As previously communicated, in the face of increasingly difficult domestic trading conditions for its soda ash business and increasing costs, Penrice Soda Holdings Limited has decided to close soda ash production at its Osborne, Adelaide chemical facility in June 2013 and import soda ash instead.
In January 2013, Penrice signed a Memorandum of Understanding with SASS Victoria Australia Pty Ltd (SASS) to form a Joint Venture (JV) to import and market soda ash in Australia. The commencement of the JV was subject to satisfaction of conditions including final due diligence and signing definitive transaction documents.
JV commences with launch of “Pro Asia Pacific”
Penrice announces that the parties have signed definitive transaction documents and the JV, to be known as “Pro Asia Pacific”, is now formed with sales to commence from May 2013.
Penrice Managing Director and CEO, Mr Guy Roberts said, “Penrice is responding to the continuing losses in its soda ash business by closing soda ash production in Adelaide and switching to importing soda ash via an import and distribution joint venture with SASS.
"With Pro Asia Pacific, Penrice is delighted to be joint venturing with the world’s largest soda ash distributor with product sourced from American Natural Soda Ash Corporation (“ANSAC”), the export arm of three of the world’s leading soda ash producers.”
He said, “While it is unfortunate that the soda ash plant closure will cause staff redundancies, customers will benefit as the JV will maintain service standards and reliable supply to our Australian customers with a quality product. Importantly for Penrice, the restructure is expected to enable Penrice’s soda ash business to generate a profit from FY2014.”
Penrice’s Osborne chemical plant will continue to manufacture its range of premium sodium bicarbonate products and lime, which will be marketed for sale for the first time.
Key features of the Pro Asia Pacific JV include:
-The JV will be owned by SASS as to 67% and Penrice as to 33%
-The term of the JV will be a minimum of 6 years
-SASS will loan Penrice $8 million to fund the cost of decommissioning the soda ash plant, including redundancies and the cost of converting the sodium bicarbonate plant to accept imported soda ash. The loan is repayable over the term of the JV
-Penrice will provide inbound logistics, warehousing, packaging and transport services for the JV at commercial rates
Sodium bicarbonate production continues as usual
Penrice has conducted trials with imported ANSAC soda ash and has produced sodium bicarbonate of the equivalent quality to current specification. Penrice has entered into a long term supply agreement with Pro Asia Pacific for the supply of ANSAC soda ash. Customers can be assured that quality and reliability of supply will be maintained.
Lime for sale
Penrice will continue to operate its kilns at its Osborne chemical facility to provide the necessary carbon dioxide to the sodium bicarbonate plant. In this process, Penrice will produce lime for sale in commercial quantities for the first time and plans are well advanced to enter this large and growing Australian market.
Penrice and Ridley
Penrice and Ridley Corporation are parties to a long term ‘take or pay’ supply agreement for supply of salt to Penrice’s soda ash plant. When the plant is closed, Penrice’s requirements for salt will cease. The parties are working together constructively to manage the plant closure impact in a manner which advances the best interests of both parties.
Penrice CEO, Guy Roberts said that, “Penrice is confident of reaching a mutually agreeable outcome, recognising that whilst it wishes to exit the supply agreement, Ridley has already announced its reactivated plan to develop the Dry Creek salt fields for residential purposes.”
About Penrice
Penrice Soda Holdings Limited is Australia’s only manufacturer of soda ash and sodium bicarbonate and one of the world’s largest sodium bicarbonate marketing companies. It also operates a limestone mine, supplying industrial minerals and civil products.
About SASS
SASS is a subsidiary of Soda Ash Holding BV, a Dutch Holding Company, that controls a number of soda ash distributors globally, making it the world’s largest independent distributor of soda ash per year, reselling over 1 million tonnes of soda ash throughout South America, Russia, Ukraine and CIS countries and elsewhere.
