Jan. 24 (Bloomberg) -- Sasol Ltd., the biggest maker of motor fuel from coal, would have to sell its Iran polymer venture at a discount should it exit the country amid growing European Union and U.S. sanctions, said Nedgroup Securities.
Arya Sasol Polymer Co., 50 percent owned by the Johannesburg-based company, “is a world-class asset,” said Nedgroup’s Mohamed Kharva, the top-ranked analyst on Sasol according to data compiled by Bloomberg. “Given the circumstances, they won’t get the real value when selling.”
Sasol, which is expanding in the U.S., has Pars Petrochemical Co. of Iran, a subsidiary of the state-owned petrochemicals producer, as its partner in Arya. The EU said yesterday it will bar imports of Iranian oil starting July.
The ban is part of efforts by the EU and the U.S. to pressure the Persian Gulf state over a nuclear program that Western nations say is aimed at producing weapons. Iran says the program is for civilian energy and medical purposes. The EU measures include freezing assets of the Iranian central bank in Europe and banning trade in petrochemicals from Iran.
“They’ve had problems at Arya and it took much longer than initially planned to reach their production target,” Nedgroup’s Kharva said by phone from Cape Town. “The plant is operating efficiently. Now is not the time you want to sell it.”
Sasol has invested about 610 million euro ($791 million) in Iran, Alex Comer, an analyst at JPMorgan Chase & Co., said in an e-mailed response to questions. “If they get that back, they will have done well considering it’s in Iran,” he said.
An exit from Iran will free up cash of about 3 billion rand ($375 million) of accumulated Arya dividends that has been restricted due to U.S. sanctions, Comer said. “The rest of Sasol’s business benefits from Iranian political risk via the premium in the oil price. We calculate to offset the earnings contribution from Arya, oil has to be about $4 a barrel higher,” he said.
Talks about a sale of the Arya stake are “ongoing and involve a number of business and government stakeholders,” Jacqui O’Sullivan, a Sasol spokeswoman, said in an e-mailed response to questions. The company started a review of its Iranian operations in October.
Sasol is diversifying crude oil supplies to South Africa’s Natref refinery, in which it has a 64 percent stake, O’Sullivan said. Iran, South Africa’s biggest supplier of crude, provides about 20 percent of the oil for Natref.
“In view of recent developments regarding trade restrictions and possible oil sanctions against Iran, Sasol Oil is diversifying its crude oil sourcing, to mitigate risks associated with oil supply disruptions from the Middle East,” O’Sullivan said.
Iran supplied 5.5 million tons of oil, or 29 percent of South Africa’s total imports, in 2010, according to the South African Petroleum Industry Association.
Sasol fell 1.4 percent to 403.50 rand by the close of trading in Johannesburg. The FTSE/JSE Africa All Share Index was 0.6 percent lower.
--Editors: John Viljoen, Tony Barrett
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