SASOL'S synthetic fuel plant in Secunda has the single largest point-source of C02 emissions on earth.     Reuters
SASOL'S synthetic fuel plant in Secunda has the single largest point-source of C02 emissions on earth. Reuters

A buyer’s guide to Sasol’s $5bn asset sale process

By Paul Burkhardt Time of article published Jun 25, 2020

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JOHANNESBURG - Sasol Ltd. has accelerated an asset disposal program that could eliminate more than half of the company’s debt.

The South African company is trying to raise cash amid cost overruns and lower oil prices. The process could be done in a year and take in as much as $5 billion, which would help prevent a last-resort rights offering.

There is plenty to sell, Chief Financial Officer Paul Victor said in an interview.

“The best possible value and the highest possible chance of a divestment, they go first,” Victor said. While each asset has its own timeline for disposal, the company intends to complete all sales by June 2021. A decision on the rights offer is due in the next few months.

Sasol said last week that it will focus on core chemical and synthetic-fuel divisions and discussions over job cuts have started. After a review of global assets, partnering is an option in some cases, while closing a unit may also be necessary, according to Victor. Sasol wants “high-yielding” returns from its businesses, he added.

Here are some of the guidelines around the ongoing sales:

U.S. Chemicals

Sasol’s “highest priority” in the process is a stake in the Lake Charles Chemicals Project in Louisiana, which has increased in cost to almost $13 billion and has received multiple bids. The company aims to have that sale at a well-developed stage by the end of December, Victor said. Specialist chemical production is considered part of the core business, while base chemicals take a lot of volume to stay competitive and the preference would be to sell a portion of that.

Core Operations

The Johannesburg-based company converts coal and gas into synthetic fuels and produces chemicals used in packaging, footwear and cosmetics. The operations in South Africa are at the heart of the company’s business and are not on the block. In order to reduce its carbon footprint, renewable energy may be purchased to help power the plants.

Oil and Gas

Sasol is still evaluating whether to sell its share of the Natref crude-oil refinery of which it owns 64%, with Total SA holding the remainder. Keeping the plant could require investing in upgrades to produce cleaner fuel. The company’s West African oil assets will be sold. Natural gas operations in Mozambique will be retained.

“Mozambique is part of our future -- it helps us to decarbonize our footprint,” Victor said. Sasol’s shale gas assets in Canada were on the block earlier than anything else and a buyer could take them “at value,” he said.

BLOOMBERG 

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