KPCT joint venture greenfield ultrapure acid plant__ON HOLDWhat will the bears say?
KHERSON our PERMA BEAR may argue that CHE’s organic growth objectives are no longer achievable, including +$45M of EBITDA by end of ‘25 and +$75M of EBITDA by end of ‘27.
Prudent capital management measured by metrics like ROIC are much more important to us vs. empire building by buying EBITDA at any price. Well done CHE Management! As previously advised in May 2023, the capital costs for the KPCT Advanced Chemicals joint venture greenfield ultrapure sulphuric acid plant in Arizona have come in significantly higher than originally estimated. The joint venture has now had a chance to analyze the results of the front-end engineering design (FEED) studies and has looked for cost savings where possible. However, Chemtrade believes the costs cannot be further reduced to any material extent. The aggregate capital costs for this project are now estimated to range between US$300 million and US$380 million, which represents an increase of approximately 50% over the original estimate. Roughly half of the increased cost is due to higher labour costs to build the plant, with the balance due to equipment costs and some changes in scope to ensure compliance with regulations.
Together with our joint venture partner, Chemtrade has made the decision to put the project on hold while revised commercial agreements are negotiated with customers to ensure that the project generates an acceptable level of return. In light of this decision, Chemtrade will provide an updated organic growth capital expenditure range for 2023 when it releases its second quarter results in August 2023.