Full Description

Terra Industries Inc. together with its subsidiaries (Terra), incorporated in 1978, is a producer and marketer of nitrogen products, serving agricultural and industrial markets. The Company is engaged in the production of anhydrous ammonia (or ammonia), the basic building block of nitrogen fertilizers. Terra converts a portion of the ammonia it produces into urea ammonium nitrate solutions (UAN), ammonium nitrate (AN) and urea. In addition to manufacturing facilities at Port Neal, Iowa; Courtright, Ontario, Canada; Yazoo City, Mississippi; Donaldsonville, Louisiana and Woodward, Oklahoma, the Company owns a 75.3% interest in Terra Nitrogen Company, L.P. (TNCLP), which, through its subsidiary, Terra Nitrogen, Limited Partnership, operates the manufacturing facility at Verdigris, Oklahoma. In addition, the Company owns a 50% interest in Point Lisas Nitrogen Limited (Point Lisas), an ammonia production joint venture in the Republic of Trinidad and Tobago.

Nitrogen Business

The principal forms of global traded nitrogen fertilizer are ammonia and urea. AN is also traded in global markets. UAN is used in North America and Western Europe, and has only recently been traded in other international markets. UAN’s high water content and need for transportation in tankers can cause transportation costs per unit of nitrogen to be higher than for other forms of internationally traded nitrogen products.

Ammonia, AN, urea and UAN are the principal nitrogen products produce and sell in North America. GrowHow produces and sells primarily ammonia, AN and fertilizer compounds in the United Kingdom. The Point Lisas production facility in Trinidad provides ammonia for sale into both the United States and international nitrogen markets. Other products manufactured by the Company include nitric acid, dinitrogen tetroxide and carbon dioxide. These products, along with a portion of the ammonia, AN and urea production, are used in non-agricultural applications.

The Terra Environmental Technologies business provides products and services to customers using nitrogen products (primarily ammonia, aqua ammonia and liquid and dry urea) to reduce NOx emissions from various stationary sources, such as power plants, and other environmental processes, such as water treatment plants, and also in the DEF market.

The Company is engaged in the production of ammonia. Ammonia is the simplest form of nitrogen fertilizer and the feedstock for the production of other nitrogen fertilizers, including urea, AN and UAN. Ammonia is also a vital raw material for many industrial applications. Ammonia is produced when natural gas reacts with steam and air at high temperatures and pressures in the presence of catalysts. Ammonia has a nitrogen content of 82% by weight and is generally the least expensive form of fertilizer on a per-pound-of-contained-nitrogen basis. During the year ended December 31, 2008, the Company produced approximately 3,171,000 tons of ammonia at the North American facilities. In 2008, the Company purchased approximately 390,000 tons pursuant to the contract with Point Lisas. Terra sold a total of 1,669,000 tons of ammonia globally in 2008 and consumed approximately 2,016,000 tons of ammonia as a raw material to manufacture the other nitrogen products.

UAN is a liquid fertilizer and, unlike ammonia, is odorless and does not require refrigeration or pressurization for transportation or storage. UAN is produced by combining liquid urea, liquid ammonium nitrate and water. The nitrogen content of UAN ranges from 28% to 32% by weight. UAN can be applied to crops directly or mixed with crop protection products, permitting the application of several materials simultaneously, reducing energy and labor costs and accelerating field preparation for planting. UAN may be applied from ordinary tanks and trucks and sprayed or injected into the soil, or applied through irrigation systems. In addition, UAN may be applied throughout the growing season, providing application flexibility. Due to its stability, UAN (like AN) may be used for no-till row crops where fertilizer is spread on the surface of the soil. In 2008, the Company produced approximately 3,703,000 tons of UAN at the North American facilities and sold approximately 3,918,300 tons of UAN to United States fertilizer dealers and distributors.

Terra is the manufacturer and marketer of agricultural-grade AN fertilizer in the United States and produce AN through GrowHow in the United Kingdom. AN is produced by combining nitric acid and ammonia into a liquid form which is then converted to a solid, largely for fertilizer applications. The nitrogen content of AN is 34% by weight. AN is less subject to volatilization (evaporation) losses than other nitrogen products. During 2008, the Company produced approximately 310,000 tons of merchant ammonium nitrate solution (ANS) and 486,000 tons of agricultural grade AN (Amtratetm). It produced 190,000 tons IGAN, at the Yazoo City, Mississippi facility during 2008. During 2008, the Company sold approximately 489,800 tons of Amtratetm, 191,700 tons of IGAN, and 308,800 tons of ANS.

Urea is produced by converting ammonia and carbon dioxide into liquid urea, which can be further processed into a solid, granular form. Urea is used for fertilizer and animal feed, in industrial applications as a raw material to produce resins, and environmentally as a reagent to reduce NOx emissions. Granular urea has a nitrogen content of 46% by weight, the highest level of any solid nitrogen product. The Company produces both a granulated form of urea, for the industrial market, and urea liquor (liquid) for animal feed supplements and industrial applications. In 2008, the Company produced and sold approximately 250,000 tons of merchant urea and urea liquor.

Nitric acid is made by oxidizing ammonia with air. The product is used as a raw material for other nitrogen products and by industrial customers to produce such products as nylon fibers, polyurethane foams and specialty fibers. In 2008, the Company produced approximately 2,110,000 tons of nitric acid. Approximately 35,000 of these tons were sold to industrial users and the remainder was used as a raw material for the production of the other nitrogen products.

Dinitrogen tetroxide is the propellant oxidizer used in various satellite, rocket and missile propulsion systems. It is also used by industrial customers in the manufacturing of pharmaceuticals. Dinitrogen tetroxide is produced by cooling and condensing a slipstream of process gas from a nitric acid plant containing various oxides of nitrogen. The recovered product is filtered and its composition adjusted to meet final product specifications. The Company manufactured approximately 262,300 pounds of the product in 2008.