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LyondellBasell, Sasol agree $2-billion Lake Charles JV

October 2, 2020
Chemical Value Chain

LyondellBasell and Sasol (Johannesburg, South Africa) have agreed to form a joint venture (JV) through which LyondellBasell will pay $2 billion to acquire 50% of Sasol’s new 1.5-million metric tons/year steam cracker and 900,000-metric tons/year low-density polyethylene (LDPE) and linear low-density polyethylene (LLDPE) plants and associated infrastructure at Lake Charles, Louisiana.

The agreement includes customary rights for each partner regarding the potential future sale of its ownership interest, the companies say in a joint statement. The JV will operate under the name Louisiana Integrated PolyEthylene JV LLC. Both LyondellBasell and Sasol will each provide pro-rata shares of ethane feedstock to the cracker and offtake pro-rata shares of cracker and polyethylene (PE) products at cost, they say. LyondellBasell will operate the base chemicals assets on behalf of the JV.

Sasol says it undertook a process to determine “the optimal partnership construct” for its US base chemicals business. The proposal by LyondellBasell “offered the best combination of upfront and long-term value, consistent with Sasol’s long-term strategic priorities,” it says. The transaction, subject to customary regulatory approvals and approval by Sasol shareholders, is expected to close by the end of the year. A number of Sasol’s US employees will transfer to LyondellBasell when the transaction closes.
Other bidders that reportedly made offers in discussions earlier this year for the assets included CPChem and Ineos.

Sasol will continue to retain full ownership and operational control of its 454,000-metric tons/year Lake Charles East Plant ethane cracker, an R&D complex, and its performance chemicals assets at Lake Charles producing Ziegler alcohols and alumina, ethoxylates, Guerbet alcohols, paraffins, comonomers, linear alkylbenzene, ethylene oxide, and ethylene glycol, it says.

LyondellBasell CEO Bob Patel describes the investment as a “unique opportunity” to create deep, long-term value that will also immediately realize the benefits of new, strategically located assets. 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,” he says. The investment allows LyondellBasell to expand in a core area of its business and leverage its operational and commercial strengths, according to the company. It will also realize immediate returns while eliminating “customary construction risks associated with new project execution,” it says.

Sasol president and CEO Fleetwood Grobler says LyondellBasell is the “ideal partner to ensure the success of these world-class assets with its deep expertise in commodity chemicals.” The transaction represents a significant step forward for Sasol in creating a more sustainable and resilient company for the long term, he says. The deal also reduces the company’s net debt and helps to shift its portfolio focus increasingly toward specialty chemicals, according to Sasol. The US performance chemicals business is “consistent with the strategy to increase focus on specialty chemicals where Sasol enjoys differentiated capabilities and strong market positions,” it says. The company will also retain access to “competitively priced onsite ethylene to ensure value chain integration,” it adds.
Kirkland & Ellis is serving as legal counsel to LyondellBasell, while Gordon Dyal & Co. and J.P. Morgan are serving as financial advisors. Latham & Watkins is serving as Sasol’s legal counsel, while Bank of America is serving as financial advisor.

Sasol said in August that it had received “strong global interest” for its Lake Charles Chemicals Project (LCCP) base chemicals assets and that a deal was expected to close by the end of the year. The overall current forecast cost of the LCCP is $12.8 billion, a cost that has soared from its original estimate of $8.9 billion. Sasol also reported a net loss of $5.3 billion for the full financial year ended 30 June.

The last remaining unit to come online at the LCCP complex is the 420,000-metric tons/year LDPE facility, damaged in a fire earlier this year. It is expected to achieve beneficial operations by the end of this month, according to the most recent available information.

By: Mark Thomas

Source: Chemical Week

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