Wednesday, October 16, 2019
Sasol Limited: Update on the Lake Charles Chemical Project
  SocialTwist Tell-a-Friend  

JOHANNESBURG, May 22, 2019 /PRNewswire/ -- Sasol has today updated its guidance for LCCP following a review process to assess the project costs and schedule.

  • LCCP's schedule remains on track with the Ethylene Glycol/Ethylene Oxide Unit due to achieve beneficial operation within days. The only revision to the schedule is the Guerbet Unit which will now be on stream in February 2020. As at the end of March 2019 project completion was at 96% with construction completion at 89%.
  • Sasol remains confident that the longer term EBITDA outlook for the LCCP remains robust.
  • The forecast total capital cost for the project has increased to $12,6 – 12,9 billion, including a $300 million contingency. The drivers of the changes in capital costs are understood and a series of mitigating actions are being taken to ensure delivery within the revised parameters.
  • Sasol's balance sheet is sufficiently robust and management actions are focused on deleveraging the balance sheet, simplifying the asset portfolio and executing our value based strategy.


In the Company's trading statement, released by the Stock Exchange News Service on 8 February 2019, updated guidance was provided for LCCP's schedule and capital costs, which were estimated in the range of $11,6 - $11,8 billion. Following this announcement a number of changes were made to the management of LCCP, with project accountability immediately reassigned to the Executive Vice President of Chemicals, Fleetwood Grobler and the strengthening of our project controls organisation.

This team became concerned regarding the accuracy of the project's cost forecast and, as a consequence, our third quarter Business Performance Metrics announcement in April 2019 indicated that the LCCP's cost was tracking the upper end of the range. Management also initiated a full review of the costs and schedule until project completion with input from independent technical and financial advisers.  

This review identified significant additional concerns related to the LCCP forecasting process and a marked increase in the projected total cost.  The review also confirmed that the actual project expenditure as at 31 December 2018 amounting to $10,9 billion was accurate and complete. Weaknesses in the project's integrated controls were identified and are being remediated.

The Board has also commissioned a review to be conducted by independent external experts.   This review will cover the circumstances that may have delayed the prompt identification and reporting of the above-mentioned matters. Upon conclusion of the review the Board will take appropriate action to address the findings.


The first derivative unit, Linear Low Density Polyethylene (LLDPE), achieved beneficial operation on 13 February 2019 and the plant continues to ramp up in line with expectations.   We have achieved beneficial operation of the Ethylene Glycol unit (EG), with beneficial operation of the Ethylene Oxide unit (EO) expected in the coming days.   The Ethane Cracker is still expected to achieve beneficial operation in July 2019.   The remainder of the LCCP schedule for beneficial operation is as previously indicated in February 2019 apart from the beneficial operation of the last derivative plant (Guerbet unit), which is expected to be one month later in February 2020.   As of the end of March 2019, overall project completion was at 96%, with construction completion at 89% and capital expenditure on the project amounted to $11,4 billion.

Following the review noted above, the cost estimate for LCCP has been revised to a range of $12,6 – $12,9 billion which includes a contingency of $300 million. The principal factors that impacted the revised cost estimate to complete LCCP are adjustments to the February 2019 cost forecast of approximately $530 million and additional events and remaining work impacting February 2019 cost forecast – approximately $470 million. A contingency of $300 million has also been included.


This increase in the anticipated LCCP capital costs is extremely disappointing.   Executive management has implemented several changes since February 2019 to further strengthen the oversight, leadership for the project and frequency of reporting.   Actions include segregation of duties between project controls and finance functions and assigning a Senior Vice President to have responsibility for the LCCP project controls.   Initiatives to improve decision making, transparency and documentation within the project management team are also in progress. The new project leadership has been instrumental in identifying and remediating these issues.  

The reviews and investigations initiated by management to date indicate that the underlying control weaknesses are limited to LCCP.  


The increase in the LCCP's cost does not alter Sasol's capital allocation strategy. The plan remains to reduce balance sheet gearing towards 30% followed by an increase in the dividend pay-out ratio to 40% and remains on track to occur between financial years 2020 to 2023.   Over this period the anticipated contribution from the LCCP has been negatively impacted by a change in the short and medium term pricing outlook. Operating costs for the LCCP, although projected to be slightly elevated during start-up, are otherwise still in line with previous guidance. As a result the earnings before interest, tax, depreciation and amortisation (EBITDA) for financial year 2022 of $1,3 billion have been revised to approximately $1 billion.   The long term market pricing outlook is still in support of a long term run rate EBITDA contribution from the LCCP of $1,3 billion.   The short term market outlook for ethane and product pricing remains volatile and estimates will be updated periodically.

As previously communicated to the market, management has substantially completed the detailed asset review programme. This process forms a key part of the portfolio optimisation strategy, and has now progressed to the stage where the disposal of larger non-core assets can be accelerated. The Company will target the disposal of assets which have an aggregate net asset value exceeding $2 billion. The safeguarding value will be prioritised through this process, and the financial metrics disclosed above do not rely on any asset disposals. Relevant disposals will therefore further support the deleveraging of the balance sheet, as well as simplification of the investment portfolio and increased focus in executing our value based strategy.

Disclaimer – Forward-looking statements

Sasol may, in this document, make certain statements that are not historical facts and relate to analyses and other information which are based on forecasts of future results and estimates of amounts not yet determinable. These statements may also relate to our future prospects, developments and business strategies. Examples of such forward-looking statements include, but are not limited to, cost estimates and expected timing of beneficial operation of LCCP, targets or guidance regarding our gearing ratio and dividend pay-out ratio, net debt-to-EBITDA ratio, EBITDA and internal rate of return for LCCP, as well as statements regarding our future liquidity, credit ratings and non-core asset disposal strategy. Words such as "believe", "anticipate", "expect", "intend", "seek", "will", "plan", "could", "may", "endeavour", "target", "forecast" and "project" and similar expressions are intended to identify such forward-looking statements, but are not the exclusive means of identifying such statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and there are risks that the predictions, forecasts, projections and other forward-looking statements will not be achieved. If one or more of these risks materialise, or should underlying assumptions prove incorrect, our actual results may differ materially from those anticipated. You should understand that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors are discussed more fully in our most recent annual report on Form 20-F filed on 28 August 2018 and in other filings with the United States Securities and Exchange Commission. The list of factors discussed therein is not exhaustive; when relying on forward-looking statements to make investment decisions, you should carefully consider both these factors and other uncertainties and events. Forward-looking statements apply only as of the date on which they are made, and we do not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise.

About Sasol:

Sasol is a global integrated chemicals and energy company. Through our talented people, we safely and sustainably create superior value for our customers, shareholders and other stakeholders. We integrated sophisticated technologies in world-scale operating facilities to produce and commercialise commodity and specialised chemicals, gaseous and liquid fuels, and lower-carbon electricity.



More News by PR Newswire India

LifeNet Health brings first clinically proven allograft-based biologic wound therapy to India

The Smart Contract Security Alliance Announces Founding Council

Patrick Imbardelli Elected to YPO Board of Directors

World Intellectual Property Indicators: Filings for Patents, Trademarks, Industrial Designs Reach Record Heights in 2018

Saudi Joy Forum 19, A Success For The Region And World

AIC Named North American Distributor Of Organic Rice, Organic Brown Rice And Organic Pumpkin Seed Proteins

WISPA Members Vote Cambium Networks Manufacturer of the Year

IMI and GustoMSC Sign Jack-up Design License Agreement

New Report: Laundry Releases Trillions of Plastic Microfibers Into the Ocean

FOX Bet Strikes Multiyear Deal With Major League Baseball

OhmniLabs Showcases Latest Telerobotics Innovations At CEATEC 2019

Airspan - Breaking Down the Barriers to Entry With the New Mimosa Connectorized A5x Access Point

TMP Worldwide Acquires UK-Based Social Media Leader Carve

CleverTap Completes $35 Million Series C Funding to Drive Global Growth

Charles Manning, Founder and CEO, Kochava, joins Forbes Technology Council

10th Foundation Day Celebrations Start at Shoolini University

Tourcom LLC, Holding Company of Tourcom Blockchain, Signs Strategic Investment Agreement through Equity Acquisition of Travel Information Sharing Service 'Wishbeen'

WorkBoard Announces Deeper Jira Integration to Bring Team OKRs into Developers' Jira Experience

Cision Announces Exclusive Platinum Sponsorship For PRSA 2019 International Conference

Systech Expands Market-Leading Brand Protection Solution for Improved Supply Chain Visibility

Artificial intelligence is transforming health care across Asia, fuelled by innovative public-private sector R&D and a focus on domestic health-care burdens

Sirius Design Group Generates $1.2m Revenue in 4 Years Helping Clients With Digital Real Estate

Dynata Launches New Platform to Transform the Future of Insights and Marketing

S BLOCK Co-Hosts WBF 2019 Indonesia Technology Conference, Creates DAO Super Community

TUV Rheinland Enables LoRaWAN(R) Certification in India

Tukatech Releases TUKAcad for Subscription in Native Languages for 4.38 Billion People

IDFC FIRST Bank and Sodexo Partner to Introduce Digital Meal Benefit Solution for Corporate Employees

Whale Cloud Unveils 5G Operation Map at India Mobile Congress 2019

LyondellBasell Announces Construction of New Small-Scale Molecular Recycling Facility

Celemics Expedites Target Enrichment NGS Data Insights by Partnering With BlueBee on a Global Genomics Data Solution

ZTE launches industry-first 5G+VDSL2 hybrid home gateway

OYO's HR Team Saved 75% At-risk Employees Using inFeedo's Engagement bot, Amber

Ameyo Integrates With Freshworks to Simplify Customer Journey

Nuclear Days 2019 - French Nuclear Industry to Intensify its Operations in Indian Market

Happiest Minds Wins 2019 Red Herring Top 100 Asia Award

The Spielwarenmesse Reveals the Trends for 2020

Xinhua Silk Road: SAIC Motor gains momentum in India with 31,000 orders received by September

CreditVidya Wins the Prestigious 2019 Red Herring Top 100 Asia Award

GCW Global Customised Wealth Announces New Partner: Tim Babich

GTPL Hathway's Consolidated H1 FY20 PAT at ₹ 580 Million, up by 102%

'Where Will Man Take Us?' by Atul Jalan has been Certified a National Bestseller by Penguin Random House India

Tejas Networks Launches World's Largest Disaggregated Packet-optical Switch at India Mobile Congress 2019

Building on Local Momentum: Malaysia's Greater Petaling Joins City Cancer Challenge

Shanghai International Money Fair - one of China's largest financial fairs will be held in December

Europe's Most Trusted Crypto And Precious Metal Companies Partner To Create Gold Token Secured By Bitcoin Network

RGE Commits US$200 Million to Next-Generation Textile Fibre Innovation and Technology

Medisanté Earns Acclaim from Frost & Sullivan for Ensuring Better Care Outcomes while Reducing Costs

INSIDE INFORMATION: BW LPG Contemplated Sale of Shares

School House Crafts Multi-Sensory Journey of Discovery and Re-collection for La Mer Campaign Exhibition

Vevue Partners with CBX Exchange for Initial Auction Offering

Frost & Sullivan Recognizes Pepco Holdings and Carlsbad Municipal Water District with Excellence in Resourcefulness Awards at Itron Utility Week

His Holiness The Dalai Lama Awarded Honorary Doctorate by Chitkara University

Surplus Keslow Cinematography Gear Up For Auction

Libyan Investment Authority Loses Claim in the UK Court of Appeal - London

Artificial Intelligence for Risk Management Process by MovingNow

Maruti Suzuki Arena Devils Circuit Season 2019-20 Draws Over 6K Runners in Hyderabad

Quectel Achieves Industry's First 5G Data Call over 5G mmWave Module

Artprice by Artmarket: The Gagosian's Grand Projects for the Late Simon Hantaï (1922-2008)

Ryan International Group of Schools Receive India's Most Respected Brand Award 2019

JD Institute Of Fashion Technology, South Announced its New Domain

VeChain Is Leading Co-sponsor of GDST Seafood Trackathons

The World's Largest Automakers, Along with MOBI, Announce a Joint Proof of Concept for the First Vehicle Identity on Blockchain

Indiannica Learning Announces the Launch of Indiannica Quiz League

Third Annual Convocation Ceremony Will be Celebrated in Apex Professional University

An Encounter of Two Icons: Tic Tac® Meets Coca-Cola®

Birlasoft to Accelerate Invacare's Business Transformation Journey Signs US$ 240 mn, Multi-year Deal, to Provide Complete IT-as-a-Service (ITaaS)

Bali Zoo Celebrated Tumpek Kandang Ritual for all its Resident Faunas

Nitin Mantri Becomes ICCO President

DMCC Awarded 'Global Free Zone of the Year' for a Record Fifth Consecutive Year

Apex Professional University Signed MoU with Life Science Sector Skill Development Council

Find TVU Networks at Broadcast India 2019

UAE and UNESCO Renew Partnership, Extending Efforts to Restore Historic Churches in Mosul

Over 70,000 Visitors, SR2m Falcon Sales on First Day of Riyadh Exhibition

The First Huion Tablet of Inspiroy Dial Series, Q620M was Unveiled at Hong Kong Electronics Fair

ZEISS showcases next-level eye care digitalization at AAO 2019

On Your Marks: 2019 Xi'an Yango International Marathon Starts 20 October

Autodesk Fusion 360 Tools Enable Social Hardware to Advance Design of Prosthetics

Bionik Gold Knee- A New Lease of Life for Young Arthritis Patients

Joy Forum19 to boost Saudi entertainment sector

SC likely to wrap up Ayodhya case hearin...
Video of 'drug party' inside Jodhpur jai...
Uttar Pradesh: Home Guard Minister assur...
Second PMC Bank depositor dies of heart ...
RSS to convene meeting of Pracharaks in ...
J-K: Encounter between police and terror...
 Top Stories
US, Italy condemn deadly airstrike ... 
RSS to convene meeting of Pracharak... 
Second PMC Bank depositor dies of h... 
Will not be having a vote at this t... 
Uttar Pradesh: Home Guard Minister ... 
Will not be having a vote at this t... 
Qatar defends Turkey's incursion in... 
Banerjee's achievement bigger and t...