MOSCOW (MRC) -- LyondellBasell and Sasol have agreed to form a joint venture (JV), under which LyondellBasell will pay USD2 billion to acquire 50% of Sasol’s new 1.5-million metric tons/year steam cracker, and low-density polyethylene (LDPE) and linear low-density polyethylene (LLDPE) plants with combined capacity for 900,000 metric tons/year, as well as associated infrastructure, at Lake Charles, Louisiana, said Chemweek.
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. 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 assets on behalf of the JV.
Sasol says it carried out 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 companies that reportedly made offers to Sasol in discussions earlier this year for the assets include CPChem and Ineos. Sasol will retain full ownership and operational control of its existing 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 cash flow and earnings per share within a 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 says it will also retain access to “competitively priced onsite ethylene to ensure value-chain integration."
Kirkland & Ellis is serving as legal counsel to LyondellBasell and Gordon Dyal & Co. and J.P. Morgan are serving as financial advisors. Latham & Watkins is serving as Sasol’s legal counsel and 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 USD12.8 billion, a cost that has soared from its original estimate of USD8.9 billion. Sasol also reported a net loss of USD5.3 billion for its 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 still expected to achieve beneficial operations by the end of this month, according to Grobler.
According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC