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Sasol Limited - Preliminary Findings Of The Lake Charles Chemicals Project Review

Release Date: 06/06/2016 07:11:00      Code(s): SOL SOLBE1     
Sasol Limited
(Incorporated in the Republic of South Africa)
(Registration number 1979/003231/06)
Sasol Ordinary Share codes:     JSE: SOL       NYSE: SSL
Sasol Ordinary ISIN codes:      ZAE000006896 US8038663006
Sasol BEE Ordinary Share code: JSE: SOLBE1
Sasol BEE Ordinary ISIN code:   ZAE000151817
(?Sasol? or ?the Company?)

Preliminary findings of the Lake Charles Chemicals Project
review

In March 2016, Sasol announced that it would be undertaking a
detailed review of the Lake Charles Chemicals Project (LCCP),
after deciding to pace the execution of the project to support
the Company?s low oil price Response Plan. At that time, there
were early indications that the overall end-of-job cost was
under pressure, and since the project engineering was at an
advanced stage, sufficient information was available to
proceed with a detailed project review.

The LCCP consists of a world-scale 1,5 million ton per year
ethane cracker, and six downstream chemical projects ? two
large polymers plants (low-density and linear low-density
polyethylene) and an ethylene oxide/ethylene glycol plant,
which together will consume around two thirds of the ethylene
produced by the cracker; and three smaller, higher-value
derivative plants, which will produce speciality alcohols,
ethoxylates and other products. The project is under
construction near Lake Charles, Louisiana in the USA, adjacent
to Sasol?s current chemical operations.

A preliminary finding from the ongoing detailed LCCP review is
that the expected total capital expenditure for the project
could increase up to US$11 billion, including site
infrastructure and utility improvements. This estimate
includes a sufficient contingency to effectively manage the
project to beneficial operation. While the detailed review is
still in progress, current indications are that the estimated
capital expenditure increase is mostly due to construction
delays caused by higher-than-expected rainfall, higher labour
costs, certain of the lump-sum bid contract prices being
higher than originally estimated, as well as quantities of
bulk materials being in excess of those included in the
original estimate.
In addition, the slower rate of capital spend until June 2018,
due to Sasol?s low oil price Response Plan, has resulted in an
extended project schedule and contributed to further project
cost increases, which have been partially offset by
productivity benefits due to improved phasing of engineering
and construction activities. As of 30 April 2016, the capital
expenditure to date on LCCP is US$4,5 billion, and the overall
project completion has progressed beyond 40%.

It is, however, important to emphasise that no material or
unexpected scope changes to the project have taken place.
Overall construction on the project continues on all fronts,
with most engineering activities nearing completion and
procurement well advanced.

As the review progresses and additional information becomes
available, management is setting firm targets and objectives
for the project team in order to minimise the capital
expenditure and optimise the overall project schedule. It is,
however, expected that the ethane cracker will achieve
beneficial operation in the second half of calendar year 2018,
which will enable around 80% of the total output from LCCP to
reach beneficial operation later in 2018 and early 2019. The
remaining volumes from the other derivative units will reach
beneficial operation by the second half of 2019.

The expected returns for the project have reduced due to
changes in long-term price assumptions and the higher capital
estimates, and are now expected to be around Sasol?s weighted
average cost of capital, compared to returns approximating
hurdle rate at the time of Final Investment Decision in
October 2014. The increase in the estimated LCCP capital cost
and extended schedule will reduce the expected project returns
by approximately the same amount as the Company?s lower long-
term price assumptions.

Although the capital expenditure for LCCP is expected to
increase, Sasol does not expect this to result in the Company
exceeding its self-imposed gearing targets. The Company is
continuing with its previously announced low oil price
Response Plan, and will manage its balance sheet to
incorporate the current estimated capital expenditure. The
funding strategy has not changed as a result of the higher
capital expenditure estimates. The project will continue to be
funded from existing facilities and ongoing group cash flow.
The detailed LCCP review is expected to be completed during
the third quarter of 2016, and further details will be
communicated together with Sasol?s annual results announcement
on 12 September 2016.

Sasol will be hosting a conference call at 14:00 South African
time (8:00 Eastern time) on Tuesday, 7 June 2016 to discuss
this announcement, which will be webcast via Sasol?s website
www.sasol.com.

Note: All references to years refer to the calendar year.



6 June 2016

Johannesburg

Sponsor: Deutsche Securities (SA) Proprietary Limited

Disclaimer ? Forward-looking statements: Sasol may, in this
document, make certain statements that are not historical
facts and relate to analyses and other information which are
based on forecasts of future results and estimates of amounts
not yet determinable. These statements may also relate to our
future prospects, developments and business strategies.
Examples of such forward-looking statements include, but are
not limited to, statements regarding exchange rate
fluctuations, volume growth, increases in market share, total
shareholder return, executing our growth projects and cost
reductions, including in connection with our Business
Performance Enhancement Programme and Response Plan. Words
such as "believe", "anticipate", "expect", "intend", "seek",
"will", "plan", "could", "may", "endeavour", "target",
"forecast" and "project" and similar expressions are intended
to identify such forward-looking statements, but are not the
exclusive means of identifying such statements. By their very
nature, forward-looking statements involve inherent risks and
uncertainties, both general and specific, and there are risks
that the predictions, forecasts, projections and other
forward-looking statements will not be achieved. If one or
more of these risks materialise, or should underlying
assumptions prove incorrect, our actual results may differ
materially from those anticipated. You should understand that
a number of important factors could cause actual results to
differ materially from the plans, objectives, expectations,
estimates and intentions expressed in such forward-looking
statements. These factors are discussed more fully in our
most recent annual report on Form 20-F filed on 9 October
2015 and in other filings with the United States Securities
and Exchange Commission. The list of factors discussed
therein is not exhaustive; when relying on forward-looking
statements to make investment decisions, you should carefully
consider both these factors and other uncertainties and
events. Forward-looking statements apply only as of the date
on which they are made, and we do not undertake any
obligation to update or revise any of them, whether as a
result of new information, future events or otherwise.

Date: 06/06/2016 07:11:00 Supplied by www.sharenet.co.za                     
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