Sasol Limited · JSE:SOL
Sasol — Investor Day (April 2013)
70 slides from Sasol's investor day presentation, Apr 9, 2013
Slide 1: Investor strategy presentation
investor strategy presentation New York: 9 April 2013 Cape Town: 19 April 2013
Slide 2: Introduction and safety
introduction and safety Raj Naidu Executive: Investor Relations and Shareholder Value Management
Slide 3: Forward-looking statements
forward-looking statements Forward-looking statements: Sasol may, in this document, make certain statements that are not historical facts and relate to analyses and other information which are based on forecasts of future results and estimates of amounts not yet determinable. These statements may al
Slide 4: Setting the scene
setting the scene David E. Constable Chief Executive Officer
Slide 5: What we will cover today: strategy execution and project prioritisation
what we will cover today strategy execution and project prioritisation Topic Duration Presenter Introduction and safety 5 min Raj Naidu Setting the scene 15 min David Constable Portfolio management and finance 30 min Christine Ramon ● Portfolio management process ● Project prioritisation ● Funding a
Slide 6: What we will cover today: focus on North America
what we will cover today focus on North America Topic Duration Presenter Our North American priorities 10 min David Constable Our North American value proposition 20 min Lean Strauss ● Technology ● Feedstock Our North American value proposition 40 min André de Ruyter ● Market ● Capability Closing re
Slide 7: The past 2 years: key themes
the past 2 years key themes ● Goal-setting and consolidation ● Prioritisation and focus ● Delivery and growth • Well-positioned and focused regional strategies - “Nurture and grow” in Southern Africa - “Expand and deliver” abroad • Cost optimisation • Strategy review, development and execution bette
Slide 8: Enhancing our long-term strategy
enhancing our long-term strategy evaluating the current strategy and our strategic path forward ● Embarked on a review of the group strategy for the period beyond 2020 ● Assessed our current strategic reality ● Developed scenarios to test potential strategic options ● Confirmed the robustness of our
Slide 9: Group imperatives
our strategic agenda will continue to guide our near- to medium-term strategy Foundation Sustainable growth grow shareholder value Operations Accelerate GTL growth Develop and empower sustainably Excellence high-performing, values- driven people Grow related upstream business group imperatives Capit
Slide 10: Our investment considerations
our investment considerations robust project economics remain cornerstone of our investment decisions Do we have access to adequate funding Financing while maintaining our targeted gearing and progressive dividend policy? robust project Do we have a technology, scale of plant or economics Technology
Slide 11: Our investment considerations: financing
our investment considerations financing Do we have access to adequate funding Financing while maintaining our targeted gearing and progressive dividend policy? robust project Do we have a technology, scale of plant or economics Technology operating know-how that provides a competitive advantage? Fee
Slide 12: Portfolio management and finance
portfolio management and finance Christine Ramon Chief Financial Officer
Slide 13: Value-enhancing strategic allocation of cash
value-enhancing strategic allocation of cash Sources and uses of cash Delivering ROIC ahead of WACC 50 30 30 2010 2011 2012 1H13 40 20 20 30 20 10 10 10 0 0 0 Rbn Sources Uses Sources Uses Sources Uses Sources Uses % 2008 2009 2010 2011 2012 % Cash gen. by ops after tax¹ Asset disposals Dividends Ac
Slide 14: Solid strategic capital allocation process
solid strategic capital allocation process options that maximise long-term shareholder value prioritised Process Response ● Distinguish between: ● Mandatory sustenance and value-enhancing • Growth / sustenance growth capex prioritised Capex • Upstream / downstream ● Other considerations: • Energy /
Slide 15: Robust portfolio management process
robust portfolio management process Portfolio analysis Selecting the optimal project and identify current gaps portfolio based on available to achieve strategy resources Sasol Strategy Portfolio strategy translation planning Capital excellence Portfolio Execution re-evaluation of portfolio Review pr
Slide 16: Prioritising our strong project pipeline
prioritising our strong project pipeline Project categories Prioritisation criteria Capital projects ranked with a focus on risk and returns Sustenance Mandatory ● Safety and compliance ● Statutory shutdowns ● Clean fuels specification Discretionary ● Mines replacement ● Renewal and non-statutory pr
Slide 17: Targeted returns compensate for investment risks
targeted returns compensate for investment risks Targeted IRR for capital investments Mechanisms to mitigate (on an unlevered basis) investment risk Sustenance ● Mandatory – n/a ● Discretionary – hurdle rate ● Project financing Growth ● Investment structures ● Economically justifiable – hurdle rate
Slide 18: Project execution delivered through rigorous capital governance processes
project execution delivered through rigorous capital governance processes BD&I model* ● Sasol business development and Idea generation New energy implementation model (BD&I Model) to govern Gate 1 capital investment decisions Pre-feasibility India CTL ● BD&I Model is Gate 2 benchmarked against “best
Slide 19: Enabling robust investment decision-making
enabling robust investment decision-making Key project assumptions stress tested ● Capital excellence through Monte Carlo analysis definition of victory to enhance project (Illustrative sensitivity tornado diagram) returns through: • World-class project execution and delivery Conservative assumption
Slide 20: Prudent long term oil price view supported by fundamentals
prudent long term oil price view supported by fundamentals Oil price – long-term panel comparison 180 Nominal oil price US$/bbl 160 140 120 100 80 FY11 FY14 FY17 FY20 FY23 FY26 FY29 Marginal cost of production = about $90 per barrel better together… we deliver 20
Slide 21: Prudent long term gas price view compares favourably to panel view
prudent long term gas price view compares favourably to panel view Gas price – long-term panel comparison 12 Henry Hub gas price ($/MM) 10 8 6 4 2 0 FY11 FY13 FY15 FY17 FY19 FY21 FY23 FY25 FY27 FY29 better together… we deliver 21
Slide 22: Focused on managing long-term gearing within target
focused on managing long-term gearing within target Gearing within targeted range during capex peak 100% 40% Gearing Capex spend 80% 30% 60% 20% 40% 10% 20% 0% 0% -10% FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 South Africa Rest of Africa Europe Middle East Far East North America South East A
Slide 23: Maintaining flexibility to fund capital investments
maintaining flexibility to fund capital investments Options Considerations ● Phase capex spend to maintain flexibility ● Projects could be phased to reduce Internal options ● Reduce capex and enhance project NPV gearing ● Cost optimisation ● Potential loss of synergies ● Various sources of funding i
Slide 24: Strong track record of delivering consistent returns
strong track record of delivering consistent returns Stable interim dividend Growth in earnings per share 30 6 40 Rand TSR1 29% 30 20 4 20 10 2 10 0 0 0 ZAR 2009 2010 2011 2012 1H13 % ZAR 2009 2010 2011 2012 1H12 1H13 Interim Final Dividend yield (year-end) Earnings per share Dividend per share 1. S
Slide 25: Delivering leading dividend yield vs. peer indices
delivering leading dividend yield vs. peer indices Sasol’s dividend yield compares favorably on historic basis Historic dividend yield FY12 6% 5% 4% 3% 2% 1% 0% Sasol MSCI EM Energy MSCI World energy JSE Resi 10 JSE Top 40 JSE Top 10 Source: Bloomberg market data as at 14 March 2013 better together…
Slide 26: Growing shareholder value sustainably
growing shareholder value sustainably Solid strategic Focused on managing capital allocation process long-term gearing growing shareholder value sustainably Strong track record Robust investment of delivering superior decision making shareholder returns better together… we deliver 26
Slide 27: Questions and answers
Sasol hing new frontier: questions and answers $8
Slide 28: Break
SasoOL b - reaching new frontiers 5 better together... we deliver
Slide 29: Our North American priorities
our North American priorities David E. Constable Chief Executive Officer
Slide 30: The home of our US growth projects
the home of our US growth projects Lake Charles Lake Charles better together… we deliver 30
Slide 31: Top management line of sight
top management line of sight Sasol Limited board CEO/GEC Mandating committee Project sponsor Steering Executive Technical contract committee committee approval committee US GTL LCCP project team project team IPMT better together… we deliver 31
Slide 32: Priority areas to drive project progress in the near term
priority areas to drive project progress in the near term guiding principles ● Appoint the best people for the job at hand ● Ensure robust Integrated Project Management Team with world-class project controls and management systems ● Leverage industry best practices and lessons learned • Mindset of z
Slide 33: Our investment considerations: technology and feedstock
our investment considerations technology and feedstock Do we have access to adequate funding Financing while maintaining our targeted gearing and progressive dividend policy? robust project Do we have a technology, scale of plant or economics Technology operating know-how that provides a competitive
Slide 34: Our investment considerations: market and capability
our investment considerations market and capability Do we have access to adequate funding Financing while maintaining our targeted gearing and progressive dividend policy? robust project Do we have a technology, scale of plant or economics Technology operating know-how that provides a competitive ad
Slide 35: Our North American value proposition – technology and feedstock
our North American value proposition – technology and feedstock Lean Strauss Senior Group Executive: international energy, new business development and technology
Slide 36: Technology
SasoOL b - reaching new frontiers 5 technology better together... we deliver
Slide 37: Gas to liquids (GTL) in a nutshell
gas to liquids(GTL) in a nutshell Product work-up GTL products Diesel: 75% Naphtha: 20% Natural gas Reforming GTL synthesis LPG: 5% as feedstock 10 mcf 1 barrel of product 1 bcf/d 100 000 bbl/day 1 tcf reserve 100 million bbl of products Over 30 years better together… we deliver 37
Slide 38: ORYX Qatar, Sasol's GTL flagship
ORYX Qatar, Sasol’s GTL flagship ● A joint venture with Qatar Petroleum ● A total of 45+ million barrels produced to date • 32 400 bbl/d nameplate capacity ● Some key performance indicators from 2012: • Zero RCR • Six months production in excess of design capacity • Nine months at 99%+ on-line avail
Slide 39: Other GTL projects in the pipeline
other GTL projects in the pipeline Escravos GTL, Nigeria OLTIN YO’L GTL, Uzbekistan ● Joint venture with Chevron + NNPC ● Joint venture with Uzbekneftegaz + Petronas ● 32 400 bbl/d – Oryx look alike ● 38 400 bbl/d – enhanced Oryx ● Beneficial operation: December 2013 ● Decision to proceed – 2nd half
Slide 40: Identified various levers to extract greater value
identified various levers to extract greater value Improving Driving capital technology productivity Improving improvement product value ● Across the fence utility ● Reactor intensification ● Chemicals supply ● Generation 3 FT catalyst ● Electricity ● Modularisation ● Improvement in reforming ● Base
Slide 41: Scale up and intensification of GTL reactor
scale up and intensification of GTL reactor ● Significant scale-up during successful commercialisation at ORYX GTL ● Subsequent focus on intensification to increase production in essentially the same shell ● Enabled by: • Integrated catalyst and reactor technology developments • Intensive fundamenta
Slide 42: Feedstock
SasoOL b - reaching new frontiers 5 feedstock better together... we deliver
Slide 43: Shale gas and shale ethane have changed North American markets
not only shale gas, but also shale ethane has changed North American energy and chemical markets estimates vary from 40-100 years of supply History 2009 Projections US dry gas (trillion cubic feet per year) 30 1% 25 Net imports 11% 20 Shale gas 45% 14% 15 20% Non-associated onshore 8% 9% Non-associa
Slide 44: US GTL opportunity advantaged by favourable oil/gas price ratios
the US GTL opportunity is advantaged by favourable oil/gas price ratios Crude oil (Brent) prices expressed as a multiple of natural gas prices (Henry Hub) 40 ● More than 400 tcf of gas in the US can be 30 commercially produced at <$6/mmbtu ● All reputable long-term energy consultants 20 forecast Hen
Slide 45: Montney shale gas – a feedstock hedge for US GTL
Montney shale gas – a feedstock hedge for US GTL ● A 50:50 Joint venture with Talisman in British Columbia ● Drilling and completion costs coming down – approaching investment assumptions ● 129 mcf/d average (gross) production for 2012 ● Montney gas production to provide ~ 2/3 feedstock price cover
Slide 46: Integrated gas and GTL economics in North America
integrated gas and GTL economics in North America Standalone Integrated Montney gas provides risk cover US GTL Montney US GTL in higher gas scenario economic value - NPV economic value - NPV integrated: US GTL + Montney Henry Hub gas price Henry Hub gas price Integrated economics between Montney and
Slide 47: GTL a compelling value proposition in Lake Charles
GTL a compelling value proposition in Lake Charles ● Phased approach after ethane cracker ● Value indicators 96 000 bbl/d Fuels • Capacity (nameplate): +96 kbpd • Gas requirement: 9 - 9,5 mmbtu Diesel ~ 43% per barrel product Naphtha and LPG ~ 29% • Capital range ($11-$14bn, including value adds) •
Slide 48: In summary
in summary GTL value proposition Lake Charles ● Arbitraging gas and oil - shale ● World class infrastructure gas revolution ● Supportive government ● Technology enhancements - ● Access to multiple markets extending our lead ● Competitive labour and compelling ● World class products contractor market
Slide 49: Our North American value proposition – market and capability
our North American value proposition – market and capability André de Ruyter Senior Group Executive: global chemicals and North American operations
Slide 50: Market
SasoOL b - reaching new frontiers 5 market better together... we deliver
Slide 51: US crackers' global leadership position on ethane
ethane associated with gas leads to global leadership position for US crackers Source: CMAI Position in bottom 30% on a cash cost basis better together… we deliver 51
Slide 52: Low market risk
low market risk Lake Charles Chemical Project gives backward-integrated growth for Sasol into a well-established and uniquely diversified market Oxygen MEG Ethylene To existing ETO Oxide/MEG* External Alcohol Ethoxylates ETO sales External Alcohol Guerbet Guerbet sales Ziegler Alcohols Alcohol Ethan
Slide 53: Prudent long term oil price view supported by fundamentals
prudent long term oil price view supported by fundamentals Oil price – long-term panel comparison 180 Nominal oil price US$/bbl 160 140 120 100 80 FY11 FY14 FY17 FY20 FY23 FY26 FY29 Marginal cost of production = about $90 per barrel better together… we deliver 53
Slide 54: GTL sells diesel, not crude oil
GTL sells diesel, not crude oil… Average oil prices in 2012: ● Brent: $111,6/bbl ● WTI: $ 94,2/bbl 129,8 130,2 Source: Platts 128,7 126,2 129,2 132,6 Diesel prices in the US are linked to international prices better together… we deliver 54
Slide 55: US GTL product marketing
US GTL product marketing a Sasol wholly-owned facility with a nameplate capacity of +96 000 bbl/d wax products debottleneck in reactor wax wax Hamburg, LPG Germany oxygen phase 1 extraction fuels natural gas syngas sasol LTFT product naphtha four new natural reforming process work -up gas emulsifica
Slide 56: Our key markets and products
our key markets and products improving the competitiveness of Sasol’s current global business Current Future Technology/ Technology/ production production Value chain Feedstock platform Market Feedstock platform Market C₂ > Polyethylene C₂ > Co-monomers C₂ > Alcohols Paraffin > LAB Wax Base oils/lub
Slide 57: Capability
SasoOL b - reaching new frontiers 5 capability better together... we deliver
Slide 58: Proactive actions to address execution challenges
proactive actions to address execution challenges Mitigation ● Integrated project management team ● Utilization of Recent mega-project standard ● Sasol and expert contractor members experience in the Gulf designs where ● Leverage local mega-project expertise and Coast execution possible ● Discipline
Slide 59: Actions to mitigate similar risks and apply best practices
actions to mitigate similar risks and apply best practices mega-project experience ● In process to contract with • A global construction company, with relevant US Gulf Coast experience • A global engineering and construction management company with GTL and lump sum credentials ● Experienced IPMT* •
Slide 60: Addressing execution risks
addressing execution risks building on prior experience ● Construction will not commence until well-defined design targets have been achieved ● Access to partners’ systems to enable tracking of costs and schedule independent of engineering contractors ● Scope for FEED is frozen ● Alleviating craft s
Slide 61: Extending the GTL schedule will reduce risk
extending the GTL schedule will reduce risk project definition drives estimate accuracy ● Delay engagement of EC and give ● Advancing project definition past typical end of FEED better definition for FEED kickoff of: (30%) to between 40% and 50%, would improve estimate accuracy by ~10% • External li
Slide 62: Modularization mitigates shortage of skills
modularization mitigates shortage of skills LCCP modularization study (feasibility) Module Yard Craft Peak Site Personnel (with modularization) Site Personnel (without modularization) better together… we deliver 62
Slide 63: Favourable location enables modularization
favourable location enables modularization Potential MATERIALS Module LABOR Laydown HEAVY HAUL EVERGREEN RD Area RAILROAD MATERIAL OFF-LOADING FACILITY SULPHUR ROAD I-10 better together… we deliver 63
Slide 64: In summary
in summary Market Capability ● Good positioning of products ● Experienced, well-resourced integrated owner team ● Well-established and uniquely diversified market ● Participation of independent reputable industry partners ● Balanced portfolio of commodity and differentiated products ● Lessons learne
Slide 65: Closing remarks
closing remarks David E. Constable Chief Executive Officer
Slide 66: LCCP business drivers
LCCP business drivers to create meaningful and profitable growth by capitalising on abundant and low-cost US ethane supplies ● Establish an ethylene-based chemicals facility with a balanced product portfolio ● Unique products and established market position ● Maintain the strategic position in alcoh
Slide 67: US GTL business drivers
US GTL business drivers the US holds significant fuels and chemical growth opportunities for Sasol and supports our strategic objectives ● Favourable US natural gas market dynamics ● Security of feedstock supply ● Sasol’s GTL and value-add technologies - unique products and established market positi
Slide 68: Revisiting our investment considerations
revisiting our investment considerations robust project economics remain cornerstone of our investment decisions ● Prioritised portfolio Financing ● Managing balance sheet within gearing target ● Good market appetite for Sasol debt robust project ● Record performance levels at ORYX GTL ● Superior te
Slide 69: Questions and answers
Sasol hing new frontier: questions and answers $8
Slide 70: Informal lunch
SasoOL b - reaching new frontiers 5 informal lunch better together... we deliver