Sasol Limited

Update on the Lake Charles Chemical Project

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.

BACKGROUND

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.