Have you allocated assets differently or is there also any payment in the mining business? That you’re taking in the fuels business. And then my last question goes around gas. You say that LNG is no longer an option. Are you still pursuing the gas ET exchange reforma project in Secunda with that on the back burner as well. And until when do you think you’ll be able to supply external customers with gas? Your gas plateau does that include external supplying external customers? Thank you.
Hanré Rossouw: Thanks. I’ll jump in with the first two parts of that question. I think Gerhard you’ve – as normally spot on, certainly in terms of the negative, cash flows in later years that I think given that we produce, and generate strong cash flows in the near term, we indeed have a tale of negative cash flows. We see that coming through post 2030, as noted also that the key part of that is the step down then in production, assumptions for Secunda moving from around 7.5 million tonnes to 6.7. Not being able to recover that from gas given the increase in the cost of gas in our assumptions base. Just on your question, also in terms of the carrying value of assets. So yes, we do also, given that the impairment, is not just for the Secunda assets, but it looks at a cash generating unit.
There are allocations of other assets into the various cash generating units. So, there is an element of mining and gas, and other assets allocated to that cash generating unit. So proportionally, if you spot on that will also then – the impact and of course, also capital throughout the year that we’ve spent since the half year, and the beginning of the year and – the half year impairment is also impacted. So that’s – why you see that in the property, plant and equipment, in balances for the year.
Gerhard Engelbrecht: Thanks Hanré. Sorry, if I just, so are you confident that the chemicals business can generate enough cash flows to offset these large negative cash flows in the longer term?
Hanré Rossouw: I think – that’s a critical point, Gerhard. In terms of – and we noted that that in the chemicals cash generating unit, South African cash generating unit, we’ve got significant carrying value still, and significant headroom. So given the higher value products that we produce in that business, we still believe that that business is, carries a lot of value, and it’s important to note that kind of where we have different cash generating units we’ve got an integrated value chain. So, these will always, offset each other and that’s really the reason why we continue with the 2050 useful life, that even though there’s negative cash flows from the fuels business, we still see significant value in the chemicals business then, and one has to look at the complete picture, as you point out.
Fleetwood Grobler: Gerhard, I’ll ask, Simon to reflect on the gas reforming projects and then Priscillah to weigh in on the external gas customers. So, Simon?
Simon Baloyi: Yes. Thank you, Fleetwood. Gerhard, yes, you correct the gas heated exchange reform, as that project we have put it on hold, but we are watching the [indiscernible] cost, it purely depends on affordability of the gas. So of course, we will not bring in gas and do the projects to destroy value, but it has to be really attractive. So what we’re going to do as we explore and find cheap gas, we might restart those projects.
Priscillah Mabelane: In terms of the $530 million that we mentioned earlier on, $330 million of that have been spent today on restoring our plants. So we’ve been in discussions with customers explicitly so to indicate that Sasol Gas, which has been investing in the PPA is not able to extend and afford gas supply from FY ’26 onwards. At the same time, previously, we’ve also communicated to our customers that the methane-rich gas will actually be phased out by FY ’26 because we need that gas for the decarbonization of our own operations. And in parallel, what we are actually doing is that we are engaging with customers to see how best we can look at alternative sources. It’s very clear as has already been highlighted by Hanré and Fleetwood earlier on, but at this current price, Sasol cannot afford LNG, but we do believe that a collaborative approach with our customers to look for alternative solutions will enable us to get perhaps gas into the future at a later — at a better pricing.
From our side in terms of, Sasol Group Limited, we continue to look at other opportunities and invest in terms of that on the exploration, as well as the current project that we are making, we’re making progress on as Fleetwood mentioned in terms of PSA.
Gerhard Engelbrecht: Thank you.
Tiffany Sydow: Thank you, Chris. Operator, if we can move to Chris Nicholson, please?
Operator: Of course. Chris Nicholson from RMB Morgan Stanley. You can go ahead, sir.
Chris Nicholson: Hi, morning. Yes. I’d like to just, continue along the line of questioning around the impairment. So it is a bit – if risky, but it is important as it signals, I get a few assumptions around future volumes and so forth. You mentioned a couple of questions around this. You mentioned in the release that you’re now assuming 6.7 million tonnes from Synfuels going forward. Could I understand, would that ratio between liquid fuels and chemicals be roughly similar to what is currently produced or if there’s any difference in how the turndown occurs there? That’s the first question. The second question then, looks at coal volumes. So clearly you’ve highlighted that LNG, is not affordable. What does this imply for the total coal volume that Synfuels will require kind of post-2030 to support that 6.7 million tonne run rate.
And then finally, I know we’ve obviously had some news flow recently around the alternative load based submissions for SO2. I do understand that there potentially could be a production impact if the Minister of Environmental and Fisheries doesn’t give you, for the right to, I guess, reduce the total load based submissions from 2025 or before 2030. Could the production impact be, that we see in the turndown be quicker an anticipated from that 6.7. Could we get there quicker? Thank you.
Fleetwood Grobler: So, Hanré, maybe you deal with the first part, and then I’m going to ask Simon to deal with the what is the required call volume at 6.7 and what is the reduction as well as the impact of 12A?
Hanré Rossouw: Thanks Chris for the questions. I think to start off with the ratio of chemicals versus fuels, so there’s no significant change on those assumptions. But I think that’s part of the mitigation measures in terms of changing production mix optimizing the production slate is going to be key part of recovering that that value. The coal volume, so that, and I think let’s just take a step back in terms of the impairment. I think key aspect, of course, is our 2030 emissions target of 30% reduction And I think as we’ve explained previously, the key element to doing that is to move from – coal to gas as an intermediate feedstock. And as such, we are still committed, and part of the plan is still going to move from around 40 million tonnes of coal to around 30 million tonnes of coal, the affordability of gas will really then determine how much we can recover.
So effectively, kind of the easiest way to just reduce emissions by 30% is to reduce the whole production by 30%, but where we’re able then to displace coal, which is less efficient from a CO2 perspective, with gas, which is more expensive, that really draws the economics, so at the moment, kind of given the current economics of LNG and alternative gas, 6.7 really is the affordability aspect to which we can, recover. I think given then kind of further enhancements to the business, optimization of costs, optimization of coal, quality of coal. Those are all parts of those initiatives that we are really pushing to recover value and will continuously reassess carrying value, and then update the market, on that basis.
Fleetwood Grobler: So, if I may weigh in before Simon goes for the next part of the question, Chris, is that, what we’ve seen in this assumption is basically you can term it almost a worst case scenario having no proven things that we are busy working on, but that couldn’t be brought into the calculation just, because of the, the stringent IFRS rules in terms of how to consider prospects versus proven prospects. And so, I can assure you that we’re working on a whole host of issues to address that. And specifically, you know, the outcome to restore on the volume is going to be a key aspect that we are focusing on. And as we as we materialize some of those benefits, we’ll definitely bring that back, but our plan is to address it meaningfully to improve value over the next years before we get to the 2030 timeframe. Simon?
