[miningmx.com] – SASOL would weigh in to South Africa’s energy crisis by signing three- to five-year power purchase agreements (PPA) with the country’s power utility Eskom for the supply of between 375MW to 400MW of power.
The R264bn petrochemical producer generates about 1,100MW in electricity from its steam boilers and gas turbines for its own use at Sasolburg and Secunda.
Said David Constable, president and CEO of Sasol: “We can work with Eskom on a PPA for 375MW to 400MW which we can put on the grid”.
The group, which today unveiled a 30-month, R30bn to R50bn cash conservation programme in a response to the lower oil price, also said it may buy liquified natural gas (LNG), probably from the Middle East, in order to provide a long-term solution to costly diesel used by Eskom’s open cycle gas turbines (OCGT).
In the longer term, and in a move that would represent a far more substantial investment, however, Constable, said the group was discussing building LNG facilities with the South African government.
Another intervention was to increase the volume of gas from Mozambique. Sasol has recently completed a gas-to-liquids pre-feasibility study for a plant that would be based in the southern African country.
The remarkable development, however, is the prospect of an LNG plant which may involve a number of governmental departments. Said Constable: “Other state-owned enterprises would come along with us, but roles not sorted out, nor the funding”.
“You could guess which organisations would be involved with us,” he added. “Sasol wants to play leading role in making it [LNG investment] happen from a technical and a deal-making perspective,” said Constable.
“We are also looking to support these initiatives by importing LNG and then land-based LNG in order to convert diesel to gas. We would look globally for LNG supply most probably from the Gulf coast,” he said.
South Africa’s resources sector has agreed to work within, and around, Eskom’s load-shedding structure for now except Sibanye Gold which said it was considering the benefits of building a R3bn power plant which could also supply the national grid.
Even Sasol’s interest in providing LNG to Eskom is far from certain given the group’s heavy cuts in capital spending down R5bn this year to R45bn, although spending would remain unchanged in its 2016 financial year at R65bn.
Constable said the group would continue with “selected investments” amid a R30bn to R50bn cash preservation strategy which has seen 1,500 in jobs losses, with a further 200 positions identified as well as a job freeze of up to 1,000 positions. Roughly 61% of top layer management had been restructured through more efficient reporting lines.
Sasol also adjusted its dividend policy recently such that it would shelve the progressive dividend strategy in return for dividend cover which seeks to conservatively match payouts against earnings performance.
Sasol posted a R7 per share interim dividend, a 12.5% decline over the dividend of the interim period in the previous financial year. This was informed largely by the decline of the crude oil price which at about $59/barrel was about $40/bbl below last year’s average price.
“The global economic environment remains volatile and uncertain,” said Constable in notes to Sasol’s interim results. We expect oil prices to remain low for the rest of the 2015 calendar year,” he said.
