Rentech Nitrogen Partners, L.P. (RNF)

RNF 
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Rentech Nitrogen Partners, L.P. (RNF)

National Association of Publicly Traded Partnerships MLP Investor Conference Call

May 22, 2013 14:15 ET

Executives

Hunt Ramsbottom - Chief Executive Officer

Presentation

Unidentified Analyst

Good afternoon everybody. Our next speaker is going to be Hunt Ramsbottom. He is the CEO of Rentech Nitrogen Partners, obviously, a non-traditional MLP. And he is here to give us the story on Rentech Nitrogen Partners. Hunt?

Hunt Ramsbottom - Chief Executive Officer

Thank you, (Ed), and thanks for joining us today. So, I will talk about Rentech Nitrogen Partners. I am going to talk about the parent corporation works. We are actually building out potentially another MLP, but I will go into that later into the presentation. Let’s talk about Rentech Nitrogen Partners today.

Two facilities today, we are a variable distribution MLP. I think we were the second one to hit the market over a year ago. Our primary location that we started with the IPO is up in East Dubuque, Illinois, those of you that follow us and those of you want to learn about us. So, this facility up in Northwest corner of Illinois is probably the best facility in the United States in terms of its location. And I will go into that more detail as why we say that. Primary products there are ammonia, UAN, although we do have DEF and urea’s products and natural gas is our primary feedstock. And I think everybody understands the natural gas story here in the U.S. and why this has become such a great business for us and others in the U.S.

Our key markets are the Corn Belt in the Tri-State area, Iowa, Illinois, up in that region. And again, everything at that plant is FOB plant-gate. And we have announced and on our way to some organic growth opportunities of that plant, that will increase the capacity of that plant, the fourth quarter this year for distributions in the first quarter of next year. Our recent acquisition down in Pasadena, Texas, different product line, diversifies our product line ammonium sulfate, again great markets for us. Right on the Houston Ship Channel, we now sell about 30% to 40% of that product into South America. We are now shipping product out into New Zealand and other parts of the globe, which really speaks of the quality of the product coming out of that market. It is a new facility for us with a new product line in the Western half in the U.S. also. That is barge, rail and truck out of that facility. We have also announced a growth expansion there that will also take place. We will take that plant down to the end of this year, and those that will be a 20% expansion in the main product line in that facility for distributions in 2014.

So, our product mix, we hit two of the main four ingredients, primarily in the marketplace today, nitrogen which has to be applied every year in our market twice a year, and again, sulfur which has been depleted in the marketplace. So, again, the ammonium sulfate and why we purchase this acquisition going forward, other products, new product lines, DEF, diesel emission fluid, we distribute to the Yara. So, again, we are growing our product lines, increasing our geographic footprint both domestically and internationally. Not only we are increasing our footprint, but are increasing our product line and also the products that we serve as you could see corn obviously – originally were over the Corn Belt, but now with our new slate of products, both at the existing facility and the new facility broad based with cotton, canola, potato, soybeans, and right across the spectrum are the crops today, so diversified products, geography, and the crops that we serve in the U.S. and now outside the U.S.

I think it’s most important to understand our business model. If you could see the margins on ammonia over the last few years have grown significantly, and that’s really because of the explosion obviously of the nat gas and what’s happened in the U.S. When I purchased this plant, gas was $11 and $12 and product prices were much lower than they are today. So, the demand of the product both domestically and internationally and the cooperation of gas over that period of time, it really expanded the margins in that facility, going forward. To offset that, you see that’s more stable margin in ammonium sulfate albeit lower, but you don’t have the volatility that you have sometimes with the other product lineup in up in East Dubuque. So, again nice stable margins in the ammonium sulfate business, growing margins both companies or both units, but also is in a little more volatility in the ammonia side.

I don’t know if you follow the current ag market, but if you do follow the current ag market, you will understand why they call this a variable distribution model. Last year around this time we planted early, it was a warmer season we get out into marketplace early, so we had a very robust first quarter last year. We pulled forward sales into the first quarter just the opposite 12 months later, I am sure you have been reading about in the headlines in newspapers that it was a very late wet cold spring, which didn’t allow the farmers to get out into the fields until really in the last couple of weeks. But due to the equipment they use today in our location if you’re seeing just the last week I think two weeks ago we are 29% planted versus historic average of 69%. And we have caught up literally in the last week at 71% planted and this is probably higher today. This is sort of couple of days ago versus the average of 79%.

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