Sasol has struck a deal for partnership in its U.S. Base Chemicals Business in Lake Charles, announcing today the formation of a joint venture with LyondellBasell, a global producer of commodity chemicals.
LyondellBasell will acquire 50% of Sasol’s new ethane cracker and the low and linear-low density polyethylene plants and associated infrastructure for $2 billion. The joint venture will operate as Louisiana Integrated PolyEthylene JV LLC.
The partnership comes five months after 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 underscored Sasol’s need for cash as it struggled with debt taken on to develop the Lake Charles complex, originally seen as a way to become a global operator and diversify away from oil, according to 10/12 Industry Report. However, expenses for the project more than doubled since early estimates, and 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.
In accordance with the joint venture, LyondellBasell will operate three of Sasol’s Lake Charles facilities, while Sasol will retain 50% joint venture ownership. Some Sasol Lake Charles employees who support these three facilities will become employees of LyondellBasell upon close of the deal.
Sasol will continue to entirely own and operate its Lake Charles Research and Development facility and 11 other chemical manufacturing facilities in the city, including its Lake Charles East Plant ethane cracker and U.S. Performance Chemicals Business assets. The company will also retain ownership of its vacant land on site.
Under the agreement, each joint venture partner will provide pro-rata shares of ethane feedstocks and will offtake pro-rata shares of cracker and polyethylene products at cost.
In a prepared statement, Sasol President and CEO Fleetwood Grobler says the joint venture with LyondellBasell marks “a significant step” in reducing Sasol’s net debt and rapidly shifting the company’s portfolio toward speciality chemicals. Meanwhile, LyondellBasell CEO Bob Patel characterizes its $2 billion investment as a “unique opportunity” to expand its footprint and boost cash flow and earnings per share within one year as market conditions improve.
The transaction is expected to close by the end of the year, pending shareholder and regulatory approvals, with the joint shareholder agreement to begin soon thereafter.
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