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Item 1. Business

2021-02-24 compared with 2020-02-24 · 149 added, 96 removed, 273 unchanged (47% of the section changed)

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Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements.

We are a leading global fertilizer and chemical company.

Our 3,000 employees operate world-class manufacturing complexes in Canada, the United Kingdom and the United States.

Our manufacturing network is among the most efficient and cost-advantaged in the world, as our facilities in Canada and the United States have access to low-cost North American natural gas.

Our principal nitrogen fertilizer products are anhydrous ammonia (ammonia), granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN).

We are a leading global manufacturer of hydrogen and nitrogen products for clean energy, fertilizer, emissions abatement, and other industrial applications.

We operate nitrogen manufacturing complexes in the United States, Canada and the United Kingdom, which are among the most cost-advantaged, efficient and flexible in the world, and an extensive storage, transportation and distribution network in North America.

Our 3,000 employees focus on safe and reliable operations, environmental stewardship and disciplined capital and corporate management, driving our strategy to leverage our unique capabilities to accelerate the world’s transition to clean energy.

Our principal customers are cooperatives, independent fertilizer distributors, traders, wholesalers and industrial users.

Our core product is anhydrous ammonia (ammonia), which contains 82% nitrogen and 18% hydrogen.

Our nitrogen products that are upgraded from ammonia are granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN).

Our other nitrogen products include diesel exhaust fluid (DEF), urea liquor, nitric acid and aqua ammonia, which are sold primarily to our industrial customers, and compound fertilizer products (NPKs), which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus and potassium.

We serve our customers in North America through our production, storage, transportation and distribution network.

We also reach a global customer base with exports from our Donaldsonville, Louisiana, facility, the world’s largest and most flexible nitrogen complex.

Additionally, we move product to international destinations from our Verdigris, Oklahoma, facility, our Yazoo City, Mississippi, facility, and our Billingham and Ince facilities in the United Kingdom, and a joint venture ammonia facility in the Republic of Trinidad and Tobago in which we own a 50 percent interest.

Our principal assets as of December 31, 2020 include:

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(CHS) owns the remainder;

See Note 17—Noncontrolling Interests for additional information on our strategic venture with CHS;

• two Canadian nitrogen manufacturing facilities, located in Medicine Hat, Alberta (the largest nitrogen complex in Canada) and Courtright, Ontario;

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• a 50% interest in Point Lisas Nitrogen Limited (PLNL), an ammonia production joint venture located in the Republic of Trinidad and Tobago that we account for under the equity method.

Our nitrogen manufacturing facility in Verdigris, Oklahoma, is owned and operated by Terra Nitrogen, Limited Partnership (TNLP).

Prior to April 2, 2018, TNLP was a subsidiary of Terra Nitrogen Company, L.P.

(TNCLP), which was a publicly traded limited partnership of which we were the sole general partner and the majority limited partner, and in which we owned an approximate 75.3% interest.

In 2018, we announced that in accordance with the terms of TNCLP’s First Amended and Restated Agreement of Limited Partnership (as amended by Amendment No.

1 to the First Amended and Restated Agreement of Limited Partnership, the TNCLP Agreement of Limited Partnership), Terra Nitrogen GP Inc.

(TNGP), the sole general partner of TNCLP and an indirect wholly owned subsidiary of CF Holdings, elected to exercise its right to purchase all of the 4,612,562 publicly traded common units of TNCLP (the TNCLP Public Units).

On April, 2, 2018, TNGP completed its purchase of the TNCLP Public Units (the Purchase) for an aggregate cash purchase price of $388 million.

We funded the Purchase with cash on hand.

Upon completion of the Purchase, CF Holdings owned, through its subsidiaries, 100 percent of the general and limited partnership interests of TNCLP.

In 2016, we completed our capacity expansion projects at Donaldsonville, Louisiana and Port Neal, Iowa.

These projects, originally announced in 2012, included the construction of new ammonia, urea, and UAN plants at our Donaldsonville, Louisiana complex and new ammonia and urea plants at our Port Neal, Iowa complex.

These plants increased our overall

CF INDUSTRIES HOLDINGS, INC.

production capacity by approximately 25%, improved our product mix flexibility at Donaldsonville, and improved our ability to serve upper-Midwest urea customers from our Port Neal location.

At our Donaldsonville complex, the ammonia plant was placed in service in the fourth quarter of 2016, the UAN plant was placed in service in the first quarter of 2016 and the granular urea plant was placed in service in the fourth quarter of 2015.

At our Port Neal, Iowa complex, both the ammonia and granular urea plants were placed in service in the fourth quarter of 2016.

The total capital cost of the capacity expansion projects was $5.2 billion.

We commenced a strategic venture with CHS on February 1, 2016, at which time CHS made a capital contribution of $2.8 billion to CFN in exchange for membership interests in CFN, which represented approximately 11% of the total membership interests of CFN.

We have a strategic venture with CHS under which CHS owns an equity interest in CFN, a subsidiary of CF Holdings, which represents approximately 11% of the membership interests of CFN.

We own the remaining membership interests.

On February 1, 2016, CHS also began receiving deliveries pursuant to a supply agreement under which CHS has the right to purchase annually from CFN up to approximately 1.1 million tons of granular urea and 580,000 tons of UAN at market prices.

CHS also receives deliveries pursuant to a supply agreement under which CHS has the right to purchase annually from CFN up to approximately 1.1 million tons of granular urea and 580,000 tons of UAN at market prices.

As a result of its minority equity interest in CFN, CHS is entitled to semi-annual cash distributions from CFN.

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See Note 17—Noncontrolling Interests for additional information on our strategic venture with CHS.

On July 31, 2015, we acquired the remaining 50% equity interest in CF Fertilisers UK Group Limited (formerly known as GrowHow UK Group Limited) (CF Fertilisers UK) not previously owned by us for total consideration of $570 million, and CF Fertilisers UK became wholly owned by us.

This transaction added CF Fertilisers UK’s nitrogen manufacturing complexes in Ince, United Kingdom and Billingham, United Kingdom to our consolidated manufacturing capacity.

For the years ended December 31, 2020, 2019 and 2018, we sold 20.3 million, 19.5 million and 19.3 million product tons generating net sales of $4.12 billion, $4.59 billion and $4.43 billion, respectively.

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We make available free of charge on or through our Internet website, www.cfindustries.com , all of our reports on Forms 10-K, 10-Q and 8-K and all amendments to those reports as soon as reasonably practicable after such material is filed electronically with, or furnished to, the Securities and Exchange Commission (SEC).

Copies of our Corporate Governance Guidelines, Code of Corporate Conduct and charters for the Audit Committee, Compensation and Management Development Committee, and Corporate Governance and Nominating Committee of our Board of Directors (the Board) are also available on our Internet website.

We will provide electronic or paper copies of these documents free of charge upon request.

Copies of our Corporate Governance Guidelines, Code of Corporate Conduct and charters for the Audit Committee, Compensation and Management Development Committee, Corporate Governance and Nominating Committee, and Environmental Sustainability and Community Committee of our Board of Directors (the Board) are also available on our Internet website.

We will provide electronic or paper copies of

CF INDUSTRIES HOLDINGS, INC.

these documents free of charge upon request.

The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

Our Commitment to a Clean Energy Economy

In October 2020, we announced that we are taking significant steps to support a global hydrogen and clean fuel economy, through the production of green and low-carbon ammonia.

Since ammonia is one of the most efficient ways to transport and store hydrogen and is also a fuel in its own right, we believe that the Company, as the world’s largest producer of ammonia, with an unparalleled manufacturing and distribution network and deep technical expertise, is uniquely positioned to fulfill anticipated demand for hydrogen and ammonia from green and low-carbon sources.

Our strategy is to leverage our unique capabilities to accelerate the world’s transition to clean energy.

Our approach will focus on green ammonia production, which refers to ammonia produced through a carbon-free process, and low-carbon ammonia, which relates to ammonia produced by conventional processes but with CO 2 removed through carbon capture and sequestration (CCS) and other certified carbon abatement projects.

We have announced an initial green ammonia project at our flagship Donaldsonville nitrogen complex to produce approximately 20,000 tons per year of green ammonia.

Additionally, we are developing CCS and other carbon abatement projects across our production facilities that will enable us to produce low-carbon ammonia.

Company History

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As a result of the Terra acquisition, we acquired five nitrogen fertilizer manufacturing facilities, an approximately 75.3% interest in TNCLP and certain joint venture interests.

CF INDUSTRIES HOLDINGS, INC.

In March 2014, we exited our phosphate mining and manufacturing business, which was located in Florida, through a sale to The Mosaic Company for approximately $1.4 billion in cash.

As a result, our company became focused solely on nitrogen manufacturing and distribution.

In July 2015, we acquired the remaining 50% equity interest in CF Fertilisers UK not previously owned by us for total consideration of $570 million, and CF Fertilisers UK became wholly owned by us.

In July 2015, we acquired the remaining 50% equity interest in CF Fertilisers UK Group Limited (formerly known as GrowHow UK Group Limited) (CF Fertilisers UK) not previously owned by us for total consideration of $570 million, and CF Fertilisers UK became wholly owned by us.

This transaction added CF Fertilisers UK’s nitrogen manufacturing complexes in Ince, United Kingdom and Billingham, United Kingdom to our consolidated manufacturing capacity.

In February 2016, our strategic venture with CHS commenced, at which time CHS made a capital contribution of $2.8 billion to CFN in exchange for membership interests in CFN, which represented approximately 11% of the total membership interests of CFN.

In 2016, we completed capacity expansion projects at Donaldsonville, Louisiana and Port Neal, Iowa which increased our production capacity by approximately 25% for a total capital cost of $5.2 billion.

In 2018, we announced that TNGP elected to exercise its right to purchase the TNCLP Public Units.

TNGP completed the Purchase on April 2, 2018, for an aggregate cash purchase price of $388 million.

In late 2015 and 2016, we completed certain capacity expansion projects at Donaldsonville, Louisiana and Port Neal, Iowa.

These plants increased our overall production capacity by approximately 25%, improved our product mix flexibility at Donaldsonville, and improved our ability to serve upper-Midwest urea customers from our Port Neal location.

The total capital cost of the capacity expansion projects was $5.2 billion.

CF INDUSTRIES HOLDINGS, INC.

Prior to April 2, 2018, Terra Nitrogen, Limited Partnership, which owns and operates our nitrogen manufacturing facility in Verdigris, Oklahoma, was a subsidiary of Terra Nitrogen Company, L.P.

TNCLP was a publicly traded limited partnership of which we were the sole general partner and the majority limited partner, and in which we owned an approximate 75.3% interest.

In 2018, we announced that, in accordance with the terms of TNCLP’s First Amended and Restated Agreement of Limited Partnership (as amended by Amendment No.

1 to the First Amended and Restated Agreement of Limited Partnership, the TNCLP Agreement of Limited Partnership), Terra Nitrogen GP Inc.

On April, 2, 2018, TNGP completed its purchase of the TNCLP Public Units (the Purchase) for an aggregate cash purchase price of $388 million.

We funded the Purchase with cash on hand.

Upon completion of the Purchase, CF Holdings owned, through its subsidiaries, 100 percent of the general and limited partnership interests of TNCLP.

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Net sales do not reflect amounts used internally, such as ammonia, in the manufacture of other products.

Sales Volume (tons)

2020 2019 2018

Sales Volume (tons) Net Sales Sales Volume (tons) Net Sales Sales Volume (tons) Net Sales

(tons in thousands;

dollars in millions)

Ammonia 3,767 $ 1,020 3,516 $ 1,113 3,135 $ 1,028

Granular urea 5,148 1,248 4,849 1,342 4,898 1,322

UAN 6,843 1,063 6,807 1,270 7,042 1,234

AN 2,216 455 2,109 506 2,002 460

2,322 338 2,257 359 2,252 385

Total 20,296 $ 4,124 19,538 $ 4,590 19,329 $ 4,429

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(1) Other segment products include DEF, urea liquor, nitric acid, aqua ammonia and NPKs.

Gross margin was $801 million, $1,174 million and $917 million for the years ended December 31, 2020, 2019 and 2018, respectively.

CF INDUSTRIES HOLDINGS, INC.

We own and operate seven nitrogen fertilizer manufacturing facilities in North America, including five nitrogen fertilizer manufacturing facilities in the United States, and two in Canada.

We own and operate seven nitrogen manufacturing facilities in North America, including five nitrogen manufacturing facilities in the United States, and two in Canada.

As of December 31, 2020, the combined production capacity of these seven facilities represented approximately 37%, 42%, 44% and 19% of North American ammonia, granular urea, UAN and AN production capacity, respectively.

Each of our nitrogen fertilizer manufacturing facilities in North America has on-site storage to provide flexibility to manage the flow of outbound shipments without impacting production.

Each of our nitrogen manufacturing facilities in North America has on-site storage to provide

CF INDUSTRIES HOLDINGS, INC.

flexibility to manage the flow of outbound shipments without impacting production.

We also operate two United Kingdom nitrogen manufacturing facilities that produce ammonia, AN and NPKs and serve primarily the British agricultural and industrial markets.

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Donaldsonville, Louisiana (7)

4,335 1,390 3,255 2,635 — 445

Medicine Hat, Alberta 1,230 770 — 810 — —

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Verdigris, Oklahoma (8)

1,210 430 1,955 — — —

Woodward, Oklahoma 480 130 810 — — 115

Yazoo City, Mississippi (8)(9)

570 — 160 — 1,035 125

Courtright, Ontario (8)(10)

500 265 345 — — 400

380 15 — — 575 415

Billingham, U.K.

595 230 — — 625 410

10,530 3,340 7,325 4,795 2,235 2,020

Unconsolidated Affiliate

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360 360 — — — —

Total 10,890 3,700 7,325 4,795 2,235 2,020

_______________________________________________________________________________

(1) Average annual capacity includes allowance for normal outages and planned maintenance shutdowns.

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CF INDUSTRIES HOLDINGS, INC.

The following table summarizes our nitrogen fertilizer production volume for the last three years:

The following table summarizes our production volume for the last three years:

2020 2019 2018

(tons in thousands)

10,353 10,246 9,805

Granular urea 5,001 4,941 4,837

UAN (32%) 6,677 6,768 6,903

AN 2,115 2,128 1,731

_______________________________________________________________________________

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Nitrogen Fertilizer Raw Materials

Natural gas is the principal raw material and primary fuel source used in the ammonia production process at our nitrogen fertilizer manufacturing facilities.

In 2019 , natural gas accounted for approximately 35% of our total production costs for nitrogen fertilizer products.

Our nitrogen fertilizer manufacturing facilities have access to abundant, competitively-priced natural gas through a reliable network of pipelines that are connected to major natural gas trading hubs near the facilities.

Natural gas is the principal raw material and primary fuel source used in the ammonia production process at our nitrogen manufacturing facilities.

In 2020, natural gas accounted for approximately one-third of our total production costs for nitrogen products.

Our nitrogen manufacturing facilities have access to abundant, competitively-priced natural gas through a reliable network of pipelines that are connected to major natural gas trading hubs near the facilities.

Our facilities utilize the following natural gas hubs:

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The North American waterway system is also used extensively to ship products from our Donaldsonville, Verdigris and Yazoo City facilities.

To ship ammonia and UAN, we employ a fleet of eleven tow boats and thirty-two river barges, which are primarily leased.

To ship ammonia and UAN, we employ a fleet of ten tow boats and twenty-eight river barges, which are primarily leased.

We also utilize contract marine services to move urea fertilizer.

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The Donaldsonville facility is connected to the 2,000-mile long Nustar pipeline through which we have the ability to transport ammonia to ten terminals and shipping points in the Midwestern U.S.

Our Verdigris and Port Neal facilities are connected to the 1,100-mile long Magellan ammonia pipeline that also serves the Midwestern United States.

On January 31, 2019, Magellan Midstream Partners, L.P.

(Magellan) announced its decision to discontinue commercial operations of the ammonia pipeline beginning in late 2019.

In September 2019, the portion of the Magellan ammonia pipeline that connects to our Verdigris, Oklahoma complex was permanently shut down, resulting in the loss of future distribution of Verdigris ammonia production through this pipeline.

In addition, we expect that the portion of the Magellan ammonia pipeline that connects to our Port Neal, Iowa complex will permanently shut down in March 2020, which will result in the loss of future distribution of Port Neal ammonia production through this pipeline.

CF INDUSTRIES HOLDINGS, INC.

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Our storage capabilities are summarized in the following table:

Granular Urea

Ammonia Granular Urea UAN (1)

Facilities Capacity

(000 Tons) Number of

Facilities Capacity

(000 Tons) Number of

Facilities Capacity

(000 Tons) Number of

Facilities Capacity

Plants 9 546 3 320 6 549 3 234

Terminal and Warehouse Locations

Leased (2)(3)

Owned 22 780 — — 9 244 — —

6 124 2 32 24 391 — —

Total In-Market 28 904 2 32 33 635 — —

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(1) Capacity is expressed as the equivalent volume of UAN measured on a 32% nitrogen content basis.

In April 2019, we sold our Pine Bend dry bulk storage and logistics facility in Minnesota, which had provided 200 thousand tons of granular urea storage.

The portion we lease back is included in the leased granular urea storage tons.

(2) Our lease agreements are typically for periods of one to five years.

The principal customers for our nitrogen fertilizer and other nitrogen products are cooperatives, independent fertilizer distributors, traders, wholesalers and industrial users.

The principal customers for our nitrogen products are cooperatives, independent fertilizer distributors, traders, wholesalers and industrial users.

Sales are generated by our internal marketing and sales force.

CHS was our largest customer in 2020 and accounted for approximately 13% of our consolidated net sales.

We have a strategic venture with CHS and they have a minority equity interest in CFN.

We have a strategic venture with CHS under which CHS has a minority equity interest in CFN.

See Note 17—Noncontrolling Interests for additional information on our strategic venture with CHS.

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and the demolition of existing plant sites upon permanent closure.

In the United States, these laws include the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act (RCRA), the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), the Toxic Substances Control Act (TSCA) and various other federal, state, provincial, local and international statutes.

In the United States, these laws include the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act (RCRA), the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), the Toxic Substances Control Act (TSCA), the Occupational Safety and Health Act (OSHA) and various other federal, state and local statutes.

Violations of environmental, health and safety laws can result in substantial penalties, court orders to install pollution-control equipment, civil and criminal sanctions, permit revocations and facility shutdowns.

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We estimate that we will have approximately $45 million of capital expenditures for environmental, health and safety in 2021.

In addition, to support safe and reliable operations at our continuous process manufacturing facilities, we conduct scheduled inspections, replacements and overhauls of our plant machinery and equipment, which are referred to as turnarounds.

A further description of turnaround activities is included in Note 6—Property, Plant and Equipment—Net to our consolidated financial statements included in Item 8 of this report.

Environmental, health and safety laws and regulations are complex, change frequently and have tended to become more stringent over time.

We expect that continued government and public emphasis on environmental issues will result in increased future expenditures for environmental controls at our operations.

We expect that continued government and public emphasis on environmental issues will result in increased future expenditures for environmental controls at our manufacturing and distribution facilities.

Such expenditures could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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Department of the Interior and other trustees intend to undertake a natural resource damage assessment for 17 former phosphate mines in southeast Idaho, one of which is the former Georgetown Canyon mine.

See Note 20—Contingencies for additional information on the CERCLA/Remediation matters.

See Note 20—Contingencies for additional information.

Regulation of Greenhouse Gases

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The steam boilers at each of our U.K.

sites are also subject to the EU ETS, and are required to hold or obtain emissions allowances to offset GHG emissions.

The EU has announced changes to the EU ETS to increase the pace of emissions cuts beginning in 2021.

Notwithstanding the exit of the United Kingdom from the European Union (Brexit) on January 31, 2020, facilities in the United Kingdom will remain subject to the EU ETS at least through the end of 2020.

Although there is uncertainty about the GHG regulations that will apply thereafter, a framework similar to the EU ETS is a likely outcome.

sites have also been subject to the EU ETS, and have been required to hold or obtain emissions allowances to offset GHG emissions.

Notwithstanding the exit of the United Kingdom from the European Union (Brexit) on January 31, 2020, facilities in the United Kingdom remained subject to the EU ETS through the end of 2020.

Beginning on January 1, 2021, our U.K.

manufacturing plants became subject to the UK Emissions Trading Scheme (UK ETS).

At least initially, the UK ETS is expected to be similar to the EU ETS, although the U.K.

government has stated that it intends to establish an emissions cap that is lower than what it would have been had the United Kingdom remained subject to the EU ETS.

No agreement has been reached as to whether the UK ETS will establish a linkage with the EU ETS or other national emission trading systems.

CF INDUSTRIES HOLDINGS, INC.

In Canada, we are required to conduct an annual review of our operations with respect to compliance with Environment Canada’s National Pollutant Release Inventory and Ontario’s Mandatory Monitoring and Reporting Regulation and the GHG Reporting Regulation.

In 2018, the federal Greenhouse Pollution Pricing Act came into effect, pursuant to which Environment and Climate Change Canada (ECCC) will implement the Output-Based Performance Standard (OBPS), which is intended to function as a backstop to provincial greenhouse gas emissions regulations.

In June 2019, the ECCC finalized the emission

CF INDUSTRIES HOLDINGS, INC.

limits for carbon dioxide equivalent (CO 2 e) emissions from nitrogen fertilizer products.

In June 2019, the ECCC finalized the emission limits for carbon dioxide equivalent (CO 2 e) emissions from nitrogen fertilizer products.

These emission limits are based on 95% of the average emissions intensity for the production of such products from all Canadian nitrogen fertilizer plants, reflecting that such products are deemed to be energy-intensive and trade-exposed and thus subject to a less stringent emissions reduction requirement.

In the provinces and territories where the OBPS will apply, a facility whose carbon emissions exceed the applicable limits will be required to offset emissions by obtaining and retiring surplus emission credits, obtaining qualifying emissions offsets, or paying a fee of $20 per ton of excess carbon dioxide equivalent for calendar year 2019, which fee will rise by $10 per ton for each year through 2022.

Ontario and Saskatchewan are challenging whether the federal government has jurisdiction to impose a federal carbon price on the provinces and territories.

The Saskatchewan Court of Appeal (in May 2019) and the Ontario Court of Appeal (in June 2019) each held that the Greenhouse Pollution Pricing Act was validly enacted under the Canadian constitution.

Ontario and Saskatchewan both appealed these decisions to the Supreme Court of Canada and oral arguments are scheduled for March 2020.

In June 2019, Alberta filed a legal challenge to the constitutionality of the statute, notwithstanding that the question will be resolved by the pending Supreme Court appeals.

In the provinces and territories where the OBPS applies, a facility whose carbon emissions exceed the applicable limits is required to offset emissions by obtaining and retiring surplus emission credits, obtaining qualifying emissions offsets, or paying a fee, which for calendar year 2019 was CAD $20 per ton of excess carbon dioxide equivalent, and which fee increases by CAD $10 per ton for each succeeding year through 2022.

In December 2020, the Canadian federal government announced that it intended to increase the price of excess emissions of CO 2 e by CAD $15 per ton for each year beginning in 2023, with the price of excess CO 2 e emissions reaching CAD $170 per ton by 2030.

Ontario, Saskatchewan and Alberta are challenging whether the federal government has jurisdiction to impose a federal carbon price on the provinces and territories.

The Saskatchewan Court of Appeal (in May 2019) and the Ontario Court of Appeal (in June 2019) each held that the Greenhouse Pollution Pricing Act (GPPA) was validly enacted under the Canadian constitution, while the Alberta Court of Appeal ruled in February 2020 that the GPPA was unconstitutional.

Oral argument on the appeal of these decisions was heard by the Supreme Court of Canada in September 2020.

In January 2017, Ontario launched its own GHG cap and trade program and beginning January 1, 2018, Ontario’s cap and trade program was linked with the cap and trade programs in Quebec and California.

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However, the Ontario government rescinded the cap and trade program in June 2018.

Because Ontario no longer has a GHG regulatory regime, the federal government imposed the OBPS in the province beginning in 2019.

Because Ontario no longer had a GHG regulatory regime, the federal government imposed the OBPS in the province beginning in 2019.

In July 2019, the new Ontario government enacted a new GHG regulation, called the Emissions-Performance Standards program (EPS), that sets CO 2 e emissions limits for nitrogen products based on a production weighted sectoral average.

For facilities whose carbon emissions exceed the applicable limits compliance options include the purchase emissions performance units for a fee of $20 per ton of excess CO 2 e for calendar year 2020, which fee will rise by $10 per ton each year through 2023.

Except for registration and recordkeeping provisions, the EPS will not go into effect until the federal government determines that the regulation satisfies the federal stringency requirements, at which time the EPS would replace the OPBS in Ontario.

In Alberta, the Specified Gas Emitters Regulation was implemented in 2007.

This program required facilities emitting more than 100,000 tons of GHGs per year to reduce emissions by 12% over such facilities’ 2007 levels.

To meet this requirement, companies could reduce emissions, purchase/use offset credits, or contribute to a technology fund at an annual rate of $15 per ton of CO 2 .

For facilities whose carbon emissions exceed the applicable limits, compliance options included the purchase of emissions performance units for a fee of CAD $20 per ton of excess CO 2 e for calendar year 2019, which fee rises by CAD $10 per ton each year through 2022.

Except for registration and recordkeeping provisions, the EPS has not yet gone into effect in Ontario and facilities in Ontario are subject to the federal OBPS.

However, in September 2020, ECCC announced that the Ontario EPS met the federal government’s minimum stringency benchmark requirements, and the federal carbon pricing system will no longer apply in Ontario at a date to be set in consultation between ECCC and the Ontario government.

Beginning in 2018, our Medicine Hat Nitrogen Complex became subject to the Carbon Competitiveness Incentive Regulation (CCIR).

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A facility with emissions that exceeded the applicable benchmark was required to take action to reduce its GHG emissions intensity, purchase emissions offsets or performance credits, or make contributions to Alberta’s climate fund.

In 2019, the Alberta government passed the Technology Innovation and Emission Reduction Implementation Act (TIER), which will replace the CCIR and go into effect on January 1, 2020.

In 2019, the Alberta government passed the Technology Innovation and Emission Reduction Implementation Act (TIER), which replaced the CCIR and went into effect on January 1, 2020.

The TIER requires large emitting facilities (other than electricity producers, which are subject to a different standard) to comply with the least stringent of a “facility-specific” benchmark of 90% of historical GHG emissions intensity from a three-year baseline, which intensity limit will be reduced by 1% a year beginning in 2021, or a benchmark reflecting the emissions intensity of the top 10% of facilities for a given sector.

The compliance options under the TIER are similar to the compliance options under the CCIR.

The compliance options under the TIER are similar to the compliance options under the CCIR, including initially establishing the price for payments into its carbon fund at CAD $30 per excess ton of emissions (the same effective price as set in the CCIR).

The federal government had determined that Alberta’s CCIR meets its stringency requirements and did not impose the OBPS in 2019.

In December 2019, the federal government determined that the TIER also met the stringency requirements of the OBPS with respect to its regulation of large industrial emitters.

However, the TIER set the price for payments into its carbon fund at $30 per ton (the same effective price as set in the CCIR).

This could result in regulated facilities in Alberta being subject to the OBPS beginning in 2021, when the effective price of carbon pursuant to the OBPS rises to $40 per ton of excess CO 2 e.

In the United States, GHG regulation is evolving at state, regional and federal levels, although some of the more significant developments to date, including EPA’s Clean Power Plan (which was rescinded in June 2019 and replaced by the Affordable Clean Energy Rule), do not directly impose obligations on our facilities.

The EPA has issued a mandatory GHG reporting rule that required all of our U.S.

In December 2019, the federal government determined that the TIER also met the stringency requirements of the OBPS with respect to its regulation of large industrial emitters for 2020.

The Alberta government has announced that it will increase the levy for excess emissions of CO 2 e from CAD $30 per ton in 2020 by CAD $10 per year, up to CAD $50 per ton in 2022, to match the price of carbon established in the OBPS.

In the United States, GHG regulation is evolving at state, regional and federal levels, although some of the more significant developments to date, including EPA’s efforts to regulate greenhouse gas emissions from fossil fuel-fired power plants, do not directly impose obligations on our facilities.

The EPA issued a mandatory GHG reporting rule that required all of our U.S.

manufacturing facilities to commence monitoring GHG emissions beginning on January 1, 2010 and reporting the previous year’s emissions annually starting in 2011.

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Such requirements may result in increased costs or delays in completing such projects.

Other than the states’ implementation of this permitting requirement, none of the states where our U.S.

CF INDUSTRIES HOLDINGS, INC.

the states’ implementation of this permitting requirement, none of the states where our U.S.

production facilities are located-Iowa, Louisiana, Mississippi and Oklahoma-has proposed control regulations limiting GHG emissions.

There are substantial uncertainties as to the nature, stringency and timing of any future GHG regulations, including in the United States.

On December 12, 2015, 195 countries adopted by consensus a new international agreement known as the Paris Agreement.

The Paris Agreement, which was accepted by the United States and ratified by Canada and the United Kingdom,

CF INDUSTRIES HOLDINGS, INC.

went into effect in November 2016.

The Paris Agreement was accepted by the United States and ratified by Canada and the United Kingdom and went into effect in November 2016.

The Paris Agreement is intended to provide a framework pursuant to which the parties to the agreement will attempt to hold the increase in global average temperatures to below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels.

In June 2017, the United States announced its intention to withdraw from the Paris Agreement, subject to renegotiation of the Paris Agreement on terms more favorable to the United States.

On November 4, 2019, the United States submitted formal notice of its withdrawal from the Paris Agreement, which will become effective on November 4, 2020.

To date, the United States is the only signatory to withdraw from the Paris Agreement.

If the Paris Agreement remains in effect, it could result in more aggressive efforts to reduce GHG emissions in the jurisdictions in which we operate.

Each signatory is required to develop its own national plan to attain this objective.

Increasing concern over the impacts of climate change is driving the signatories to establish even more ambitious GHG reduction targets.

In December 2020, the United Kingdom announced a target to reduce GHG emission 68% from 1990 levels by 2030.

The EU has announced a new target to reduce its GHG emission 55% below 1990 levels by 2030.

On November 4, 2019, the United States submitted formal notice of its withdrawal from the Paris Agreement, which became effective on November 4, 2020, but on January 20, 2021, President Biden announced that the United States has rejoined the Paris Agreement.

This will require the United States to submit its own national plan for reducing GHG emissions.

Executive Orders issued by the Biden Administration, including in particular an executive order issued on January 27, 2021 focusing on climate change, evidence the Administration’s intent to undertake numerous initiatives in an effort to reduce GHG emissions, including promoting renewable energy development, limiting or prohibiting new oil and gas leases on federal lands, and in general, making climate change considerations a critical component of federal policy.

New Source Performance Standards for Nitric Acid Plants

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More stringent environmental standards may impact our ability to obtain such permits.

As of December 31, 2019 , we employed approximately 3,000 employees.

Human Capital Resources

Our long-term success depends on our people.

We are dedicated to creating a workplace where employees are proud to work and grow and everyone feels empowered to do their best work.

We do this by investing in extensive recruitment, training and professional development opportunities for our employees and fostering diversity and inclusion in our culture.

Employee Population.

We employed approximately 3,000 employees at December 31, 2020, of which 66% were located in the United States, 20% in the United Kingdom, and 14% in Canada.

As of December 31, 2020, 16% of our employees have worked for the Company more than 20 years, 16% of our employees have worked for the Company between 11 and 20 years, 27% of our employees have worked for the Company between 6 and 10 years, and 41% of our employees have worked at the Company for less than 6 years.

Full-time employees represented approximately 99% of our workforce as of December 31, 2020 and approximately 15% were covered by a collective bargaining agreement.

We supplement our workforce with contractors with specialized skill sets during periods of peak activity, such as during turnarounds and maintenance events.

Culture, Inclusion and Diversity.

Our core values and their underlying principles reflect our commitment to a diverse and inclusive culture, treating one another with respect.

During 2020, all of our employees engaged in training to learn to recognize and address the effects of unconscious bias by challenging assumptions;

encouraging diversity of experience, opinion, and expression;

and supporting a workplace culture that actively strives to be more inclusive.

As of December 31, 2020, approximately 14% of our global workforce was female and 15% of the Company’s employees in managerial roles were female.

Minorities represented approximately 14% of the Company’s U.S.

workforce and 12% of our U.S.

employees in managerial roles.

In order to continue to improve the inclusiveness and diversity of our company and culture, our recently

CF INDUSTRIES HOLDINGS, INC.

announced comprehensive ESG goals include goals to increase the representation of females and persons of color in senior leadership roles and to implement a program designed to increase the hiring and promotion of minority and female candidates.

Workforce Health and Safety.

Operating in a safe and responsible manner is a core value and an integral part of what sets the Company apart.

We believe that focusing on leading indicators - such as the behavioral safety practices we have incorporated into our annual incentive plan - to drive and measure activities that prevent and control safety incidents, results in our industry-leading safety record.

As of December 31, 2020, our 12-month rolling average recordable incident rate (RIR) was 0.14 incidents per 200,000 work hours, and our total recordable injury count was four.

For the year ended December 31, 2020, our days away, restricted or transferred (DART) incident rate was 0.03 injuries per 200,000 work hours, and our lost time incident rate was 0.00.

Response to COVID-19 Pandemic.

During fiscal 2020, in response to the COVID-19 pandemic, we implemented safety precautions to protect the health and well-being of all of our employees, including the manufacturing workforce who operate our nitrogen manufacturing complexes and distribution facilities.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview of CF Holdings—Market Conditions and Current Developments—COVID-19 Pandemic, for a further discussion of the pandemic and the actions we have taken.

Talent Development.

A core aspect of our culture is our commitment to identifying and developing talent to help employees accelerate growth and achieve their career goals.

We invest in extensive assessment, training and professional development opportunities for our employees through a robust set of formal and informal programs, including targeted job movements, key experiences, and training, with an emphasis on creating a culture of inclusion.

Leadership is the quality that drives our values and sets us apart.

To help foster leadership, we have developed a set of leadership competencies that provide a common language for how to demonstrate leadership at every level of the organization.

We view training and development programs as being a key part of succession planning, allowing us to grow a stronger company today and in the future.

CF INDUSTRIES HOLDINGS, INC.

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What changed 10-K

Item 1. Business