Sasol U.S. Project Gets Tax Reform Boost as Startup on Track

(Bloomberg) -- Sasol Ltd. said U.S. tax cuts will boost returns from its Lake Charles chemical project, which remains on track to start up in 2018.

The $11.1 billion plant in Louisiana was 81 percent complete as of Dec. 31 and the cost forecast is unchanged from the last estimate, Johannesburg-based Sasol said in an earnings statement Monday. U.S. tax reforms have positively impacted the project’s returns, with the net present estimated to jump by as much as $500 million.

“We are making steady progress in delivering the LCCP within the revised schedule, as we place increased emphasis on business readiness,” joint Chief Executive Officer Stephen Cornell said. “Once fully operational, the LCCP will transform Sasol’s earnings profile.”

Sasol raised the cost forecast for Lake Charles in November by $130 million, citing expenses related to Hurricane Harvey, after announcing an about 25 percent jump in the estimate in 2016. The company has said it won’t invest in new gas-to-liquids or crude-oil refining capacity, or pursue any more wholly owned mega-projects such as Lake Charles, which will convert ethane into plastics and other products.

Read more: South Africa’s Sasol Tightens Purse Strings for New Projects

Sasol rose 3.4 percent as of 2:05 p.m. in Johannesburg and has gained 8.8 percent in the past year.

The company expects to raise more than $1 billion from asset sales through 2022, Cornell said. A review of potential divestment targets is about 70 percent complete and it has appointed an adviser for the sale of its Canadian shale gas operations. The plans won’t mean breaking off large parts of the company, he said.

Sasol reported earnings per share excluding one-time items rose to 17.67 rand ($1.5) in the six months ended Dec. 31, 17 percent higher than a year earlier. Brent crude gained about 40 percent in the period. The company reported a steady performance in its liquid-fuels operations.

Sasol said it may be forced to write down the of some chemical assets in South Africa if the local currency continues to strengthen against the dollar. The rand has gained about 23 percent to the dollar in the past three months. Most of the company’s products are sold in dollars, while its costs are mainly in the South African currency.

“Margins are highly sensitive to the exchange rate,” the company said.

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