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JOHANNESBURG, Nov 20 (Reuters) – South Africa’s Sasol said on Friday shareholders have approved a proposed agreement to form a joint venture with chemical company LyondellBasell Industries at its U.S Lake Charles Chemicals Project in a bid to pay down debt.
LyondellBasell agreed last month to acquire a 50% stake of Sasol’s base chemicals business at Lake Charles for $2 billion and operate the newly formed joint venture.
As part of the agreement, the two companies will form a 50-50 joint venture which will take over the base chemicals business at Lake Charles. LyondellBasell will be the operator of the new JV firm.
Sasol, the world’s top manufacturer of motor fuel from coal, has been battling high debt amid lower oil and chemicals prices and falling fuel demand due to a country-wide lockdown to prevent the spread of COVID-19.
Investors have been concerned by the company’s rising debt level which stood at 189.7 billion rand ($11.35 billion) for the year to June 30.
To tide over a debt crisis and repair its balance sheet, Sasol embarked on a three-pronged strategy this year which included disposal of assets, cash conservation efforts and a rights issue.
“Depending on the success of self-help measures, we will use that to inform on the ticket size of the rights issue,” Sasol Chief Finance Officer Paul Victor told shareholders during a general meeting on Friday ahead of its annual shareholders meeting.
“We have reserved that decision until February… but it could also be zero.”
Sasol shares were down 2.83% at 1200 GMT versus a broader market index down 0.13%.
(Reporting by Promit Mukherjee and Tanisha Heiberg; editing by Emma Rumney and Jason Neely)