Sasol’s Louisiana project beset by more delays

(The Associated Press)

Sasol’s Lake Charles chemical plant is again facing delays and cost overruns.

The South African company’s share price recorded its biggest one-day drop in nearly three years, Business Day reports, after announcing startup would be delayed by up to five months and capital costs could rise to as much as $11.8 billion.

Less than four months after telling investors that its new Lake Charles chemical plant is on track to cost $11.13 billion, the company warned last week that it was now expected to cost between $11.6 billion and $11.8 billion.

The start-up of the project’s first unit was also delayed by two months.

The project—an ethane cracker and derivatives complex—has already faced a number of cost overruns and delays. On inception in 2014 it was expected to cost $8.9 billion and to be in operation by 2018.

Lake Charles is Sasol’s biggest project and is set to transform it from largely a fuel producer, with its main footprint in Southern Africa, to a major global chemicals player, Business Day reports. Chemicals, used in the production of products ranging from plastics to cosmetics, are expected to contribute more than 70% to Sasol’s overall revenue once the complex is fully operational.

Sasol attributed the delays and cost overruns to a number of factors, including excessive rainfall in the December quarter, high absenteeism around public holidays and “late scope additions for the cracker as a result of incomplete engineering work not timeously identified.”

Sasol reports that its Lake Charles facilitywas expected to generate earnings before interest, tax, depreciation and amortization of between $110 million and $160 million in the financial year to end-June, but now will report a loss of between $165 million and $195 million over the period.

Business Day has the full story.