Sasol has struck a deal for a partnership in its U.S. Base Chemicals Business in Lake Charles.
LyondellBasell is acquiring 50% of Sasol’s 1.5 MM ton ethane cracker, 0.9 MM ton low and linear-low density polyethylene plants and associated infrastructure for $2 billion. The joint venture will operate as Louisiana Integrated PolyEthylene JV LLC.
Sasol announced in May it was on the hunt for a buyer to secure a large stake in its $13 billion chemical complex in Lake Charles, with a goal of reaching a deal by June. The move highlighted Sasol’s need for cash as it struggled with debt taken on to develop the Lake Charles complex in Louisiana, originally seen as a way to become a global operator and diversify away from oil. Expenses for the project more than doubled since early estimates—to almost $13 billion. Following an independent investigation that concluded the project team “engaged in conduct that was inappropriate, demonstrated a lack of competence and was not transparent,” Sasol’s joint CEOs stepped down.
Under the terms of the deal, both Sasol and LyondellBasell will provide pro-rata shares of ethane feedstocks and will offtake pro-rata shares of cracker and polyethylene products at cost. LyondellBasell will operate the U.S. Base Chemicals assets on behalf of the joint venture.
Once the deal closes, some Sasol U.S. employees will become employees of LyondellBasell. Sasol will retain full ownership and operational control of its Lake Charles Research and Development complex, Lake Charles East Plant ethane cracker and U.S. Performance Chemicals Business assets in Lake Charles, which produce Ziegler alcohols and alumina, ethoxylates, Guerbet alcohols, paraffins, comonomers, linear alkyl benzene, ethylene oxide and ethylene glycol.
“This investment represents a unique opportunity to bring together the best of both companies and create deep, long-term value while immediately realizing the many benefits of new, strategically-located, world-scale assets,” Bob Patel, CEO of LyondellBasell, said in the announcement. “The transaction is expected to be accretive to both cash flow and EPS within one year with significant upside as market conditions continue to improve.”
Sasol characterizes the venture as a “significant step” in reducing its net debt and rapidly shifting the company’s portfolio towards specialty chemicals.
The deal, expected to close by year’s end, is subject to customary regulatory approvals and approval by Sasol shareholders.