Baker & O'Brien, Inc.

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Factors that Contribute to the Value of a Fertilizer Plant

Arbitration, Central and South America

October 1, 2019

The majority interest operator and a minority interest partner of a large nitrogen fertilizer complex filed for arbitration regarding the value of the minority interest.  A key item of evidence in the dispute was a report that alleged numerous deficiencies in the plant that impaired the value of the facilities.  Baker & O’Brien was engaged to evaluate these deficiencies and to determine the extent of any impairment.

The plant had been delivered to the owners about 15 years earlier by an experienced and reputable international EPC firm under a lump sum turnkey project.  We investigated whether the original plant was accepted by the owner and certified to lenders as a first-class facility that had fulfilled all of its performance guarantees for capacity, efficiency, and product quality.  We also investigated whether the facility had operated at its nameplate capacity over reasonable periods of time.  We compared the overall mechanical reliability of the plant to industry norms for similar equipment.  Our analysis also considered the extent to which historical operations had been impacted by external factors, such as interruptions in natural gas supply, power supply, and other utility services, and whether the outlook for these services supported improved or reduced mechanical availability.

Baker & O’Brien reviewed extensive project records, corporate records, and operating records related to the complex.  We researched operating norms for nitrogen fertilizer complexes in areas of the world with similar labor skills and technologies.  Our consultants’ experience serving as independent engineer on behalf of lenders for large international fertilizer projects resulted in an expeditious review of these issues.  The results of this investigation were summarized in a report, which was presented in the arbitration.