Sasols Giant U.S. Plant Delayed, Cost Up to $11.8 Billion

Sasol Ltd. said capital costs at its Lake Charles chemicals project in Louisiana have increased once again, to as much as $11.8 billion, and the startup will be delayed by as many as five months.

The previous cost estimate for the project, which will convert ethane into plastics and other products, was about $11.1 billion. Sasol cited “several factors within and beyond our control” for the revision.

Key Insights

Lake Charles is Sasol’s largest project and will transform the South African company’s production mix once up and running. Yet it’s faced repeated setbacks, including a 25 percent cost hike in 2016 to $11 billion — a price tag the then-chief executive officer called a “
worst-case scenario.”
Friday’s announcement will disappoint investors after the company said as
recently as October that project costs were within market guidance.

Rising Estimate

Price of Sasol’s Lake Charles chemicals project increases

Source: Sasol

Market Reaction

Sasol
shares sank as much as 5.7 percent on Friday and traded down 5.4 percent at 389.4 rand as of 10:13 a.m. in Johannesburg. It was the worst performer on the FTSE/JSE Africa All Share Index.

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Sasol also released a
trading update on Friday, saying headline earnings, which exclude one-time items, probably rose as much as 34 percent in the six months through December from a year earlier.
See key figures from Sasol’s trading statement
here.

(Updates with share reaction.)