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Sasol starts stake sale in R246bn Lake Charles chemical complex

In bid to shore up finances.
Image: Waldo Swiegers/Bloomberg

Sasol is looking to sell a large stake in its R246 billion ($13 billion) chemical complex in the US, as the South African energy producer moves to shore up finances amid an historic rout in the oil market, according to people with knowledge of the matter.

The company has hired Bank of America to help find a buyer for a minority stake in the Lake Charles chemical project, said the people, who asked not to be identified because the matter is private. Sasol previously indicated it was considering a partial sale of its US base-chemicals business to avoid a last-resort rights issue.

Sasol would prefer finding an industrial partner for the stake and may structure any deal as a joint venture, one of the people said. The goal is to reach a deal by June, the person said.

Sasol wasn’t immediately able to comment. A representative of Bank of America declined to comment.

The move to find a buyer highlights Sasol’s need for cash as it struggles with debt taken on to develop the Lake Charles complex in Louisiana, originally seen as a way to become a global operator and diversify away from oil. Its cost has more than doubled since early estimates to almost $13 billion, while the current crash in oil prices has choked off revenue and taken the company to the brink.

Sasol shares have been in freefall since investors saw pressure building on the balance sheet, sliding 82% this year. They rose as much as 2.1% on Tuesday after news of the planned Lake Charles stake sale, before trading 1.1% lower at the close in Johannesburg.

Sasol share price

Sasol said last month it plans to raise $6 billion by the end of its 2021 financial year, mainly through asset sales, as it seeks to reduce net debt of about $10 billion. The company left open the possibility of selling as much as $2 billion of shares, and is also in negotiations with lenders to arrange greater flexibility over its repayments.

Moody’s Investors Service has downgraded the debt to junk.

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Not clear why somebody would want a minority stake. Completely illiquid, basically like owning a rail car on a train but not in charge of what the driver does. And in this case the train driver has shown himself to be somewhat unreliable.

Not clear?

XON can enter into the JV at fire sale prices and reap benefits of rebounding oil prices.

All it takes is a few airplanes to start flying and the odd pipleline bombing in the middle east.

But yes, still super risky and the incompetence if previous mgmt cannot be overlooked.

My understanding is that Lake Charles is an Ethane cracker. In other words, it makes plastics and not petrol. First, the plants separate ethane from natural gas to produce ethylene, the building block of plastics and other industrial products. The plants use extreme heat to “crack” the molecular bonds in ethane to produce ethylene. Ethylene is further processed into a resin, which is used to produce plastics products. So a few aeroplanes which start flying or the odd pipeline bombing in the Middle East aren’t going to help too much. People need to buy plastic junk at the Crazy store or McDonald’s happy meals which are accompanied by plastic toys to boost the fortunes of Lake Charles.

Buffet’s probably already running the numbers, it will end up a great buy for someone with the right synergy’s and a close eye on the running,to get a brand new, state of the art Facility at fire sale price of course!

It is no doubt compliant with all the latest eco/ green/ emissions etc , regulations, whereas a lot of older Plants still have to shut down production in order to upgrade to comply with and spend heaps of capex on!

Warren Buffett also likes very good management, which is not what Sasol seems to have at the moment.

Probably because it is such bad timing to sell this type of asset. The two previous CEO’s were proper incompetents.

Goes to show, to start a project, complete the project and actually operate a project are all different monsters.
The fact that SASOL never kept a competent eye on this process is sad.

I truly believe that the previous leadership of Sasol belong in jail.

Incompetence is not a crime

With other people’s money, it should be.

It seems that the news has allowed the share price to recover by 12% today… maybe a mild turn around in the horizon?

End of comments.

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