Koch says ‘no’ on idled plant

Lawrence facility not included in offer for Farmland assets

Thanks, but no thanks.

Bankrupt Farmland Industries Inc. reached a tentative deal Tuesday to sell the bulk of its nitrogen fertilizer operations to Wichita-based Koch Nitrogen Co., but the deal does not include Farmland’s Lawrence fertilizer plant.

The Lawrence plant, located east of the city on Kansas Highway 10, has been shut down since May 2001. It is the oldest plant in the Farmland system. Koch officials said they weren’t interested in purchasing the 467-acre plant because it was no longer in operation.

“If you take a look at the assets Farmland kept operating, they were making a bet on which assets could be the most steady performers if the fertilizer market recovers,” said Mary Beth Jarvis, a Koch Nitrogen spokeswoman. “The Lawrence plant wasn’t part of that bet. We kind of just followed their lead in that respect.”

Koch also declined to purchase a fertilizer facility in Pollock, La., which had been shut down.

Plants included in the deal: Dodge City; Fort Dodge, Iowa; Enid, Okla., and Beatrice, Neb. Koch also would purchase Farmland’s 50 percent ownership stake in a fertilizer plant in the Republic of Trinidad and Tobago, and it would get a one-year option to purchase Farmland’s fertilizer plant in Coffeyville.

The $270 million deal is subject to bankruptcy court approval and must go through a court-mandated auction process. The announcement means Koch’s offer would be the starting bid in a live auction set by the court, Farmland spokeswoman Sherlyn Manson said. The Kansas City, Mo.-based cooperative filed May 31 for Chapter 11 bankruptcy protection.

Lawrence site’s future bleak

Manson stopped short of saying Tuesday’s announcement meant the Lawrence plant, which was built in 1954, never again would be used to produce fertilizer.

“The current bid doesn’t include Lawrence, but we still have an auction to go through, and that means another bid may,” Manson said.

An industry analyst who has been following the Farmland bankruptcy said it was unlikely any fertilizer company would be interested in purchasing the sprawling site.

Diana Thompson, a Kansas University junior from McPherson, and her dog Scooby play on the Douglas County 4-H Fairgrounds west of the Farmland Industries facility on the east edge of town. Farmland Industries announced it has accepted a tentative 70 million offer to buy its fertilizer operations from Wichita-based Koch Nitrogen; however, the deal does not include the facility in Lawrence.

“Lawrence is an old plant, and in the industry it is reported that it has some environmental problems, and nobody wants to touch it because of that,” said John Douglas of Douglas Associates, an Alabama-based consulting firm for the fertilizer industry.

Lawrence economic development officials said Tuesday’s announcement was a sign people should begin thinking of other uses for the land.

“I think this should send a message to everyone that it is really a redevelopment candidate now,” said Lynn Parman, vice president of economic development for the Lawrence Chamber of Commerce.

Possible uses

Parman said the plant, because it was a neighbor to the East Hills Business Park and has direct access to Kansas Highway 10, was a prime candidate to be redeveloped as an industrial park.

Jerry Samp, vice president of Douglas County Development Inc., the public-private partnership that oversees East Hills, said the group would consider purchasing the property.

The land could go a long way in easing the shortage of available industrial lots in the Lawrence area, Samp said. But he added that DCDI probably would have to seek public funding to purchase the property.

“We don’t have any money to do it on our own,” Samp said. “We would have to form a partnership, and I’m not sure if that would be with the city, the county or the state. But I think it is the perfect thing for something like DCDI to explore.”

Sale’s completion likely

Manson said Farmland wouldn’t comment on how it would go about disposing of the Lawrence plant until after the auction process was completed. She also declined to say how much the property could be worth.

Farmland said it anticipated completing the fertilizer sale later this spring. It is still trying to sell its petroleum refinery and grain elevators, Manson said. The cooperative suffered a $121.8 million loss on its fertilizer operations last year. Selling the business is a key to the company’s restructuring plan.

Koch Nitrogen owns a fertilizer manufacturing plant in Sterlington, La., 15 storage facilities across the Midwest, and has part ownership and marketing agreements in place in Venezuela and Trinidad.

Koch Nitrogen Co. is a subsidiary of Koch Industries Inc., which is ranked by Forbes magazine as the second-largest privately held company in North America.