Don't fine us - we admitted it - Sasol CEO

Alerted Competition Commission to possible misdemeanours.

Sasol (JSE:SOL) CEO Pat Davies is hoping that his company will pay no fine for breach of the Competition Act because it proactively confessed the matter to the Competition Commission.

Davies told Moneyweb: "After our experience in the wax division in Europe and the Competition Tribunal's investigation into the fertiliser industry, we started a rigorous review of all our activities across the globe.

"In SA, we appointed the four biggest law firms to go through every subsidiary to uncover anything in breach of the regulations.

"They did unearth certain matters in the piped gas and petroleum division, which we have reported to the Competition Commission. We simultaneously applied for 100% corporate leniency."

The commission's Nandi Mokoena agreed that Sasol volunteered that it might have engaged in anti-competitive conduct. She said the investigation was at a very early stage, so there was no knowing yet what fines might be in store.

The commission normally levies a "consent agreement", which is a fine by any other name. This is usually a percentage of turnover. Sasol's piped gas and petroleum (Sasol Oil) division turns over many billions a year.

The fear of a fine to equal that of Arcelor Mittal's R600m impost drove the share price 2% lower hours after announcement of the leniency application.

Davies said even now most of the matters it has volunteered were not an open and shut case.

"We admit that the German wax case was deliberate illegal behaviour but that is not the case here.

"We are not offering excuses but these are complex issues, where one set of regulations overlaps another. One clause in a contract, for example, was to support a BEE company but it seems to have put us inadvertently in breach."

Sasol is less hopeful that it will be unscathed by the fertiliser investigation, which started in 2003 and was dealt with in the Sasol annual report in 2004. In this case, the investigation started after a complaint by a company called Nutriflo.

He said the lower rand has offset some of the damage wrought by the fallen oil price. Sasol hedged 30% of its production when the oil price was above $100. That will provide some protection at least until May, when Sasol will reconsider its hedges.

Davies says Sasol's investment plans are being reviewed since the oil price plunged from $140/bbl to $43/bbl. It has embarked on an aggressive cost cutting programme but has announced no retrenchments yet.

He said the pre-feasibility and feasibility studies currently in progress would continue but projects would proceed only at economical product prices.

Davies says Sasol's existing plants are fully paid for and can therefore survive low oil prices.

He hopes for a recovery in global prices and takes some hope from President Barack Obama's determination to reduce US dependence on imported oil. The US is rich in coal and Sasol's coal-to-gas and gas-to-liquid technology are obvious solutions.

Write to David Carte: david@moneyweb.co.za

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