tonnes of urea and ammonia in 2007 during the five months it was operational, with the shutdown expected by month-end. It is expected the resulting reduction in nitrogen supply will further tighten the global nitrogen market in 2008

Agrium purchased 53 billion cubic feet (BCF) of natural gas in 2001 and this supply has steadily diminished to only 10 BCF in 2007. The book value of the asset was written down in 2003 and shutdown costs were accrued at that time, therefore no further impairment charge is required. Incremental costs associated with the shutdown are expected to be less than five cents per share. Agrium's plant was shutdown for the winter period of 2006/2007 but no layoffs occurred. Closing the facility will result in the lay-off of over 100 employees.

"It is a sad day for us to have to close this facility which has added much value to the Alaskan economy for the past 40 years. It has been a major supplier to international markets in the Pacific region and was Alaska's third largest exporter in 2006, despite running at 50 percent of capacity," said Mike Wilson, President and CEO of Agrium. "Our employees at Kenai have been the key to the success of the operation. Had it not been for the natural gas supply situation in the Cook Inlet, we would not have had to make this difficult decision which will impact our employees, customers and the community."

Agrium continues to work on the feasibility of a coal gasification project to use coal as a feedstock instead of scarce natural gas for the Kenai facility. A decision on whether to proceed with the next stage of the project is anticipated later this year. The earliest the proposed facility could be operational is 2012.

FOR FURTHER INFORMATION: Investor/Media Relations: Richard Downey, Senior Director, Investor Relations (403) 225-7357. Contact us at:

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