Sasol Limited Climate Change Report 2021 - Book - Page 24
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A NET ZERO AMBITION
Capital allocation
Sasol’s financial position over the past two years has been constrained due to significant capital expenditure on our United States LCCP
investment and challenges presented by the COVID-19 pandemic. Through our immediate response plan last year and our Sasol 2.0
transformation programme, we are on track to restore and build attractive shareholder returns and fund our transition. Our gearing is
approaching more manageable levels as Net debt:EBITDA1 has reduced to 1,5 times in 2021 (4,3 times in 2020), which is well below our
covenant of 3,0 times.
Our disciplined approach to capital allocation
Over the year, Sasol has amended our capital allocation priorities in line with our decarbonisation approach and emission-reduction roadmaps.
Transform capital to deliver our GHG reduction targets has been prioritised and forms part of first order capital allocation, while 'maintaining our
asset base'. We have strategically evaluated our reduction levers using a decision-making framework that considered capital availability, technology
maturity and cost, emission-reduction requirements and the carbon tax. Our green hydrogen aspirations, which are directly tied to our own
decarbonisation, will be more aggressively pursued closer to the 2030 time horizon.
Our coal exposure
Sasol's major revenue streams come from a combination of coal, natural gas and oil-based derivatives.
Over the past four years, the percentage of revenue from coal-derived products was on average
between 39 - 41%. The Secunda Operations are directly linked to coal and limited to the products within
the affected value chains. This translates to more than 90% of liquid fuels and chemicals produced in
Secunda and all export coal. Note that some chemicals produced in South Africa are from natural gas
feedstock. None of the chemicals or fuels produced outside of South Africa are coal-derived.
This calculation is sensitive to oil price, currency exchange rate, production volumes and international
chemical prices. As we progress our Future Sasol strategy and integrate larger volumes of sustainable
fuels and chemicals, our coal exposure will naturally reduce.
Our growth priorities, including our FT sustainable solutions business and circular solutions are being phased in over time as per our capital allocation
framework ( IR see below and refer to pages 44).
Post 2030, our emission-reduction roadmaps with identified signposts will allow us to pivot efficiently and effectively to reach our long-term
ambition while creating value for our shareholders.
Managing and optimising our future capital
Clear capital investment
guidelines
Strategic partnering to
grow value and reduce
investment risk
Portfolio optimisation
Appropriate financing
Key capital allocation principles
Our first order capital will be
allocated to:
Our second order capital will be
allocated to:
• Maintaining our asset base;
• Expansionary growth and potential
sustainable businesses; and
• Decarbonising our existing business to deliver on our GHG reduction targets (Transform
capital) and protecting returns;
• Additional shareholder returns.
• Selective new growth/improve capital and funds for smaller high return, short payback
projects and potential sustainable businesses;
• Deleveraging and maintaining a robust balance sheet (