Methanex Switch Core Production to Low Cost Chilean Plant

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). In November 2002, Methanex Corporation (NASDAQ:MEOH,TX:MX) (Vancouver, Canada) made two announcements. The first was that the company would proceed with the construction of an 840,000 tons per annum expansion at its methanol production hub in Punta Arenas, Chile. The second, and connected announcement was that Methanex was taking a $113 million write off on its 570,000 tons per annum methanol plant in Fortier, Louisiana. The Fortier plant had been mothballed since March 1999.

The expansion in one plant and the write-off of the other reflects the company's low cost strategy of reducing reliance on North American production by expanding methanol production in Trinidad and Chile.

The Punta Arenas expansion has a 20 year natural gas supply contract and is expected to cost around $275 million in total. The project should be completed by early 2005. In connection with the expansion, the gas contracts for Methanex's existing plants, Chile I, Chile II and Chile III, have been extended to 2025, 2027, and 2029 respectively. The expansion will give Methanex, the world's largest producer and marketer of methanol, additional low cost capacity to supply their customer base and secure the low cost structure of the whole Chile site for many years into the future.

Connected with the Fortier write-off Methanex will take a non-cash after-tax charge of $86 million in the last quarter of 2002. This will be partially offset by a $27 million reduction in the accrual for site restoration and demolition costs at the company's New Zealand facilities. The adjustment to the site restoration and demolition accrual for the New Zealand facilities was made after completing a comprehensive review and analysis to update a previous estimate.