Business Maverick

Business Maverick

Sasol raises $2 billion in sale of stakes of some of its US assets

A general view of the Sasol Head Office on Katherine Street in Sandton on March 09, 2020 in Sandton, South Africa. (Photo: Gallo Images/Sharon Seretlo)

Petrochemicals giant Sasol, which was laid low by the Covid-triggered collapse in oil prices, will garner $2-billion from the sale of 50% stakes in three of its US units. This marks progress in the company's target of raising $4 to $6 billion by the end of its 2021 financial year to shore up its creaky finances. 

Sasol made the announcement on Friday, 2 October. The units in question comprise part of its Louisiana Lake Charles Chemicals Project, which has contributed to its balance sheet weakness as it has been bedevilled by cost overruns. Its current price tag, unchanged from last year, is $12.6-billion and $12.9-billion, which is a whopping 45% more than originally envisioned in 2014. Mega-cost estimate mistakes are often the fate of megaprojects.

The three units in question – Sasol’s ethane cracker and two others – will now form part of a 50/50 joint venture (JV) with Houston-based LyondellBasell. The JV will be called Louisiana Integrated PolyEthylene. The LyondellBasell group is one of the leading global producers of plastics, chemicals and refined products. The JV’s focus will be the production of “commodity chemicals” used for such products.

Sasol for its part plans to focus on “speciality chemicals” that make detergents, soaps and related products. These have lower volumes but higher margins than their commodity counterparts and will be churned out by the other units at its Louisiana project. 

“Proceeds from this transaction, in conjunction with proceeds from previously announced transactions and the progress in achieving short term cash savings measures, will make a meaningful and positive impact on Sasol’s financial prospects, principally as a result of the intended use of the Transaction proceeds to reduce Sasol’s debt,” Sasol said in a statement.

“Notwithstanding this progress, the company continues to work towards a rights offer of up to

 $2- billion in the second half of the 2021 financial year,” it added. 

The cost savings measures include potential job cuts in the pipeline and combined with the asset disposal and the rights issue, should get Sasol to its $4 to $6 billion target.  

Sasol’s share price lost 3.4% on Friday. But the sector across the board was pulled down by a 4% slump in the oil price on news that US President Donald Trump had tested positive for Covid-19. DM/BM


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