investor strategy presentation New York: 9 April 2013 Cape Town: 19 April 2013

Transcription

1 investor strategy presentation New York: 9 April 2013 Cape Town: 19 April 2013

2 introduction and safety Raj Naidu Executive: Investor Relations and Shareholder Value Management

3 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 also relate to our future prospects, developments and business strategies. Examples of such forward-looking statements include, but are not limited to, statements regarding exchange rate fluctuations, volume growth, increases in market share, total shareholder return and cost reductions. Words such as believe, anticipate, expect, intend, seek, will, plan, could, may, endeavour and project and similar expressions are intended to identify such forward-looking statements, but are not the exclusive means of identifying such statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and there are risks that the predictions, forecasts, projections and other forward-looking statements will not be achieved. If one or more of these risks materialise, or should underlying assumptions prove incorrect, our actual results may differ materially from those anticipated. You should understand that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors are discussed more fully in our most recent annual report under the Securities Exchange Act of 1934 on Form 20-F filed on 12 October 2012 and in other filings with the United States Securities and Exchange Commission. The list of factors discussed therein is not exhaustive; when relying on forward-looking statements to make investment decisions, you should carefully consider both these factors and other uncertainties and events. Forward-looking statements apply only as of the date on which they are made, and we do not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise. better together we deliver 3

4 setting the scene David E. Constable Chief Executive Officer

5 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 and dividend Q&A Break 15 min 15 min David Constable Christine Ramon better together we deliver 5

6 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 remarks 5 min David Constable Q&A Informal lunch with management 20 min David Constable Christine Ramon Lean Strauss André de Ruyter better together we deliver 6

7 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 better together we deliver 7

8 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 near- to medium-term strategy GTL and chemicals in our longer term future better together we deliver 8

9 group imperatives our strategic agenda will continue to guide our near- to medium-term strategy Foundation Sustainable growth grow shareholder value Operations Excellence Develop and empower high-performing, valuesdriven people Accelerate GTL growth Grow related upstream business sustainably Capital Excellence Business Excellence Continuously improve and grow existing asset base Grow technological lead Grow chemicals based on feedstock, market and/or technology Values-driven Organisation Deliver on the South African transformation agenda advantage Develop and grow new energy better together we deliver 9

10 our investment considerations robust project economics remain cornerstone of our investment decisions Financing Technology Do we have access to adequate funding while maintaining our targeted gearing and progressive dividend policy? Do we have a technology, scale of plant or operating know-how that provides a competitive advantage? robust project economics Feedstock Do we have a long-term low-cost feedstock? Market Do we have a product or market position that provides us with a compelling business case? Capability Do we have the required project execution capability? better together we deliver 10

11 our investment considerations financing Financing Technology Do we have access to adequate funding while maintaining our targeted gearing and progressive dividend policy? Do we have a technology, scale of plant or operating know-how that provides a competitive advantage? robust project economics Feedstock Do we have a long-term low-cost feedstock? Market Do we have a product or market position that provides us with a compelling business case? Capability Do we have the required project execution capability? better together we deliver 11

12 portfolio management and finance Christine Ramon Chief Financial Officer

13 value-enhancing strategic allocation of cash Sources and uses of cash Delivering ROIC ahead of WACC H Rbn Sources Uses Sources Uses Sources Uses Sources Uses Cash gen. by ops after tax¹ Asset disposals Dividends Acquisitions and investments Downstream energy capex Upstream capex Chemicals capex 0 % % ROIC WACC IRR target 1. Cash generated by operations after payment of taxes better together we deliver 13

14 solid strategic capital allocation process options that maximise long-term shareholder value prioritised Capex Process Distinguish between: Growth / sustenance Upstream / downstream Energy / chemicals South Africa / international Response Mandatory sustenance and value-enhancing growth capex prioritised Other considerations: Prioritisation criteria Geographic diversification M&A Acquisition of businesses Acquisition of assets Considered on a case by case basis Returns to shareholders Dividends Share buybacks Progressive dividend policy followed Share buybacks periodically assessed for attractiveness Excess cash and buffer for volatility considered before capital is allocated better together we deliver 14

15 robust portfolio management process Portfolio analysis and identify current gaps to achieve strategy Selecting the optimal project portfolio based on available resources Sasol strategy Strategy translation Portfolio planning Capital excellence Portfolio re-evaluation Execution of portfolio Review progress on portfolio execution and effectiveness of capital expenditure Execute project following the BD&I model and governance principles better together we deliver 15

16 prioritising our strong project pipeline Project categories Sustenance Prioritisation criteria Capital projects ranked with a focus on risk and returns Mandatory Safety and compliance Discretionary Renewal and non-statutory maintenance Growth Statutory shutdowns Clean fuels specification Mines replacement programme Financial returns Project risk and execution capability Economically justifiable Improve efficiency or effectiveness New business opportunities Synfuels growth programme Integrated US chemicals US ethane cracker Ethylene purification C 3 stabilisation Competitive advantage (technology, feedstock) Business robustness FT wax expansion Tetramerisation Markets Project maturity US GTL Uzbekistan GTL Escravos GTL Canada GTL Upstream exploration and potential acquisitions better together we deliver 16

17 targeted returns compensate for investment risks Targeted IRR for capital investments (on an unlevered basis) Mechanisms to mitigate investment risk Sustenance Mandatory Discretionary n/a hurdle rate Growth Economically justifiable hurdle rate Hurdle rate = WACC x 1,3 Includes buffer for unforeseen project risk and sustenance projects Required IRR for mega projects increased for identifiable project specific risks Project financing Investment structures Lump sum EPC contracting Long term feedstock arrangements JV partners Group WACC Includes country risk premium adjustment Based on long term target gearing Maximise returns and minimise risks to sustainably grow shareholder value better together we deliver 17

18 project execution delivered through rigorous capital governance processes BD&I model* Idea generation Pre-feasibility New energy Gate 1 India CTL Gate 2 Sasol business development and implementation model (BD&I Model) to govern capital investment decisions BD&I Model is benchmarked against best in class Feasibility Canada GTL Gate 3 Staged gate approach for approvals to ensure balanced risk/reward Basic development (FEED) Implementation US ethane cracker US GTL Uzbekistan GTL Tetramerisation Secunda growth EGTL Gate 4 Gate approval process optimised to reduce impact on project schedule Robust governance structures to review and prioritise capital projects * Excludes upstream exploration + further acquisition of gas assets better together we deliver 18

19 enabling robust investment decision-making Key project assumptions stress tested through Monte Carlo analysis (Illustrative sensitivity tornado diagram) Conservative assumptions Capital expenditure Operating costs Feedstock prices Commodity prices Exchange rates -1,50% -0,75% 0,00% 0,75% 1,50% Change in IRR Capital excellence definition of victory to enhance project returns through: World-class project execution and delivery (cost, schedule, operability) Portfolio management (value optimisation, capital governance) Optimise returns through procurement and contracting Learning and post-implementation reviews Capital scrubbing and optimisation ensures focus on higher return projects: Confirming project drivers Ensuring reliable project valuations Verifying and testing assumptions Investigating alternative solutions Sensitivities of key assumptions tested over the long term better together we deliver 19

20 prudent long term oil price view supported by fundamentals Nominal oil price US$/bbl 180 Oil price long-term panel comparison FY11 FY14 FY17 FY20 FY23 FY26 FY29 Marginal cost of production = about $90 per barrel better together we deliver 20

21 prudent long term gas price view compares favourably to panel view Henry Hub gas price ($/MM) 12 Gas price long-term panel comparison FY11 FY13 FY15 FY17 FY19 FY21 FY23 FY25 FY27 FY29 better together we deliver 21

22 Capex spend Gearing focused on managing long-term gearing within target 100% Gearing within targeted range during capex peak 40% 80% 30% 60% 20% 40% 10% 20% 0% 0% FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 South Africa Rest of Africa Europe Middle East Far East North America South East Asia /Aus Total Growth Total Sustenance Gearing Target gearing -10% Incorporates progressive dividend policy better together we deliver 22

23 maintaining flexibility to fund capital investments Options Considerations Internal options Phase capex spend to maintain flexibility Reduce capex and enhance project NPV Cost optimisation Projects could be phased to reduce gearing Potential loss of synergies Debt options Various sources of funding include: Bank loans (local and international) Bond markets (local and international) Export Credit Agency funding Project finance Debt more cost effective than equity Impact on credit rating and cost of funding Other options Potential equity options Equity is an expensive funding option until projects are commissioned Delays in process All options are under consideration better together we deliver 23

24 strong track record of delivering consistent returns 30 Stable interim dividend 6 40 Growth in earnings per share Rand TSR 1 29% ZAR H13 % 0 ZAR H12 1H13 Interim Final Dividend yield (year-end) Earnings per share Dividend per share 1. Source: Bloomberg 31 December 2009 to 31 December 2012, assuming dividends are reinvested in securities better together we deliver 24

25 delivering leading dividend yield vs. peer indices Sasol s dividend yield compares favorably on historic basis 6% Historic dividend yield FY12 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 we deliver 25

26 growing shareholder value sustainably Solid strategic capital allocation process Focused on managing long-term gearing growing shareholder value sustainably Robust investment decision making Strong track record of delivering superior shareholder returns better together we deliver 26

27 questions and answers

28 break

29 our North American priorities David E. Constable Chief Executive Officer

30 the home of our US growth projects Lake Charles Lake Charles better together we deliver 30

31 top management line of sight Sasol Limited board CEO/GEC Mandating committee Project sponsor Steering committee Executive committee Technical contract approval committee IPMT US GTL project team LCCP project team better together we deliver 31

32 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 zero scope changes post-epc award Single point of accountability A robust yet flexible contracting strategy Quality of agreements, incentives and relationships with contractors paramount Better market intelligence than contractors and competitors Create independent key craft labour strategy better together we deliver 32

33 our investment considerations technology and feedstock Financing Technology Do we have access to adequate funding while maintaining our targeted gearing and progressive dividend policy? Do we have a technology, scale of plant or operating know-how that provides a competitive advantage? robust project economics Feedstock Do we have a long-term low-cost feedstock? Market Do we have a product or market position that provides us with a compelling business case? Capability Do we have the required project execution capability? better together we deliver 33

34 our investment considerations market and capability Financing Technology Do we have access to adequate funding while maintaining our targeted gearing and progressive dividend policy? Do we have a technology, scale of plant or operating know-how that provides a competitive advantage? robust project economics Feedstock Do we have a long-term low-cost feedstock? Market Do we have a product or market position that provides us with a compelling business case? Capability Do we have the required project execution capability? better together we deliver 34

35 our North American value proposition technology and feedstock Lean Strauss Senior Group Executive: international energy, new business development and technology

36 technology

37 gas to liquids(gtl) in a nutshell Product work-up GTL products Diesel: 75% Natural gas as feedstock Reforming GTL synthesis Naphtha: 20% LPG: 5% 10 mcf 1 barrel of product 1 bcf/d bbl/day 1 tcf reserve 100 million bbl of products Over 30 years better together we deliver 37

38 ORYX Qatar, Sasol s GTL flagship A joint venture with Qatar Petroleum A total of 45+ million barrels produced to date 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 availability Technology proven and feedstock conversion target exceeded better together we deliver 38

39 other GTL projects in the pipeline Escravos GTL, Nigeria Joint venture with Chevron + NNPC bbl/d Oryx look alike Beneficial operation: December 2013 OLTIN YO L GTL, Uzbekistan Joint venture with Uzbekneftegaz + Petronas bbl/d enhanced Oryx Decision to proceed 2nd half 2013 better together we deliver 39

40 identified various levers to extract greater value Improving capital productivity Improving product value Driving technology improvement Across the fence utility supply Modularisation Partnerships and alliances Chemicals Electricity Base oils Reactor intensification Generation 3 FT catalyst Improvement in reforming technology 5-7% improvement in IRR targeted better together we deliver 40

41 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 fundamental studies, model systems and semi-commercial piloting Understanding critical design parameters and margins based on commercial operation enabled significant optimisation US GTL design at 150% of ORYX GTL reactor capacity better together we deliver 41

42 feedstock

43 not only shale gas, but also shale ethane has changed North American energy and chemical markets US dry gas (trillion cubic feet per year) estimates vary from years of supply History Projections 25 Net imports 1% 20 11% 14% Shale gas 45% 15 20% 10 9% Non-associated onshore Non-associated offshore 8% 8% 5 28% 8% 2% 9% Tight gas Coal-bed methane Alaska Associated with oil % 7% 1% 7% Source: EIA, Annual Energy Outlook 2011 better together we deliver 43

44 the US GTL opportunity is advantaged by favourable oil/gas price ratios 40 Crude oil (Brent) prices expressed as a multiple of natural gas prices (Henry Hub) More than 400 tcf of gas in the US can be commercially produced at <$6/mmbtu All reputable long-term energy consultants forecast Henry Hub in a USD 4-6/mmbtu range (real 12) Oil/gas price differential forecast to remain favourable actual EIA (2013) better together we deliver 44

45 mmcf/day 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 for GTL investment in US US GTL consumption 800 Sasol Montney gas production better together we deliver 45

46 economic value - NPV economic value - NPV integrated gas and GTL economics in North America Standalone Integrated US GTL Montney US GTL Montney gas provides risk cover in higher gas scenario integrated: US GTL + Montney Henry Hub gas price Henry Hub gas price Integrated economics between Montney and GTL robust better together we deliver 46

47 GTL a compelling value proposition in Lake Charles Phased approach after ethane cracker Value indicators Capacity (nameplate): +96 kbpd Gas requirement: 9-9,5 mmbtu per barrel product Capital range ($11-$14bn, including value adds) Operating cost: < $20/bbl Economics further enhanced by attractive incentives GTL exceeds hurdle on standalone basis Chemical products make a significant incremental contribution to GTL value proposition bbl/d Fuels Diesel Naphtha and LPG Chemical value adds GTL Paraffin cuts and LAB Wax products Synthetic base oils ~ 43% ~ 29% ~ 28% better together we deliver 47

48 in summary GTL value proposition Arbitraging gas and oil - shale gas revolution Technology enhancements - extending our lead World class products Chemical value adds Integrated value chain Lake Charles World class infrastructure Supportive government Access to multiple markets Competitive labour and contractor market Abundant feedstock compelling investment opportunity better together we deliver 48

49 our North American value proposition market and capability André de Ruyter Senior Group Executive: global chemicals and North American operations

50 market

51 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

52 low market risk Lake Charles Chemical Project gives backward-integrated growth for Sasol into a well-established and uniquely diversified market Oxygen External Alcohol Ethane External Alcohol Ethane Cracker Ethylene Ethylene Oxide/MEG* Ziegler Alcohol Ethoxylates Guerbet Alcohols MEG To existing ETO ETO sales Guerbet sales Alcohol sales Alumina TET 1-Octene 1-Hexene LLDPE LLDPE Crude C3s Crude C4s Light Pygas LDPE LDPE Heavy pygas Ethylene Balanced portfolio of commodity and differentiated products better together we deliver 52

53 prudent long term oil price view supported by fundamentals Nominal oil price US$/bbl 180 Oil price long-term panel comparison FY11 FY14 FY17 FY20 FY23 FY26 FY29 Marginal cost of production = about $90 per barrel better together we deliver 53

54 GTL sells diesel, not crude oil 130,2 129,8 Average oil prices in 2012: Brent: $111,6/bbl WTI: $ 94,2/bbl 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

55 phase 2 phase 1 US GTL product marketing a Sasol wholly-owned facility with a nameplate capacity of bbl/d wax products oxygen natural gas natural gas reforming syngas sasol LTFT process reactor wax condensate wax extraction paraffin extraction fuels product work - up Process * LPG naphtha diesel debottleneck in Hamburg, Germany four new emulsification units paraffins oxygen natural gas natural gas reforming syngas sasol LTFT process condensate reactor wax paraffin extraction Paraffin for LAB production fuels product work - up Process * LPG naphtha diesel new LAB unit in Lake Charles minor modifications in Augusta, Italy base oils base oils * flexible design allows for operation in fuels only or value adds mode A balanced product portfolio of 29% chemicals and 71% fuels (by mass) better together we deliver 55

56 our key markets and products improving the competitiveness of Sasol s current global business Current Future Value chain Feedstock Technology/ production platform Market Feedstock Technology/ production platform Market C₂ > Polyethylene C₂ > Co-monomers C₂ > Alcohols Paraffin > LAB Wax Base oils/lubricants GTL diesel No position Fair position Good position Strong position better together we deliver 56

57 capability

58 proactive actions to address execution challenges Mitigation Recent mega-project experience in the Gulf Coast Contracting strategies Labour availability and productivity Integrated project management team Sasol and expert contractor members Leverage local mega-project expertise and execution Holistic review of feasible contracting options and defined contracting strategies Comprehensive contractor scan and development effort to ensure most competitive pool of qualified EPCs Current preference for FEED contracts is a converted lump sum approach Detailed market analysis of key labour supply/demand balances, productivity and labour rates Market intelligence and resource planning Modularization strategies Utilization of standard designs where possible Disciplined stage-gate discipline to control change during design evolution Extended FEED programme to allow sufficient time to complete designs prior to construction better together we deliver 58

59 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* Salt and pepper team under Sasol s leadership - Sasol South Africa and Sasol North America employees - Local US Gulf contractor experts - Local/Sasol expat split 75%/25% Members selected for relevant experience Independent - No execution responsibilities, thus no conflict of interest - Own FEED and EPC management control systems * IPMT: mega-project experience IPMT schematic for illustrative purposes better together we deliver 59

60 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 shortage by moving certain activities off site through modularization Utilization of known technologies Leveraging of world class suppliers (e.g. Oxygen OTF, electricity co-generation) Utilization of local employees and contractors with in-country experience Careful study and review of lessons learnt executing megaprojects at Sasol and by others Experienced, well-resourced integrated owner team with participation of independent reputable industry partners better together we deliver 60

61 extending the GTL schedule will reduce risk project definition drives estimate accuracy Delay engagement of EC and give better definition for FEED kickoff of: External license packages, OOTF and co-generation definition Greater project scope and design definition at time of FID Reduced execution risk and narrows the band for EPC cost by extending FEED Less potential of scope growth Support more accurate prices from market (e.g. lump sum) Consideration of alternative contracting strategies Advancing project definition past typical end of FEED (30%) to between 40% and 50%, would improve estimate accuracy by ~10% 10% on a US$6,5bn EPC cost could equate to a US$650m improvement in accuracy Source: Association for the Advancement of Cost Engineering International better together we deliver 61

62 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

63 EVERGREEN RD favourable location enables modularization Potential Module Laydown Area MATERIALS LABOR HEAVY HAUL RAILROAD MATERIAL OFF-LOADING FACILITY SULPHUR ROAD I-10 better together we deliver 63

64 in summary Market Good positioning of products Well-established and uniquely diversified market Balanced portfolio of commodity and differentiated products Capability Experienced, well-resourced integrated owner team Participation of independent reputable industry partners Lessons learned executing mega-projects at Sasol and by others Lake Charles, Louisiana ORYX GTL, Qatar better together we deliver 64

65 closing remarks David E. Constable Chief Executive Officer

66 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 alcohols and ethoxylates Maintain the strategic position in octene and grow market share Replace divested production and grow polymers global footprint within existing portfolio Create a sustainable competitive advantage by positioning ourselves in the lower third of the global ethylene cash cost curve Produce current tolled ethylene oxide thereby improving cost base, operations, safety and sustainability better together we deliver 66

67 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 position Existing asset and resource base in North America Integration synergies with the LCCP Enable Sasol to enter a lucrative and quickly developing premium base oils market One of the lowest cost paraffin and LAB value chains globally Allow production of high quality waxes to support differentiation strategy better together we deliver 67

68 revisiting our investment considerations robust project economics remain cornerstone of our investment decisions Financing Technology Prioritised portfolio Managing balance sheet within gearing target Good market appetite for Sasol debt Record performance levels at ORYX GTL Superior technology value proposition Utilisation of proven technologies robust project economics Feedstock Market Capability Abundant low-cost feedstock supply Volume and price feedstock cover for GTL investment Well-established and uniquely diversified market Good market positioning of products Balanced portfolio of commodity and differentiated products Experienced, well-resourced team Independent, reputable industry partners Lessons learned executing mega-projects better together we deliver 68

69 questions and answers

70 informal lunch