Sasol shareholders back Lake Charles deal

Sasol’s shareholders have voted overwhelmingly in favour of the sale of a 50% stake in the base chemicals operations at its Lake Charles Chemicals Project (LCCP) to LyondellBasell Industries.

The deal was approved at a general meeting ahead of its annual general meeting on Friday and followed news earlier in the week that the last unit at Lake Charles had finally come online. The Low Density Polyethylene Unit (LDPU) will form part of the joint venture that Sasol is entering with LyondellBasell, which is paying $2 billion for the stake. The transaction excludes Sasol’s US performance chemicals business as well as its legacy base chemicals operations in that country.

Sasol has invested about $12.8 billion in the total Lake Charles project following a series of delays and cost overruns. Last year, joint CEOs Bongani Nqwababa and Stephen Cornell agreed to step down following the mismanagement of the project.

The LCCP Base Chemicals business, which produces polyethylene and ethylene products, consists of the LDPU, an ethane cracker and a linear low density polyethylene plant. It was valued at about $3.9 billion (R67.6 billion) at the end of June and reported an attributable loss of $2.3 billion (R36.1 billion) for the year.

As a result of the deal, net debt before lease liabilities was expected to reduce materially to about $8 billion from around $10 billion, significantly improving its financial position. Together with proceeds from other transactions, net debt would reduce by close to $3 billion. While a rights issue of up to $2 billion may also be on the cards as the final step of its response plan to Covid-19 and a weak oil price, the company said it would only make that decision in February.

Sasol’s shares declined by 3.6% to R113.39 on Friday.