Sasol reaches $24m class action settlement over US project cost overruns
South African petrochemicals giant Sasol has quietly reached a $24-million settlement in a class action brought by investors over cost overruns at the company’s problem-plagued Lake Charles chemical plant project in the US state of Louisiana, according to court documents seen by Business Maverick. Sasol has confirmed the settlement.
The wheels were firmly set in motion in August 2020 when a US District Court judge ruled that Sasol had to face an investor class action launched in February that year, accusing it of lying about the true cost of the multibillion-dollar project in Louisiana. Some claims alleging misleading statements about internal controls were dismissed.
Sasol was the main defendant in the suit, as well as former CEOs David Constable, Bongani Nqwababa and Stephen Cornell, and former CFO Paul Victor. The corporate debacle in the land of po’ boys blues is a key reason some of the executives named in the class action are no longer employed by Sasol.
“Subject to court approval, plaintiffs have agreed to settle all claims in the action in exchange for a cash payment of $24-million, which has been deposited into an escrow account,” reads the “Plaintiff’s Motion for Final Approval of Settlement”, dated 21 July 2022.
“The parties reached the settlement only after extensive arm’s-length negotiations between experienced counsel … The $24-million that will be available for claimants represents approximately 12% to 15% of the maximum recoverable damages.”
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For Sasol, it must be said that $24-million – or about R410-million – plus the fees for lawyers who clearly coin it in such circumstances, is fairly small change. Sasol’s earnings in the financial year to June before interest, tax, depreciation and amortisation more than doubled to R75.5-billion, capping a remarkable turnaround under its new management team.
This is why the company has not made a Sens announcement about the matter. It is simply not material. Sasol spokesperson Alex Anderson confirmed the settlement, which was reached months ago.
By 2019, it was estimated that Sasol’s Louisiana Lake Charles Chemicals Project would cost between $12.6-billion and $12.9-billion, 45% more than originally envisioned in 2014.
Mega projects often cost more than originally planned, but this was a whopper that left investors singing the blues. DM/BM