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S.Africa's Sasol may expand U.S. cracker, sell power to Eskom
South African petrochemicals group Sasol could expand its $8.9 billion cracker project in the U.S. state of Louisiana depending on market conditions, its chief executive said.
Sasol is going ahead with the cracker, which takes ethane, a component of natural gas, and turns it into ethylene, used in the manufacture of plastic products.
The world's biggest maker of motor fuel from coal in January delayed the final investment decision on the gas-to-liquids (GTL) plant at the Louisiana site, which will cost up to $14 billion, because of the low oil price.
"Because of the volatility in the market, other things may feature. For example, more cracking capacity versus GTL," chief executive David Constable told Reuters on Monday after the company announced interim results.
Constable said Sasol could build another cracker and derivatives plant or expand cracking capacity.
"Gas prices are staying very low. We need 16 times that gas price to make a good return on GTL," he said.
Sasol said it could sell up to 400 megawatts of excess power that it generates in-house from steam boilers and gas turbines to South Africa's state-run power utility Eskom.
Eskom is scrambling to keep the lights on in Africa's most advanced economy and frequently has to implement controlled power outages to keep the grid from being overwhelmed.
"There are options for us to work with Eskom on power purchase agreements," Constable said during a results briefing, which showed a 6 percent rise in first-half earnings after higher sales helped offset the impact of falling oil prices.
Headline earnings per share rose to 32 rand, the middle of the range that Sasol previously flagged to the market.
Sasol cut its interim dividend by 12.5 percent, a move it had also previously signalled, to save cash in a volatile environment, though the reduction was not as big as some in the market had anticipated.
Sasol, which declared an interim dividend of 7 rand per share, said its objective was to maintain a 40:60 split between the interim and final dividend.
The group has changed its progressive dividend policy to a more fluid payout based on headline earnings.
"They didn't want to make the first reduction to the dividend too aggressive," said Nedbank Capital analyst Mohamed Kharva.
Sasol's share price was 2 percent higher, outpacing a 0.75 percent decline in Johannesburg's benchmark Top-40 index . By Ed Stoddard and Zandi Shabalala (Editing by James Macharia)
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