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.