Our objective is to maximize quarterly distributions to our unit holders.
Our policy is to distribute all of the cash available for distribution we generate each quarter to unit holders of record on a pro rata basis. We intend to evaluate and pursue opportunities to increase our profitability by expanding our production capabilities and product offerings through expansion projects at our plants and selective acquisitions.
We currently have two expansions underway at our East Dubuque facility which will positively contribute to cash distributions upon completion. We also recently acquired Rentech Nitrogen Pasadena, which will not only be accretive to cash distributions beginning in 2013, but also provides a number of opportunities for organic growth projects, providing a platform for multi-year growth.
East Dubuque Facility
Ammonia Capacity Expansion
We have commenced construction of a project at our East Dubuque facility that is designed to increase ammonia production by approximately 23%, or 70,000 tons annually, for sale or upgrade to additional products and to increase on-site ammonia storage capacity by 20,000 tons. We expect this project to be completed by the end of 2013 and anticipate the additional production to begin contributing to cash distributions in 2014.
Urea Expansion and Diesel Exhaust Fluid (DEF) Build-Out
We have completed an expansion project to increase urea production capacity at our East Dubuque facility by approximately 15%, or 21,900 tons annually. As part of this expansion, we installed mixing, storage and load-out equipment for diesel exhaust fluid (DEF) production, which was completed in the summer of 2012.
DEF is a high-purity urea solution composed of de-ionized water and prime urea. As part of the Clean Air Act, the U.S. Environmental Protection Agency has mandated has mandated that all on-road diesel vehicles (class I through class 8) manufactured on or after January 1, 2010 employ an emissions-reducing engine technology, which specifically targets hazardous nitrous oxide (NOx) emissions. The market leading solution for heavy-duty vehicles to comply with these stricter emissions standards is selective catalytic reduction (SCR), which involves injecting DEF into the exhaust of vehicles and achieves NOx reductions in excess of 90 percent. According to the Engine Manufacturers Association, the U.S. market for DEF is projected to grow from 50 million gallons in 2010, rising to 750 million gallons in 2015, and 1.3 billion gallons in 2019.
With the completion of the DEF system, Rentech Nitrogen has expanded its product offerings to include DEF, an industrial high-purity urea solution, which sells at a premium to urea used for agricultural purposes. Yara North America Inc., a leader in the DEF market, has entered into a long-term agreement with Rentech Nitrogen for the exclusive rights to purchase and distribute the quality DEF produced at Rentech Nitrogen’s facility under Yara’s Air1® brand.
With the completion of the DEF system, we are converting a portion of our existing prime urea stream into high-quality DEF, which is being sold to Yara. Once the urea expansion at our plant is completed later this year, the additional 19,250 annual tons of prime urea production will also be used to produce DEF for sale to Yara.
Ammonium Sulfate Debottlenecking Project
The Pasadena facility will be commencing an ammonium sulfate debottlenecking project next year to increase ammonium sulfate capacity by 20%, from 1,750 tons per day to 2,100 tons per day. This project is expected to be in the first half of 2014 and is expected to contribute to cash distributions beginning in the second half of 2014.
Power Cogeneration Project
We identified a low risk potential power cogeneration project at the Pasadena facility. Currently, the sulfuric acid plant vents excess steam. We could install a steam turbine and use this excess steam to produce baseload power. Some of the power could be used internally, reducing electricity expenses, and the remaining power can be exported and sold in the deregulated Texas power market, creating an additional revenue stream.
Selectively Pursue Acquisitions
The nitrogen fertilizer industry has undergone significant consolidation over the last decade as a result of mergers and acquisitions and capacity curtailments. The top five domestic nitrogen producers have increased their share of ammonia capacity in North America from 56% in 1999 to 79% in 2012. As a result, we are one of a few remaining independent operators of a nitrogen fertilizer facility that is located in the Mid Corn Belt. We expect industry consolidation to continue and intend to pursue value-enhancing acquisition opportunities, strategic relationships, and partnerships as they arise. We believe that there are nitrogen fertilizer facilities in the United States that could be attractive acquisition targets for us, but whose operations are too small to attract attention from many of our larger competitors. We will also continue to pursue acquisitions in the related fertilizer industry, similar to our recent acquisition of the Pasadena facility.