Sasol Form 20-F for the year ended 30 June 2021 - Book - Page 15
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Failure to comply with any covenant would
enable the lenders to accelerate repayment obligations
and will lead to cross-defaults with the other facilities.
Sasol’s credit facilities have standard provisions
whereby certain events relating to other borrowers
within the Sasol group could, under certain
circumstances, lead to default and/or acceleration of
debt repayment under the credit facilities and other
borrowings. Should cross-default clauses be triggered,
this will likely create liquidity pressures and create a
risk for the sustainability of Sasol. In addition, the mere
market perception of a potential breach of any financial
covenant could have a negative impact on our share
price and our ability to refinance indebtedness or the
terms on which this could be achieved, which could
place pressure on the validity of our going concern
assumption.
Further downgrades to our credit rating, be
that due to the deterioration of our metrics or the impact
of the sovereign credit rating, will also adversely affect
our cost of financing, restrict our ability to grow and
may force us to make non-strategic divestments that
could impact our long-term sustainability. A substantial
portion of cash flows from operations is required to
meet the payment of principal and interest on our
existing debt, which will limit our ability to use our
cash flow for other purposes such as:
Our access to and cost of funding is affected by our
credit rating, which in turn is affected by, among
other factors, our key financial metrics and the
sovereign credit rating of the Republic of South
Africa, as well as our ability to comply with
acceptable environmental emissions targets
In May 2021, S&P affirmed South Africa’s
credit rating. Sasol’s credit rating could also be further
negatively impacted if the South African sovereign
rating is further downgraded. In addition, Sasol’s credit
rating may be further downgraded if Sasol’s credit
metrics deteriorate outside the guidance provided by the
rating agencies for a period longer than 12 to 18
months.
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the cost of debt on any new bank facilities
or bonds issued will likely be higher; and
to fund capital expenditure in our
operations;
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to pay dividends; and
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to fund future business opportunities.
Fluctuations in crude oil, natural gas, ethane,
chemical and petroleum product prices and refining
margins may adversely affect our business,
operating results, cash flows and financial condition
As a result of Sasol’s credit rating
downgrades:
the cost of debt on certain existing
facilities has increased;
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As discussed in more detail below, our key
manufacturing processes in South Africa, especially
coal gasification and combustion, result in relatively
high greenhouse gas (GHG) emissions. Our relatively
high carbon emissions and the use of coal as a key
feedstock could limit our ability to source financing in
debt capital and/or bank markets or increase our cost of
funding. Please refer to “—Our ability to respond to
climate change could negatively impact our growth
strategies, reduce supply/demand for our products,
increase our operational costs, reduce our
competitiveness, negatively impact our stakeholder
relations, adversely affect our legal licence to operate
and our access to capital and financing” for further
information.
Sasol’s credit rating is impacted by our
business performance and leverage, as well as the
financial policy and sovereign rating of the Republic of
South Africa, including other factors such as global oil
and chemical market conditions which may be outside
of our control. Both Moody’s Investor Services
(Moody’s) and S&P Global (S&P) have Sasol at subinvestment grade levels currently.
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access to funding in both the bank market
and the debt capital markets will likely be
more limited.
Market prices for crude oil, natural gas, ethane
and chemical and petroleum products fluctuate as they
are subject to local and international supply and
demand fundamentals and other factors over which we
have no control. Worldwide supply conditions and the
price levels of crude oil may be significantly influenced
by general economic conditions; industry inventory
levels; technology advancements; production quotas or
other actions that might be imposed by international
associations that control the production of a significant
proportion of the worldwide supply of crude oil;
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