Sasol Form 20-F for the year ended 30 June 2021 - Book - Page 20
downgrade of our credit ratings by rating agencies or
new funding limitations, our ability to pursue new
business opportunities, invest in existing and new
projects, fund our ongoing business activities and retire
or service outstanding debt and pay dividends, could be
constrained. Any of these could have a material adverse
effect on our business, operating results, cash flows and
financial condition.
For example, the LCCP which is now
complete, experienced significant cost overruns, with
the estimated cost to completion having risen from
US$8,9 billion to US$12,8 billion. The last unit
achieved beneficial operations on 15 November 2020.
The reasons for the cost overruns included adverse
weather conditions (including Hurricane Harvey),
unforeseen costs in addressing ground conditions and
fire.
Refer “Item 5.A—Operating results” for the
impact of our large projects, such as PSA, on the results
of our operations.
In addition, significant variations in the
assumptions we make in assessing the viability of our
projects, including those relating to commodity prices
and the prices for our products, exchange rates, import
tariffs, interest rates, discount rates (due to changes in
country risk premiums) and the demand for our
products, may adversely affect the profitability or even
the viability of our investments.
Exposure related to significant investments in
associates and joint arrangements may adversely
affect our business, operating results, cash flows and
financial condition
We have invested in a number of associates
and joint arrangements and will consider opportunities
for further upstream gas and downstream investments
(including licensing opportunities), where appropriate,
as well as opportunities in chemicals. The development
of these projects may require investments in associates
and joint arrangements, some of which are aimed at
facilitating entry into countries and/or sharing risk with
third parties. Although the risks are shared, the
objectives of our associates and joint arrangement
partners; their ability to meet their financial and/or
contractual obligations; their behaviour; their
compliance with legal and ethical standards; and the
increasing complexity of country-specific legislation
and regulations may adversely affect our reputation
and/or result in disputes and/or litigation. All of these
may have a material adverse effect on our business,
operating results, cash flows and financial condition,
and may constrain the achievement of our growth
objectives.
As the PSA capital investment is particularly
material to Sasol, any cost overruns, schedule delays,
process safety incidents or adverse changes in
assumptions affecting the viability of the project could
have a material adverse effect on our business, cash
flows, financial condition and prospects. This risk is
further exacerbated by the COVID-19 pandemic and its
potential impact on the project schedule and costs.
Our operating cash flow and credit facilities
may be insufficient to meet our capital expenditure and
related incremental working capital plans and
requirements, depending on the timing and cost of
development of our existing projects, including, in
particular, PSA and any further projects we may
pursue, as well as our operating performance and the
resultant utilisation of our credit facilities. As a result,
new sources of capital may be needed to meet the
funding requirements of these projects and to fund
ongoing business activities. Our ability to raise and
service significant new sources of capital will be a
function of macroeconomic conditions, our credit
rating, our net debt to EBITDA ratio and other risk
metrics, the condition of the financial markets, our
share price, future prices for the products we sell,
particularly oil and key chemical products, the
prospects for our industry, our operational performance
and operating cash flow and debt position, among other
factors.
We may not pay dividends or make similar
payments to shareholders in the future due to
various factors
As further described under “Item 8. Financial
Information”, the company’s dividend policy takes into
consideration various factors, including overall market
and economic conditions, the group’s financial
position, capital investment plans as well as earnings
growth. Whether funds are available for distribution to
shareholders depends on a variety of factors, including
the amount of cash available and our capital
expenditures and other liquidity requirements existing
at the time. Under South African law, the company will
be entitled to pay a dividend or similar payment to its
In the event of unanticipated operating or
financial challenges, such as those caused by COVID19, any dislocation in financial markets, a deterioration
in the price outlook for the products we sell,
particularly oil and key chemical products, any
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