Good morning, and welcome to Sasol Limited's financial year 2023 results presentation. Thank you for taking the time to listen to our announcement today. My name is Tiffany Sydow from Investor Relations, and with me today is Fleetwood Grobler, President and CEO of Sasol, and Hanré Rossouw, Chief Financial Officer. Fleetwood will start today's presentation with an overview of the business performance. The financials will be covered in more detail by Hanré, and Fleetwood will conclude with a brief update on our strategy. The Q&A session will commence immediately thereafter, where you will have an opportunity to ask your questions via the webcast or teleconference facility. I'd now like to refer you to our forward-looking statement on the slide. This contains important information regarding statements that are made in this presentation. Please have a look at it in your own time.
I will now hand over to Fleetwood to commence today's presentation.
Good day, everyone. Welcome to our annual financial results update for 2023. To frame our performance for the period, there is a distinct set of factors which contributed. We continue to face macro challenges with headwinds on demand and pricing, particularly in the chemicals, alongside persistent inflation with elevated feedstock and energy costs. We are also encountering specific challenges in our operating environment, notably in South Africa, where we have been impacted by the performance of state-owned enterprises. However, in addition to benefiting from an elevated oil price and a weaker rand dollar exchange rate, we've also seen real progress in the mitigation actions that we have taken in the areas within our control.
This is driving better performance in areas like Secunda Operations, amongst others, more resilience, with the ability to reset to more aggressive targets on Sasol 2.0, following recent outperformance and progress towards the longer-term goals. This backdrop, our financial results for the year is reflective of these mixed factors. One particular noteworthy impact is evident in the significant impairment on the Synfuels liquid fuels refinery. Suffice to say that in Secunda Operations, the various chemicals cash-generating units in the integrated value chain still show significant headroom. Hanré will discuss this in more detail later. Broadly, the cost and operating challenges we have faced have required us to reassess the steps we need to take to ensure Sasol remains a sustainably profitable organization.
We are taking stock of our current reality while intensifying our attention on priority actions to deliver on the reset phase of our strategy. We need to remain realistic and focused on delivery as we head into another financial year. As with previous results presentations, I will start by covering some of the business highlights for the year across our people, planet, and profit pillars. For some 18 months, between November 2021 and March 2023, we did not experience any workplace fatalities. Regrettably, this changed with the tragic passing of Mr. Khauta Matlaba from Secunda Operations and Mr. Stephen Nhlapo from Mining, both in the last quarter of this financial year. We express our heartfelt condolences to their families. Notwithstanding these fatalities, safety remains deeply ingrained in our ethos as we see positive trends in our safety performance. I will unpack this in greater detail shortly.
Our commitment to social well-being in our communities remains undeterred, as evidenced by the over ZAR 850 million we've invested in various programs. We remain active, contributing to community upliftment initiatives that realize positive and beneficial outcomes for the most vulnerable in our society. On our planet pillar, we continue to progress our renewable energy procurement program. We are well on track to achieve 1,200 megawatts of large-scale renewables integration in our SA value chain by 2030. In Mozambique, our gas drilling campaign continues to yield positive results, providing additional flexibility in our sustainability roadmap. We are also expanding sustainable aviation fuel or SAF opportunities through our proposed joint venture with Topsoe, which I will talk about later. On the profit pillar, Sasol delivered a marginally weaker set of financial results for FY 2023, for the reasons I mentioned earlier.
Despite continued volatility over the period, the Board declared a final dividend of ZAR 10 per share, in line with our dividend policy. Turning to safety, I already mentioned the 2 tragic fatalities we experienced in the second half of the financial year 2023. Any loss of life or harm is unacceptable. We remain resolute in our commitment to creating a caring, sustainable, and zero-harm workplace. We ended the year with more lost workday cases compared to the previous years, mainly driven by higher activity on the back of the total East Factory shutdown. Important in this decrease in our high severity incident rate is moving from 16 in financial year 2022 to under 10 this year, supported by our dedicated efforts to drive our safety, health, and environment interventions. Our fires, explosion, and releases severity rate also reflected a downward trajectory for the period.
Our high-severity injury prevention program remains the backbone for improving our SHE performance. We have now shifted our focus to further maturing it. Through our Humanizing Safety initiative, focus remains on showing care through every layer of the influence instead of a compliance-driven approach only. We remain committed to improving our safety performance and constantly adapting and streamlining our approach to align with evolving reporting requirements. Looking at the operating environment, a combination of a few material factors continues to pose near-term challenges to our business. This includes global economic volatility and, in South Africa specifically, an uncertain regulatory environment and other business challenges.
All this taking place against a backdrop of far-reaching policy shifts, such as the recalibration of the relations between the US and China, and the move towards more muscular industrial policy, as we are seeing with the Inflation Reduction Act, or IRA, in the US. The IRA, combined with the European Union's Carbon Border Adjustment Mechanism, could potentially have a significant impact on industrial policies and global trade relations, contributing to the uncertain business environment. The legal and regulatory environment in South Africa includes a range of complexities such as the domestic gas price, environmental compliance, fuel blending mandates, and carbon tax. We continue to navigate these challenges and uncertainties through proactive engagements with all stakeholders. This includes ongoing engagements with NERSA to facilitate approval of our gas price applications for financial years 23 and 24.
Pending approval, we have not been allowed to increase prices since financial year 22, despite the impact of rising inflation, higher capital costs, and commodity prices. Looking at environmental compliance, in July 23, we communicated that Sasol's application for an alternative emission, alternative emission load basis for sulfur dioxide from our Secunda boilers was declined by the National Air Quality Officer. Sasol has subsequently lodged an appeal of this decision with the Minister of Forestry, Fisheries, and the Environment and await the decision. Challenges also exist around renewable energy investments, with some now at risk of being undermined by grid allocation uncertainty. Constrained grid capacity in certain resource-rich provinces in South Africa is making it increasingly difficult to bring renewable energy projects online. Investment and upgrades of the transmission network will be critical to alleviate this risk.
In terms of our other business impediments, many of these are well known, such as persistent load shedding and infrastructure constraints, in particular, the poor performance of the national provider of rail and port logistics services. Although I think it is important to be specific about these areas of uncertainty as we move forward, it is also important to keep them in perspective. I would firstly reiterate that we have constructive dialogue around these issues across a range of stakeholders. Secondly, we are progressing well in making our business more resilient. As we recap our Sasol strategy, shared at the Capital Markets Day in September 2021, we defined a path to realize our net-zero ambition along three horizons: reset our business to enable us to transition and ultimately reinvent ourselves to a more sustainable company.
At that time, certain assumptions of WAF the world would look like and how Sasol would perform underpinned these horizons. Since then, our operating environment and the reality has changed materially. We believe we are on the right strategic pathway, although the macroeconomic economy has not developed in the way that we or others anticipated at the time. The headwinds that I've talked to at length make it critical to double down our efforts to deliver on the reset phase of our strategy, to ensure that we have a business that's as resilient as possible with a robust balance sheet to support it. This will help create financial headroom to self-fund our transition and progress our long-term goals, while continuously calibrating that against our means and affordability.
In the past year, we remained committed in stabilizing our business through our operational mitigation plans and have seen good progress in this regard. Looking at our energy business, our mining productivity of 951 tons per continuous miner per shift was 3% lower than the prior year due to unplanned safety stoppages and operational challenges experienced earlier in the year. The second half of the year, our focused efforts realized a 5% improvement in productivity, while we diligently progressed the rollout of our Full Potential Programme. In Mozambique, production was 2% higher than the prior year, reflecting a strong production performance, which was underpinned by the additional wells brought online in our PPA license. Secunda Operations production for the year was 1% higher than prior year, despite the planned total East factory shutdown.
This performance was achieved as a result of management interventions to reduce the impact of coal quality variability and higher availability of natural gas. Owing to this performance, the Energy Business recorded a 1% improvement in gross margin. In the Chemicals Business , Chemicals Africa sales volumes for the financial year were 1% higher than last year, despite ongoing infrastructure challenges in South Africa. Chemicals America sales volumes were 9% higher when compared to the prior financial year. In response to market demand and pricing pressures, we adjusted our operational rates downward during the first half of the year. However, I'm pleased to share that we have since raised our utilization rates and have achieved monthly production records on several units at our Lake Charles Chemicals Project. In Europe, after normalizing for the wax divestment, sales volumes decreased by 19%.
The lower sales volumes were due to reduced demand and customer destocking across most of our business divisions, with production rates at several of our units also proactively reduced to avoid inventory build. For Chemicals, gross margin is down 20%, reflective of a weak macro environment with reduced global demand and higher energy and feedstock costs. A pivotal focus of our endeavors in the second half of the year was to improve the quality and productivity of coal supply in our Secunda Operations. I'm pleased to report that our Full Potential Programme, designed to provide sustainable improvement across all our collieries, is starting to deliver early gains. We commenced in January 2023 with the first colliery, Syferfontein, and have seen improvement in production over the last six months and will continue to build on this momentum.
Learnings from this phase will be embedded in the rollout at Shondoni and Thubelisha collieries in the coming months. We have successfully maintained the coal stockpile within the targeted levels of 2 million tons through the increase in own production and a successful coal purchasing strategy. We are progressing several levers to improve productivity and coal quality over the short to medium term. I talked through this in great detail at interim results, which includes mechanical interventions for roof control, improved coal blending to minimize the variation of coal quality to Secunda facility, and continuous miner interventions to limit the cutting of stone in the roof and in the floor of the coal seam. Collectively, these shorter-term levers are all necessary to unlock higher production output from Secunda operations, which is what we have built into our plan for financial year 2024.
Beyond this, I will reiterate that we need to implement the medium to longer term levers to restore production back to historic levels. These include the completion of the Full Potential Programme rollout, employment of a destoning technology to remove sinks from the coal, and unlocking additional reserves to place and to replace the existing Isibonelo supply contract coming to an end. We conducted a successful destoning test using our own coal, which was concluded in March of this year. The results are promising, and we are aiming to make a final investment decision for our destoning facility during this financial year, 2024. Lastly, the appointment of focused executive leadership positions for mining was the right thing to do, and we are seeing the benefits in terms of operational learnings and a much higher level of transparency.
With the imminent retirement of Riaan Rademan as Executive Vice President, Mining, I'm pleased to confirm that his successor is Hermann Wenhold, our current Senior Vice President of Mining. In turn, Hermann's successor is also an internal candidate, Sandile Siyaya, currently on the Mining ExCo. Both appointments are effective 1 November 2023 and will ensure leadership continuity at mining, which is a key to ongoing delivery of our initiatives. In South Africa, we stepped up re-reliability at both Secunda Operations and Natref in the second half of the financial year through a range of technical interventions, as demonstrated in our delivery against market guidance for both sites. Furthermore, our teams ensured a successful total shutdown of the East factory at Secunda and increased natural gas availability at the site to maximize production.
Looking ahead, we will continue our reliability improvement initiatives, ensure ongoing mitigation of coal quality challenges, and proactively manage the risks associated with the legal and regulatory challenge, as outlined earlier. At our international sites, we successfully completed train 2 repairs at Oryx, allowing us to achieve stable operations on both trains, which bodes well for ongoing improvement in utilization rates at that plant. We proactively reduced some of our operating rates in the U.S. and European businesses in response to weaker market demand and pricing pressures. We will continue to manage operating rates to mitigate financial losses until we see a recovery in the market. As anticipated at half year, the performance of all our U.S. units improved in the second half of the financial year, and the Ziegler unit reached 100% available capacity by the end of quarter 3, per our guidance.
The commercial ramp-up of our Lake Charles specialty chemical units will continue throughout financial year 2024. Turning to our Mozambique gas drilling campaign, I am delighted to report that the positive results we see across our licenses. We continued our infill well drilling on our PPA license, increasing well stock from 19 to 24, which contributed to the higher production rates at Secunda Operations. Our PSA development project remains on track, progressing within budget and schedule despite the inflationary and other pressures. Another important milestone is the completion of the construction and commissioning of the initial gas facility, which is a precursor to the integrated gas facility, which is still to come. We are awaiting regulatory approval of the initial facility, which enables us for gas to flow to our operations earlier in South Africa, while we wait for the CTT project to come online.
Our exploration strategy has also resulted in a successful gas discovery in Block PT-5C, which is located in southern Mozambique, which could bolster our reserves and further extend our plateau. Of course, it is still early days, and there is further exploration and appraisal work required to determine commercial viability. In line with our commitment to secure sustainable future gas, we've already invested approximately $530 million in Mozambique in plateau extension projects. Our success in Mozambique gives us more feedstock flexibility towards the end of the decade, which is a critical step towards meeting our greenhouse gas reduction targets by 2030. Given the factors I've outlined, covering both internal and external dynamics, I will now touch on just a few financial metrics before I hand over to Hanré. Our Adjusted EBITDA reduced by 8% - around ZAR 66 billion.
Earnings were significantly impacted this year by the write-down of our Synfuels liquid fuels refinery cash-generating unit. Our net debt, now standing at $3.8 billion, is down marginally, with a net debt to EBITDA of 1.3 times, significantly below our covenant levels. Core headline earnings per share decreased by 30% - ZAR 47.71 compared to the prior period. In line with our commitment to maintain shareholder returns, as I've already mentioned, we declared a final dividend of ZAR 10 per share. We continued to benefit from our Sasol 2.0 transformation program, mitigating some of the higher inflation and lower margin volatility in recent years. Furthermore, we are stepping up some of the targets as we head to the finish line in financial year 2025.
On that note, I will now hand over to Hanré to take us through the detailed financial results for the reporting period.
Thank you, Fleetwood, and good morning, ladies and gentlemen. As Fleetwood highlighted, our financial results were impacted by a range of factors owing to the challenging external operating environment as well as internal operational issues. Encouragingly, we have seen significant business improvement in the second half of the financial year. I'm confident that we will build on this momentum to enhance business performance. We continue to work hard to mitigate the factors within our control, and I will talk more about our progress on cost and capital management, supported by our Sasol 2.0 program. Additionally, we endeavor to remain agile and build resilience in a complex operating environment. To start with, some specifics on the impact of the macro environment.
After support from a rising oil price in the first half of the year, we were negatively impacted by a softening of the oil price in the second half, resulting in an overall decrease of 5% when compared to the prior financial year. This was offset by the rand weakening 17% - an average of ZAR 17.77 to the dollar. The weaker closing exchange rate of ZAR 18.83 negatively impacted the translation of our U.S. dollar-denominated debt. We saw our commodity chemical prices decrease due to poor demand and additionally, capacity build in Asia, resulting in excess supply. This is evident in the 29% decrease in polyethylene prices compared to the previous period. We have seen some respite in lower ethane and energy prices in the latter part of the year, positively contributing to margins in our chemicals business.
However, this continues to be at elevated levels compared to historic levels. Chemical margins and global demand remain depressed, negatively impacting our chemicals business, particularly in America and Europe. Looking ahead, we expect the uncertain global economic environment to continue weighing on prices and demand in the short to medium term, with continued volatility in oil prices and weaker margins for the refined products and chemicals. We anticipate higher ongoing inflation, which requires us to carefully manage our cost and capital strategies. Our strategic response is based on three pillars to navigate the challenging landscape and ensure our resilience. Firstly, our adaptability to market dynamics requires an ability to swiftly adjust our strategies and operations in response to changing market conditions. By staying agile, we are able to effectively mitigate risks. Secondly, margin optimization is critical and includes improving operational efficiencies and streamlining processes.
Thirdly, we will continue to improve our cost competitiveness through ongoing cost and capital discipline, assisted by our Sasol 2.0 program. I have full confidence in Team Sasol's ability to adapt and thrive amidst this uncertainty. Turning now to our financial results for the year, it is key to recognize that our profitability was not only impacted by factors within our control, but also by multiple factors beyond our control. Given the challenging backdrop, our EBITDA decreased by 8% compared to the previous financial year, with cash generated by operations increasing by 15%. We continue to benefit from our diversified Energy and Chemicals portfolio, evident in the profitability mix, with the Energy Business contributing 56% of total EBITDA generation. I will unpack the EBITDA performance per segment later in the presentation.
Our earnings before interest and tax for the year was significantly impacted by remeasurement items, which includes a combination of impairments, reversals, exploration write-offs, and asset disposal gains in the prior year. The most notable impairment relates to the Secunda liquid fuel refinery cash generating unit, or CGU. I will provide more detail regarding this in the next slide. Lastly, our core headline earnings of ZAR 47.71 per share decreased by 30% compared to the previous year. We continue to strengthen the cash flow generation ability of our business, which supports a final dividend of ZAR 10 per share declared. The development of our Emission Reduction Roadmap , or ERR, demonstrates our commitment to sustainably carving out a path to achieve our 2030 greenhouse gas emissions reduction target, as well as compliance with air quality requirements.
As we progress our sustainability journey, we need to continuously evaluate and refine our roadmap, ensuring we follow a measured and balanced approach to balance the people, planet, and profit impact of our transition. With this in mind, we have revised our reference case that was dependent on gas to restoring Secunda volumes back to historic levels. We have reassessed the affordability associated with additional gas and as such, incorporated lower production volumes post 2030. This adjustment, together with other factors such as current lower volume output of Secunda, higher cost of capital, higher feedstock cost, and changes in capital assumptions, resulted in the full impairment of the Secunda liquid fuels refinery CGU of approximately ZAR 35 billion. It is important to note that the Secunda Chemicals cash generating unit, CGU, are demonstrating resilience with no impairment incurred due to the production of higher value products.
We are diligently evaluating and progressing various technology and feedstock solutions that could potentially aid in partially restoring our production volumes. However, it is important to note that the maturity of these solutions need to be progressed before it be considered in the impairment assessment. I will now provide some detail on the business segments, starting with the Energy Business. Our Mining Business saw a 16% decline in Adjusted EBITDA, mainly as a result of lower export sales volumes and prices, as well as higher external coal purchases given our lower productivity. We have seen incremental improvement in productivity since the implementation of our Full Potential Programme. Our Gas Business benefited from higher internal gas prices, although our selling price to the external market remained flat, pending the NERSA decision on our financial year 2023 and 2024 pricing applications.
The increase in Adjusted EBITDA of 3% was supported by the weaker exchange rate and lower cash fixed cost. In our fuel segment, Adjusted EBITDA was up by 5% compared to the previous year, supported by the higher rand per barrel oil prices. This was offset by the lower Natref refining margin on the back of higher crude oil premiums incurred in the 1st half of the financial year. Turning to the chemicals business, Chemicals Africa saw a 10% decrease in Adjusted EBITDA compared to the previous year, mainly due to lower sales prices. This was offset by slightly higher sales volumes, despite the planned total Secunda East factory shutdown in the financial year, compared to a phased shutdown in the previous financial year.
In Chemicals America, Adjusted EBITDA was down by 96% compared to the previous year, driven by lower sales prices as well as higher feedstock costs, mainly in the 1st half of the financial year. Overall, ethylene and derivative margins improved in the 2nd half as feedstock costs reduced, but margins remained significantly below levels seen in prior years, continuing to negatively impact profitability. Chemicals Eurasia's Adjusted EBITDA decreased by 74% compared to the previous period, impacted by higher feedstock and energy costs associated with the ongoing war in the Ukraine. Energy costs reduced in the 2nd half of the financial year, resulting in significant inventory devaluations and impacting profits. Given this, as well as weaker demand, production rates at several of our units were reduced.
Turning now to our Sasol 2.0 transformation program, we are pleased with the savings we have realized to date, which has given us more headroom to withstand the impact of the volatile economic landscape and higher inflation. We have realized over ZAR 7 billion in net sustainable annual cash fixed cost savings and ZAR 6.4 billion gross margin improvements since the start of this program, exceeding our targets for both of these metrics to date. This was achieved mainly through the implementation and continuous assessment and refining of the operating model, as well as embedding market-driven strategies to improve customer experience and increasing profitability of our products. Given the high inflationary environment, we have also updated our capital target from the ZAR 20 billion-ZAR 25 billion in financial year 20 real terms, to ZAR 26 billion-ZAR 32 billion in financial year 23 real terms.
Our maintain and transform capital for the financial year remained well within this targeted range. We continue to embed a risk-based capital allocation approach in accordance with our capital allocation framework. Lastly, we managed working capital ratio to turn over close to our 12-month rolling average target of 15.5%-16.5%. Although marginally above this range on a 12-month basis, we ended the year at 12.4% through focused management interventions. Given the impact of the external operating environment, we need to intensify our efforts to remain resilient, profitable, and cash generative. We have therefore pushed to reset our targets for financial year 2024 and 2025 by increasing our targets for cash fixed cost and gross margin improvement by more than 20%. This amounts to an additional ZAR 4 billion in annual EBITDA enhancements by financial year 2025.
Our focus remains on bolstering the strength and maturity of our pipeline of initiatives, and we are confident that we will maintain momentum in achieving the 2.0 targets for the coming financial years. Looking next at the outlook for the financial year 2024. In mining, we expect productivity to step up to between 975 to 1,100 tons per continuous miner per shift, as we continue to roll out our Full Potential Programme to the remaining collieries. In our gas segment, we have increased the volume guidance to 113 to 119 billion standard cubic feet, as we are seeing the benefits of the investment in our gas drilling campaign in Mozambique. The increase in production volumes at our Secunda Operations is directly linked to the performance of our mining operations.
As such, we forecast volumes of 7-7.3 million tons for the year, with our South African liquid fuel sales volumes to range between 51 million and 54 million barrels. In our chemicals business, sales volumes for Chemicals Africa is expected to be between 0-5% higher compared to prior year, following the recovery from the operational challenges in the first half and supply constraints we experienced. In Chemicals America, we expect sales volumes to be between 0-5% higher than the prior year as we increase utilization rates supported by the anticipated improvement in market conditions. We will continue to monitor conditions and adjust our plant operating rates in response, ensuring minimal inventory buildup.
Chemicals Eurasia sales volumes are expected to range from 5% lower to 5% higher than prior year, given the significant volatility and uncertainty that remains in the operating environment. We continue with prudent capital management, with the objective to invest appropriate capital to safeguard asset reliability across all our operations whilst progressing our transform objectives. Our maintain and transform capital for the financial year of ZAR 30 billion includes the total Secunda factory shutdown, as well as the ramp-up of capital spend on the PSA project, which remains within budget and schedule. We have also seen an increase in capital spend towards our environmental and Clean Fuels 2 projects. To date, minimal discretionary growth capital has been incurred, with spend mainly towards the Sasol Green Hydrogen pilot project, which produced our first green hydrogen.
Total capital of ZAR 31 billion exceeded our market guidance of ZAR 27 billion-ZAR 28 billion, mainly driven by higher than expected inflation and weaker rand dollar exchange rates, which impacts a substantial portion of our capital portfolio. Our capital forecast of ZAR 33 billion-ZAR 34 billion for the financial year 2024, in nominal terms, is aligned with our Sasol 2.0 targets. We continue to ensure our capital strategy aligns with our overarching vision of operational excellence, reaching our greenhouse gas reduction target, and sustainably growing within a dynamic operating landscape. In wrapping up then, a reminder that our capital allocation framework continues to serve as the foundation of our investment decisions as we assess capital requirements across competing priorities. We continue to prioritize our sustenance capital to ensure we have sustainable operations well into the future.
As we progress our emissions reduction roadmap, our pathways are becoming increasingly well-defined. We continuously evaluate and enhance our capital spend towards our roadmap. We remain focused on the best risk-adjusted returns. In achieving this, we are dedicated to explore all opportunities to utilize our capital more effectively while understanding our limits and risks. Our current net debt of $3.8 billion decreased slightly compared to the comparative period. We continue to work towards our goal of further reducing debt levels. Our liquidity headroom of nearly $6 billion is well above our target to maintain liquidity in excess of $1 billion. We have further significantly optimized our debt maturity profile through the successful refinancing of our near-term debt maturities, which was a critical achievement given the current volatility and market uncertainty. A key priority remains sustainable returns to our shareholders.
I'm pleased with the declaration of our final dividend, as Fleetwood also mentioned, which brings our total financial year 2023 dividends to over ZAR 10 billion. In our second order of allocation, our approach to discretionary capital will revolve around prioritization of long-term growth initiatives in collaboration with partners such as the proposed Topsoe joint venture. Another example of ensuring efficient capital allocation to support our growth ambitions is Sasol Ventures, our venture capital fund launched in February. Since then, we have refined the investment strategy for the fund and actively evaluated a number of opportunities. As we move forward, the portfolio will be deliberately and carefully formulated, ensuring investment into technologies which will support the delivery of our strategy. Thank you for listening, and I will now hand back to Fleetwood to provide more detail on the progress made in the delivery of our strategy.
Thank you, Hanré. In the final section of my presentation, I will talk you through our strategy, the progress we've made on our sustainability journey, our continued contribution to society, and our priorities for the next financial year. For the past year, we have seen extraordinary volatility in the global landscape, and there are a number of important underlying factors which are relevant to our transition. Energy security continues to be a source of great concern across the globe, with energy prices spiking after the war broke out in Ukraine in early 2022. While we've seen a slight reprieve in some of these energy costs in the last six months, availability and affordability of energy remains a key issue. Regulatory and policy uncertainty is also a critical factor.
Consistent and effective policy and regulation is required both to encourage investment and reward risk-taking in the pathway, in the pathway to transition. Unfortunately, some of the more recent developments in the broader South African business have instead created more uncertainty that add to the challenges of investing with confidence towards transition. We remain committed to prioritizing an affordable and sustainable transition for our business. We are faced with what is commonly known as the energy transition trilemma, and it is imperative that we invest in the energy transition itself, but simultaneously also consider our commitments to today's energy needs, largely shaped by oil and gas. Swift action is required, but we must equally recognize the importance of our means and affordability of this transition.
We've seen a few shifts in strategy from our peers in the recent months in response to some of these challenges, with most reaffirming the need for a value-accretive and demand-driven energy transition. Our triple bottom line strategy, people, planet, profit, remains intact. Looking now at our environmental performance, we've achieved a greenhouse gas reduction of approximately 5% in financial year 2023 compared to our 2017 baseline. Lower production rates from our SA operations, as well as poorer coal quality and other inefficiencies associated with lower production rates, contributed to the greenhouse gas reduction. Taking this into account, we must estimate that real greenhouse gas emission reduction would be less than the 5% shown on the slide. Note that we expect slightly higher greenhouse gas emissions in financial year 2024 as a result of higher production in SA.
This being said, we continue to implement our greenhouse gas reduction initiatives with significant step changes expected post-2025, after the integration of renewable energy and phased boiler shutdowns. We have made steady progress on our greenhouse gas emission reduction journey towards our 30 target. Our major 2030 levers are unchanged: integration of renewable energy, transitioning away from coal as a feedstock, and greater energy efficiency across our operations. The relative % in each block may change as we optimize the overall program. Allow me to highlight some key milestone progress in the past year. 6 months ago, I announced the first significant tranche of renewable power purchase agreements, which were signed. We have since concluded a few more agreements in excess of 600 MW for Secunda, representing more than half of the committed commitment of 1,200 MW by 2030....
The 69 MW Msenge wind farm is under construction in the Eastern Cape and is expected to come online in 2024. In Sasolburg, we have commissioned a 3 MW solar farm adjacent to our operations to facilitate the green hydrogen project, which includes a retrofit of an existing electrolyzer. We are very proud to announce that Sasol produced its first green hydrogen in June of this year during the commissioning phase. Once operational, the Msenge Wind Farm , together with the Sasolburg solar farm, will provide sufficient renewable power to commercialize green hydrogen in South Africa. This is a huge step forward in the energy transition, not just for Sasol, but also for South Africa. As mentioned in the past, the signed PPAs remain subject to standard conditions precedent and grid access.
In our chemicals business, we have concluded approximately 24 megawatts of PPAs in Europe, with the first solar power received at our Augusta site in April this year. We now have two plants in Europe, Brunsbüttel and Augusta, supplied with renewable energy. Turning to the feedstock transition lever, our plan to reduce consumption of coal over time will require innovative solutions to utilize the coal we have more efficiently, as well as transition to other feedstocks over time. The turndown of gasifiers or coal intake, together with a fine coal briquetting project, will facilitate the bulk of this reduction. The briquetting project is making good progress towards an FID decision. Alternative feedstocks means that we will continue to use transition gas in the near term until sustainable sources of carbon become affordable, for example, biomass, which is in early phases of assessment.
As mentioned earlier, our gas drilling campaign in Mozambique becomes increasingly important to enable this transition. With a plateau extension up to 2028 from existing fields, we have more feedstock flexibility up to 2030. The recent onshore gas discovery in the PT-5C block also has potential, should this become a viable supply in future, together with any other explorations prospects in southern Mozambique. The recent Kinetiko gas discovery near Secunda also provides potential gas supply options, and we are engaging with them to understand this opportunity better. Given the recent market tightening on LNG globally, it does not make economic sense for Sasol to pursue LNG to supplement our feedstock supply by 2030 at current prices.
For this reason, we will not execute this option and instead prioritize our own supply of gas from existing assets or near field acreage, with due consideration of risk and reward. We are executing a suite of projects to unlock energy efficiency benefits, some of which involves innovative solutions being explored by our research and technology teams. We will turn down our boilers in a phased approach once renewable energy is online. This will have a further benefit of also reducing our sulfur dioxide emissions from the site, in line with our request to be regulated on an alternative load-based limit. These levers are not without risk. We are systematically working through the risks and mitigating the ones which are within our control. There are some factors which are outside of Sasol's control, which rely on regulatory processes and decisions and globally supply chains to progress.
Our immediate focus is firstly to reset the business and to maintain our steady progress to reach our 2030 targets, but we have also not lost sight of our reinvent aspirations to reach our 2050 net zero ambition. I'm excited to announce that Sasol and Topsoe signed a 50/50 joint venture agreement, which will focus on unlocking opportunities related to SAF production. The JV will develop, own, and operate ventures producing sustainable aviation fuels from sustainable feedstock sources based on Sasol and Topsoe's leading technologies, decarbonizing the aviation industry. The JV agreement is still subject to merger control conditions before becoming operational.
We have made good progress in developing a portfolio of catalytic green hydrogen projects, including the strategic integrated projects gazetted by the South African government in December 2022, namely Sasolburg Green Hydrogen Production, HyShiFT study to produce sustainable aviation fuels in Secunda, and the study for a Boegoebaai Green Hydrogen Development Program. We are prioritizing investment in key proof of concept activities, focusing on repurposing our assets in Secunda and Sasolburg. In the U.S., we believe the Lake Charles site provides multiple attractive opportunities for enhancing value through co-location and for expansion as a sustainability hub with partners. We continue to progress studies to advance these opportunities. I'm also pleased to announce the first production of low sulfur 10 ppm diesel at our Natref Refinery in Sasolburg in June of this year, and we are on track to meet the Clean Fuels II compliance specifications in due course.
We have also completed a pre-feasibility study on the hybrid refinery concept, which involves the introduction of bio-based feedstock to the refinery to reduce greenhouse gas emissions in future. This is a very positive step for Sasol and affirms our commitment towards energy security for South Africa. Sasol remains a significant contributor to our society and a key investor in our communities. I'm very proud of the leading role we continue to play, driving positive change. In financial year 2023, we contributed over ZAR 56 billion in taxes and royalties across all jurisdictions. We remain one of the largest corporate taxpayers in South Africa.
We have invested close to ZAR 100 billion in sustenance capital in our South African assets over the last 6 years, with over ZAR 175 billion planned to be spent up to 2030, demonstrating our commitment, commitment to South Africa and its future. Our spend this past year on majority Black-owned businesses in South Africa was approximately ZAR 42 billion, almost 25% higher than financial year 2022 spend. Spend on Black women-owned businesses also increased by 32% - approximately ZAR 29 billion. We remain committed to broad-based Black economic empowerment through sustainable transformation. Continued investment in the communities we operate in is a priority for us. ZAR 1.4 billion in skills and development this year makes us one of the largest investors in South Africa in this area.
To name a few examples of our targeted interventions, in Mozambique, we trained over 500 people on entrepreneurship, also providing funding for half of them for new businesses. In North America, we sponsored consulting and business training to small business owners in Southwest Louisiana area. We've also invested over ZAR 850 million globally in socioeconomic and skills development, and I would like to draw your attention to a few highlights in this area. We invest in multiple education initiatives to support the development of technical and vocational skills to address the shortage of critical skills needed in the workplace. Sponsorship of tertiary education through bursaries, technical education in schools, and teacher training underpins our initiatives to improve socioeconomic conditions in our society.
Our Sasol for Good program encourages our own employees to get involved in their communities through various volunteer schemes, donating their time, skills, and resources to social development causes. Through this program and direct employee contributions, close to ZAR 50 million was donated to multiple initiatives, such as packing meals for the needy, donations to flood-affected areas in South Africa, and assistance to nonprofit organizations. We continue to make investments in the community infrastructure of our fenceline communities, creating and enabling in an environment in which both communities and business can thrive. This year alone, we invested over ZAR 170 million in water and sanitation repairs, health screening initiatives, maintenance of clinics, and construction of sporting facilities, for example, the one in Inhassoro Training Center in Mozambique, amongst others. Lastly, I take great pride in Sasol's sponsorship of South African women's football team, Banyana Banyana.
The team's recent successes on the global football stage is testament to their hard work and dedication. Well done, Banyana Banyana! Our focus on achieving future Sasol ambitions is still firmly embedded and the pathway firmly rooted in our reset, transition, and reinvent levers. The realities of the operational and business headwinds faced in the last year has impacted our performance in the reset phase of the journey, but we have responded by intensifying our efficiency initiatives to ensure we continue to be able to deliver our strategy. Looking ahead, there are several key areas where we must maintain relentless focus. Safety of our people remains a top priority. The pursuit of zero harm while maintaining safe and reliable operations is not negotiable. I'm pleased with the advancements we've made in our sustainability journey.
That being said, there is more work to be done to refine some of the levers to 2030 to optimize capital spend, balance demand, and decarbonize sustainably. Sasol's roadmap development is underpinned by the principles of a Just Transition, taking into account push and pull factors and the context of national circumstances in Southern Africa. Maintaining strong cost and capital discipline through our Sasol 2.0 transformation program is critical to manage some of the short-term challenges, and the increased targets Hanré announced will help mitigate some of the extraordinary cost pressure we've seen in the last 12-18 months. I am confident that the ongoing interventions at our mining operations to mitigate poorer coal quality and low productivity will result in improved performance in this area over time.
Unlocking the full potential of Lake Charles investment and value uplift remains an important priority despite the market headwinds we faced this past year. Lastly, we commit to follow a balanced capital allocation process, focusing on safeguarding shareholder returns and further deleveraging of the balance sheet. Delivery of all these goals will improve business outcomes and ultimately provide sustainable shareholder returns. In conclusion, I want to emphasize the importance of our employees. In recent years, we had to adapt to existential challenges, forcing us to reset our organizational culture and the way we conduct our business. We continue to evolve our culture to establish a diverse and high-performing, resilient workforce that experiences equity, inclusion, and a sense of belonging, as well as embracing innovation and collaboration.
I want to thank Team Sasol for once again rallying around our objectives to recalibrate and reset the business and forge ahead towards a sustainable future Sasol. Your unwavering dedication propels us forward on this remarkable journey. This concludes our results presentation for today. Thank you for watching and listening. We will now take a five-minute break before we commence with the question and answer session. Thank you.
Good morning, and welcome to the question and answer session for Sasol's 2023 final financial results. With us today in the room are, to my left, Priscillah Mabelane, EVP of the Energy Business. To my far left, Simon Baloyi, EVP of the Energy Operations and Technology stream. To my right, Mr. Riaan Rademan , who's the EVP of the Mining Operations, and to my far right, Brad Griffith, EVP of Chemicals. Participating online, we also have three participants. Charlotte Mokoena, our EVP of HR and Stakeholder Relations, Vuyo Kahla, EVP of Strategy, Sustainability, and Integrated Services, and also Hermann Wenhold, who's our current SVP of Mining. Your questions can be posted online via the streaming platform. On the right-hand side of the screen, you should see a dialogue box, which you can post your questions.
Alternatively, you can also dial in via the Chorus Call link, which was provided, and you can voice over your questions via a queuing system. I'll be switching between the two platforms to allow everybody a fair opportunity to ask their questions. We've taken the liberty of theming the questions to make the, the, session slightly more efficient today. I'll start with a few of the online questions which have come in via the webcast platform. I think let's start with the financial questions, which I'm gonna direct to Hanré. I'll, I'll perhaps do two questions at a time, Hanré. The first one, talking through the earnings impact going forward of the massive impairment and the depreciation impact per annum. That comes from Herbert Kharivhe from Investec. I think a key question there also, are we still looking at 2050 as the useful life?
The second question, also from Herbert Kharivhe, is the oil book, hedge book reflective of breakeven prices?
Thanks, Herbert, for the questions. I think firstly, on the depreciation impact of the impairment, given that we are writing down ZAR 36 billion of the asset value, of course, it reflects in the annual depreciation charge. So the immediate impact for financially at 2024 would be about ZAR 1.2 billion-ZAR 1.3 billion lower depreciation since we've, of course, immediately written off that value. I think over the next 30 years, the useful life remains at 20, 30, so that will be spread out roughly about ZAR 1 billion per year, then ongoing basis. That translates to about ZAR 2 per share on a core HEPS basis.
I think in terms of your question around the oil hedge book, you would note that we have reduced significantly reduced over the last two, three years, our hedge cover ratio, so we're sitting for oil. Around a quarter of our oil is hedged. We've also moved down our, our rand, rand-dollar hedging to a more appropriate level. What we do is not to, to, to risk out, to hedge out all risks, but it's, it's more of a Monte Carlo scenario on what is the extreme shocks that the business will have to endure. Given that our breakeven is sitting now around a $50-$60 a barrel, that is still a level that, that we are targeting.
it effectively, then we, we do see a quarter of the book giving a significant risk mitigation together with the stronger balance sheet, that we don't have to fully hedge all our oil at all.
Thank you, Hanré. Another 2 questions coming in, one from Ashton Domburg , from Noah Capital Markets . How much of a premium in dollar per barrel did you pay to source crude oil? I think a couple of questions around gas from Shashank Lanka at Bank of America. A couple of questions, investment of the $530 billion or million in Mozambique gas drilling, how will this be reflected in Capex over the coming years, yearly Capex arising for this? I think also moving back to the impairment, is there more to come on the Secunda CGU impairment, and how much lower will volumes be post 2030? Is Sasol now running the refinery as a terminal value asset, and are there any potential impairments in the Eurasia segment given the weak outlook there? Couple of questions in one.
It's a mouthful, so please remind me if I miss, miss anything, Tiffany. I think just on the premium on the hedge book, just to note that we, we've not continued the use of cap and collar in terms of hedging, so we are now only using put options. That the question relates to what is the, the premium that we, we pay on, on those hedges. That for the last financial year and currently, it's hovering around the $2-$3 a barrel. Effectively, it's an insurance cost that we expense to cover that downside risk on oil. In terms of the Mozambique oil, just to note that that $530 million investment that Fleetwood quoted, that, that is the amount already spent.
We're just about halfway through our investment program in Mozambique. The peak period would be over the next two to three years, whereafter that will, that will decline. I think, of course, it is a continuous capital allocation discussion. As we see prospectivity improving, we might accelerate that or decelerate it depending on the exploration results. We do believe that there's lots of potential in terms of gas from Mozambique. Did that cover everything, Tiffany?
Yes. I think just on the potential impairments on Eurasia.
On Eurasia, I think, and, and perhaps just a comment on impairments in general, and at risk of geeking out on IFRS and accounting standards, one has to recognize that, that, that impairments are reactive to an extent. We, we do, on an annual basis, assess the carrying value of our assets. Where there is limited headroom in some assets, we will go and watch that closely. When we see improvements in our business that could potentially reverse an impairment, and we saw that in the detrimentization business, we reversed an impairment. Kind of we, we will do that as well. That, that assessment will happen annually. Perhaps just to note on Secunda, we, we in the financial statements, note 8, give a lot of detail on what drives the impairment.
A big aspect of that has been a reduction in, in the macro assumptions. For example, the Brent oil price is now down to $88 a barrel over the long term. WACC rates have increased, and we note the sensitivities on those. Then also, we, we don't include any enhancements due to IFRS. You can, you can, you cannot include an enhancement until it's affected. So we'll continue to look at options not only for our chemicals business, but also Secunda, in terms of where we can reverse those impairments. We, we see that as a challenge for us in the business, and I think that really talks to the, to the longer-term transition strategy as well, that we are driving.
... Thank you, Hanré. That covers the full suite of questions. I'm gonna move to operational questions from a few people. So the first one comes from Gustavo Campos at Jefferies: How would you evaluate the overall impact of Eskom and Transnet constraints for this fiscal year, and how do you see those potential challenges going forward? And then the second question, also from Shashank Lanka from Bank of America: What should be the mining productivity once the full rollout is done? And for the overall business, what is the upside to 2024 volumes we can expect on a normalized basis? Fleetwood, I'll direct those to you.
Thank you, Tiffany, and, and thank you for those, those two questions. Let me contextualize the impact we've seen in our chemicals business, for example, with respect to state-owned enterprise impact. When I look at the two aspects that impacted chemicals, one was that we couldn't move the product to the coast or the port, and therefore we either lost the sale or delayed it substantially. The other aspect is that we had to move the, the product from rail to road. That in itself, the latter, increased our logistic cost by 27%, and that also incurred, and we've, we said most of that was in the first half of the year, around ZAR 0.7 billion.
If I include the first element, it was just over ZAR 1 billion that we have seen as an impact on our Chemicals Africa bottom line because of these two factors that I've indicated. We are, and I've mentioned it in my presentation, that we are actively engaging, and we've got constructive engagements also with Transnet and Portnet on various issues. One of the aspects that we are dealing with is our trajectory between Sasolburg and Secunda with respect to ammonia rail tank cars, where we have worked with them jointly to put more rolling stock under Sasol's watch into that trajectory, as well as that we assist with the maintenance of that rolling stock.
Of course, these are ongoing discussions, but we are encouraged by the collaboration that we've seen, and we've also seen improvement in the last months with respect to some of the other, rail trajectories to either Richards Bay or into the, port, of Durban. I think, you know, we're looking forward towards an improvement. I think the, the government is doing and pulling all stops to, to improve the situation. From a collaboration point of view, I'm encouraged. If I look at the, the load-shedding part of it, we are actively, as Sasol, also part of Business South Africa, where we are contributing in the collaboration, efforts between business and government.
You would know that we've published recently over 120 CEOs represented business signed a pledge where we would put shoulder to the wheel to assist with energy security, to help with the logistics factor that I've mentioned now, which is mostly on the state-owned enterprise, as well as crime and corruption. Sasol is playing a much bigger part in the first two, where we are helping with resources to assist with Eskom in terms of the leadership on power stations, to, to help them, you know, solidify and look at KPIs to run those power stations in a way that could be more sustainably. Although, we found that there is top-notch people in Eskom currently working those agendas, so we can just bring further experience to what we have had in our own power generation facilities.
I think that just adds to a more robust recovery plan of energy availability in South Africa. Those efforts are ongoing, and as I've said also on the logistics sides, we, we are having, you know, our inputs in terms of that. All in all, positive development. Have we seen the, the final outcome yet? No, we're working on that, but I'm encouraged. I think the second point that was raised was, you know, what should we... Should the mining productivity be at the exit run rate? Today, and I'm gonna ask Riaan, to help me here in terms of the focus of where we will end. First of all, the range that I've indicated, is primarily the focus on our Secunda collieries.
The target we want to achieve for the Secunda collieries, which is more than 95% of our volume output for, for our feedstock, is the number that we are improving year to full potential. We believe that at the end of this year, we will have a steady improvement, so the average guidance that you've given you, is the average over the year. We aim that by July onwards, that means in the next financial year, that we will target for the Secunda collieries, a run rate of 1,230 tons per continuous miner per shift. Then hopefully, you know, maintain that through the financial year from there on. That's how we, we think about, you know, that run rate.
Then, you know, we, we also mentioned that, you know, that that is a key focus area that we currently have, and therefore, you, your, hopefully, your question is answered. Riaan, anything to add to that?
No, Fleetwood, I, I fully agree with you. I think as said in the presentation, we've seen some, some very good upside thus far. We believe the 1,238 will be the number. Thank you.
Thank you.
I think, additional questions on the operational front, Fleetwood, from Thato Mbatha at Fairtree. Has the issue of West African crude, which was bought at a premium in half one, been resolved, and how would you look at mitigating this risk in future? Then I think we have another question also from Adrian Hammond on the, related again to the impairment, but, what is the... Sorry, the coal improvement project, and what should we expect in terms of Synfuels volumes at steady state?
Okay, I'm gonna ask Priscillah to weigh in on the, on the crude part. I'll start off with our operations in Secunda, then ask Simon to weigh in as well on that one. All the interventions we've guided now that we are focusing on a 7.1 million-7.3 million tons out of Secunda, we all know that is not full potential or what we've proven in the past. The unlock to increase beyond that is the deployment of technology to improve the coal quality through de-stoning, and of course, that is our target to get back to higher production volumes.
We have to implement this technology, and it will take capital and time, and we hopefully we can address that context or perspective of what it entails during our September market operational update, that we hopefully will see most of you in Secunda at that time. I hand over to Priscillah and then Simon.
Thanks, Fleetwood. In the first half of the year, we highlighted that the diffs for what are driven by 2 things. 1 was the turn due to environmental, and we saw that reflecting in the diesel cracks. That has actually started to come down in the Q4 of this year. The second part of that is also in terms of our crude source of potential. How do we go and look at, first of all, broadening our crude slate? We are testing a number of crudes at Natref to ensure that we can actually grow them and not necessarily rely just on 1 particular crude opportunity. At this stage, we are broadening and then looking at the WTI crude as well. That is still at a pilot stage.
At the right time, we'll be able to give proper updates as moving forward. Beyond that, we've also built a strategic partnerships to ensure that we can actually cater the market to recover. Again, at the pilot stage, but at this stage, indicating, showing that in the Q4, we've seen an improvement in this. Hope that answers the question.
Thank you. Simon?
Thank you, Fleetwood and Adrian. We, we're going to continue on volume improvement to focus on both the internal mitigation. I think we've previously spoken about the steps taken and, and, and to that, and I want to really thank Team Sasol across the entire value chain for collaborating to deal with the impact that was holding us back. We, we are confident that at least in the next financial year or two, we'll remain within the 7.0-7.3 market guidance. In the long term, once we've resolved all the coal quality interventions, as indicated by Fleetwood in his presentation, our guidance will be 7.5 million tons plus. We confidently think we can go and, and, and be that steady state.
Apologies, all. There seems to be sound. A problem with the sound. There's a request for Priscillah to please just repeat her answer from before, if you wouldn't mind, please.
Sure.
Okay. I think, I think while we are waiting for that, I think perhaps we can go to the next question. I think a question for Hanré in the meantime: Could you comment on the gearing targets, either dollar debt or gearing ratio across the group, as well as the regional breakdown, SA versus international? International costs are up material. Are there any opportunities to lower or optimize the cost of debt capital now that liquidity has improved? That comes from Ilana Dolenko at Old Mutual.
Thanks. Thanks, Tiffany. I think, perhaps to start off with the conundrum of US dollar-denominated debt versus what it effectively now is 97% of our EBITDA coming from South Africa in the last year. Of course, that is a bit of a hangover from kind of the funding of LCCP. We sit at the moment with $5.5 billion of US dollar-denominated debt. I think critical to that is the ramp-up and recovery of our offshore business to repay that debt. We're quite comfortable then also at the appropriate time, to translate kind of rand into dollars to repay it.
That will be a continued balance to just affect a more kind of more balanced debt, a debt book that matches our cash flow with our debt, and ultimately the intention then is to reduce the dollar debt, use more DMTN and other South African-denominated debt products to align that. That will be a project that runs over a number of years to rebalance that. I think in terms of debt targets, we're quite comfortable still with the capital allocation framework. One looks at the debt targets for dividend payment, we note that on a first-order capital allocation, that we committed to paying a dividend whilst debt is under $5 billion. Under $4 billion, we step the dividend payment up further.
I think ultimately, the current absolute level of debt and a net debt to EBITDA ratio of about 1.5 times net debt to EBITDA is comfortable. I think effectively, aiming for debt metrics that effectively puts us in investment grade rating to ensure that we get good access to the dollar, effectively, the dollar-denominated capital markets.
Thank you, Andre. Priscillah, your the question, apologies again to just address on the crude premiums.
Thank you. Is that working now? Okay, thanks. Thanks, Tiffany. Just probably first practice. Let me just summarize it into three buckets. I think at half year end, as we indicated, that the crude prices or the diffs were actually driven by macros, part of that, as we've seen in terms of the spike, in terms of the diesel cracks. We've seen that softening in the Q4 and year to date for the new financial year as well. That has actually helped us to improve some of the differentials that we're paying on WAF. In addition to that, we highlighted that we are working on piloting and broadening our crude slate. We've made good progress. We are currently looking at different crudes. We're testing a WTI crude.
We'll take learnings from that, and if it's efficient, we'll be able to broaden that. As we move forward, we will be looking at different supply sources, at a global scale. The third issue that we also highlighted was that we're also looking at strategic partnerships because we do understand that our scale is not necessarily able to, enabling us to achieve significant margins. We are piloting a 6-months arrangement with a strategic partner. Depending on the outcome, we'll do a retro analysis, and if we think there's value proposition, then we'll look at that going forward. Those are the 3 initiatives that we are looking at. I just want to reiterate that in the Q4 and year to date, we are seeing significant improvement in terms of the diffs that we're paying versus the first 3 quarters of the year.
Thank you, Priscillah. I'm gonna switch to chorus call, as there are a few, callers that are queued. If I could perhaps ask the chorus call operator to go to Gerhard Engelbrecht first, and then we'll take Christopher Nicholson next.
Of course. Gerhard, you can go ahead, sir.
Gerhard, can you bring through your question?
Sorry, you... Can you hear me?
Yes, we can hear you clearly. Go ahead. Gerhard, we're unable to hear you. Do you want to try again?
Is that, is that better? Can you hear now?
Yes. Yes.
Okay.
Please go ahead.
Okay, I've got 3 questions: 2 around the image and 1 around the future of gas and LNG. If I look at your exchange rate or, or your, your oil price assumptions of $88 and above average refining margins and currency, it looks like the front end of your DCF is loaded with very strong cash flows, which must imply that later in your DCF, you turn into very large negative cash flows to get to zero values. I guess the question is: when do you see that happening, first? When do you see these negative cash flows coming through in the fuels business? My second question goes around the $35 billion. I looked at the asset values in FY 2022 and what you ended up with FY 2023. You've impaired more than the asset value than what...
than the asset values, that you ended with in FY 2022. I also see that the property, plant, and equipment in the mining business has been cut quite significantly. Have you allocated assets differently, or is there also an impairment in the mining business that you, that you're taking in the fuels business? Then my last question goes around gas. You say that LNG is no longer an option. Are you still pursuing the gas heat exchange reformers project in Secunda, or is that on the back burner as well? Until when do you think you will be able to supply external customers with gas? Your gas plateau, does that include external, supplying external customers? Thank you. Of course.
Thanks. I'll, I'll jump in with the first two parts of that question. I think, Gerhard, you've, as normal, you're 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 tail 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 tons to 6.7. Not being able to recover that from, 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.
Yes, we, 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, 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. Proportionally, you're spot on. That will also then be impacted, and of course, also capital throughout the year that we've spent since the half year and the beginning of the year in the half year impairment is also impacted. That's why you see that in the property, plant, and equipment in balances for the year.
Thanks. Thanks, Hanré. Sorry, if I... are you confident that the chemicals business can generate enough cash flows to offset these large negative cash flows in the longer term?
I think that, that's a critical point, Gerhard. In terms of, we noted that in the chemicals cash-generating unit, the South African cash-generating unit, we've got significant carrying value still and significant headroom. Given the higher value products that we produce in that business, we still believe that that business carries a lot of value. It's important to note that kind of where we have different cash-generating units, we've got an integrated value chain. 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. One has to look at the complete picture, as you point out.
Gerrit, I'll ask Simon to reflect on the gas reforming projects, and then Priscillah to weigh in on the external gas customers. Simon?
Yes, thank you, Fleetwood. Gerrit, yes, you, you correct, the gas heat exchange reformers, that project, we have put it on hold, but we are watching the signposts 'cause it purely depends on affordability of the gas. 'Cause, 'cause we will not bring in gas and do the projects to destroy value, but it has to be value attractive. What we're going to do, as, as we explore and find cheap gas, we might restart those projects, but for now, we've put them on hold.
Thank you. In terms of the ZAR 530 million that we mentioned earlier on, ZAR 330 million of that have been spent today on restoring our plateau. 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 2026 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 2026 because we need that gas for the decarbonization of our own operations. In parallel, what we're actually doing is that we're 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, that at this current prices, Sasol cannot afford LNG.
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're making progress on, as Fleetwood mentioned, in terms of PSA.
Thank you, Priscillah.
Thank you.
operator, if we can move to Christopher Nicholson, please.
Of course. Christopher Nicholson from RMB Morgan Stanley, you can go ahead, sir.
Hi. Morning. Yes, I'd like to just continue along the line of questioning around the impairment. It is a bit frisky, but it is important as it, it signals, I guess, your assumptions around future volumes and so forth. There's 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. 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 ton run rate? Then finally, I know we've obviously had some news flow recently around the alternative load-based emissions for SO2. I do understand that there potentially could be a production impact if the Minister of Environmental and Fisheries doesn't give you the right to, I guess, reduce the total load-based emissions from 2025 or before 2030. Could the production impact be that we see in the turndown be quicker than anticipated from that 6.7? Could we get there quicker? Thank you.
Andre, maybe you deal with the first part, and then I'm gonna ask Simon to deal with the, what is the required coal volume at 6.7, and what is the reduction, as well as the impact of 12A.
Thanks, thanks, Chris, for the questions. I think to start off with the, the ratio of chemicals versus fuels, so, so there's no significant change on those assumptions. I think that's part of the mitigation measures in terms of changing production mix, optimizing the production slate, is gonna be a key part of recovering that, that value. Coal volume, 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. I, I think as we've explained previously, the key element to doing that is to move from, from coal to gas as an, as an intermediate feedstock.
As such, we are still committed, and part of the plan is still then to move from around 40 million tons of coal to around 30 million tons of coal. The affordability of gas will really then determine how much we can recover. Effectively, the easiest way to just reduce emissions by 30% is to reduce the whole production by 30%. Where we're able then to displace coal, which is less efficient from a CO2 perspective, with gas, which is more expensive, that really drives the economics. At the moment, given the current economics of LNG and alternative gas, ZAR 6.7 really is the affordability aspect to which we can recover.
I think given then 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 we'll continuously reassess carrying value and then update the market on that basis.
If I may weigh in before Simon goes for the next part of the question, Chris, is that, you know, 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 stringent IFRS rules in terms of how to consider prospects versus proven prospects. 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 gonna be a key aspect that we are focusing on, and as we materialize some of those benefits, we'll definitely bring that back.
Our plan is to address it meaningfully to improve value over the next years before we get to the 2030 timeframe. Simon?
Yes, Fleetwood, there was 2 questions to 2 parts to Chris's question. The first one was: What is the volume of coal that Secunda Operations will use post 2030? That number is, we've previously communicated, we're going down from 40 million tons on average to 30 million tons, so that's where we're going to be post 2030. That 10 million ton space is what Fleetwood is referring to, to say we'll have to look at alternative ways and sources to try and fill that gap. The second question is on the, on the 12A. You, you remember what we're asking for on the 12A is for the site to be regulated, I mean, on, on a load basis versus a concentration basis. That's what we're asking for.
We, we, we hope, and, and believe that that, I mean, represents the best possible solution for us going forward. If the minister were to uphold the decision of the NAQO, what we will do, we'll have to follow due processes 'cause, I mean, there is a process to try and resolve the issue, we will continue with that, I mean, to try and find an amicable solution to both parties.
I might just add, Chris, that, you know, we, we've got confidence that it is not a better solution only for Sasol, it's a better solution for the outcome of that pollutant in terms of the communities and areas that we operate in in Secunda. Because we've got other precedents where the mass base, you know, assessment on these emissions are practiced and, and is a very effective way of dealing with it. We in that process, we believe we've got a, a, a very clear, substantial benefit, and we will, you know, present that in as part of the process. Suffice to say, there are also other areas where we are regulated on a load basis . For example, in the U.S., that is also a practice that's been accepted.
Thank you for that. Yeah, I think it's very clearly explained on your website. I was just wondering, in a worst-case scenario, whether we would have a negative impact on production volumes if you didn't get that relief from the minister.
Yes, I, I, I think, you know, it is about the license of the operations. So it is, it is a dire outcome. If, if it, if it's the license is withdrawn, it will imply a phase shutdown of the facility, which we believe is not in the interest of everyone, given that we believe our solution is gonna be a superior outcome that will not require the phase shutdown.
Thank you very much, Fleetwood.
Thank you for your questions, Chris. I'm going to move to Alex Comer, please, also on Chorus Call .
Alex Comer from JP Morgan, please go ahead, sir.
Good. Can you hear me?
Yes. Thank you, Alex. Go ahead.
Yeah. Look, another question on the, on the write-down and, and following on from the excellent questions from Gerhard and Chris. Look, I don't want to labor the point here, but if you look at that fuels business, it's probably making, I don't know, $20 billion of free cash flow. Yeah, incredibly strong cash flows at the, at the oil price and rand you've indicated the next sort of five, six years and then, and then a collapse. You've given us this 6.7 million tons production number in 2030. What... You know, what happens to production over the next 20 years? Are, are you still expecting to hold that number for Secunda, or does it drop dramatically? I just wonder if you've changed that. Also, what is the oil price assumption? We know that it's $88 real to 2030.
What is it after that? Then also, what is the carbon tax assumption that you've, you've got embedded into these numbers? Thanks.
Thanks. Thanks, Alex. Effectively, just the, just to, to start perhaps with the oil price, the 88 rand is an average of the dollars. Sorry, yes, let's make it dollars. $88 a barrel is the average long-term nominal, nominal price. It is, I think it's in line with a real price that is, is close to consensus. I think it's not a, it's not an, certainly not an outlandish price, and I think that, that does bring sort of margin squeeze into, into that business. The key is, and I, I think you, you spot on that, we are generating strong cash flow now. Beyond 2030, given that we now then have a, a, a tail of, of negative cash flows over the period.
For example, if I look at the 2030 to 2040, we've got about -$13 billion discounted kind of value in, in that part, then a further, further negative, negative cash flow, 2040 to 2050. That brings the carrying value then to zero, as we've discussed before. I think the last part in terms of. Certainly the other assumption, uncertainty is carbon tax. Again, there we've used the current trajectory. $20 going to $30 per ton of CO2. The key uncertainty is then, what do one, what does one do with, with the carbon tax allowances?
There, we've also just used an extension of what we know at the, at the moment, but that remains a critical assumption also going forward, that will underpin the, kinda, that, that carrying value.
The last part, Andre, is that up till 2030, the assumption is that there is a range between the 7.1, 7.2, thereabout is the, is the assumption. The point that I made is that we're working on a whole host of issues. If we restore the coal quality, we believe that that would work against the impairment, because then we would be able to generate cash where it matters most in the near 6 years, or when we implement the de-stoning, say, from FY 2025 or calendar year 2025 on, that will restore to more historic volumes. The SO operations would also then contribute to offset some of, some of the woes.
Yes, so just to confirm, then, 6.7 is flat from 2030 to 2050. I think, for example, we are looking at various technologies to back that out. For example, if we can get a carbon capture and you can revert that volumes back to 7 million tons or more, kinda pushes out the need to reduce the 30% by capturing CO2. We've got, we've got a readily available streams of carbon that we can capture. Those are the kind of opportunities that, that we're working on, then ultimately to offset that reversal.
It's not just 2030, but it's really that journey to Net Zero, Net Zero ambition in 2050 as well, that we'll, we will continue to progress the, the various technology solutions.
Yeah, I mean, Hanré, if I may add, 'cause, yeah, we've, we've now introduced the 6.7 number. The critical assumption underpinning the 6.7 is also the grid emission factor of the South African grid. We also see, I mean, an upside of up to 300 kilotons if, I mean, the grid emission factors, I mean, improve. I think holding the 6.7 all the way up to 2050.
Mm.
yeah, will be a critical assumption that we must take into account. so we see as the grid, I mean, does improve, that you can access that.
Thank you, Alex.
Sorry, Hanré, I just wanted to... Sorry, no, just want to confirm one thing, because if I look at note 8 in your account, it says the oil price assumption of $88 a barrel is for 5 years. Are you saying that, that real $88 price is the, is to 2050, or is there some other oil price post 2030 assumption?
Yes, so that's the average, that's the average long term. We can, take it offline, but-
Yeah.
the detail there.
We'll confirm for you, Alex, and get back to you on that assumption. Thanks for your questions. We are talking to you later today, so I hope to, hope to get more of them there. I'm going to just finally wrap up on the impairment topic with 2 more questions, Hanré, which just come through, and then we can move over to more strategic questions. I think Adrian from SBG just wanted to confirm: What is the potential upside or what is included in the impairment assessment in terms of feedstock and any upside potential from, from the PSA and, and coal briquetting projects, et cetera? I think another important question, from Shuaib at Aluwani Capital : If the Secunda fuel and chemicals components are so integrated, why are they tested separately for impairment purposes?
Thanks. I think perhaps just to start on the capital assumptions, page 21, this is where my eyesight, failing eyesight is falling short, but there's a little footnote that details the exchange rate assumption for our capital guidance. Just to reiterate, capital guidance for the year is ZAR 32 billion-ZAR 33 billion on a maintain and sustain basis, ZAR 1 billion on a growth basis. We've got about ZAR 10 billion of that is in U.S. dollar denominated, so that relates to our Mozambican investment and, of course, also our international chemicals business. That's set at just over ZAR 16 to the U.S. dollar.
Given, of course, the, the, the current weakness in the rand, there is some risk to that, but we'll continue to manage, to manage risk, both from an exchange rate inflation, to, to really push for, for capital efficiency in the delivery of, of that.
The other question on the integrated nature of fuels and chemicals on impairment testing.
again, that's the, that's the risk now of, of, of, getting caught in the vagaries of, of IFRS. Yes, I think it's always a debate, how to define a cash generating unit, given our integrated value chain. We will continue to reassess that. I think the, the, the fact that we, we take the smaller, more granular approach gives us more clarity in terms of where there is headroom and deficits in the carrying value, relative to the value in use. I think our disclosure to that extent is also extensive enough that the reader can, can then aggregate or disaggregate the numbers.
It is a valid point, and I think to the, the point we made previously, to the extent that we then show significant value still in the chemicals value chain, does give good insight into the way that we manage the business and the strategic options available to us going forward. If we just aggregated that, it would be much less difficult to understand those strategic options.
I may add that in terms of the, the way that you define the boundary limits on the cash generating unit, is that you have to have a definable market. So if your unit is linked to basically known fuel and markers, then it becomes quite easy to define that, but you can't now patch in there something like a co-monomer market, which is totally driven by other dynamics in market demand and supply, and therefore, that also informs how we defined the cash-generating units in Secunda.
Thank you, Fleetwood. I'm going to shift gear a little bit to sustainability. There's a question from Desmond Madupe , from Ashburton, on how is Sasol tracking against the Just Transition plan. We have already covered your the air quality question, Desmond, which was your second question. Then I think another question from Herbert Kharivhe on the progress of our green hydrogen projects and SAF suite of projects.
Thank you. Thank you, Tiffany. I'm gonna deal with the first one and ask that Priscillah Mabelane weighs in on the, on the hydrogen and SAF projects. I will touch on the, the joint venture that also covers on SAF. Desmond Madupe, in terms of the Just Transition, we have made quite progress over the last year. We have defined our Just Transition strategy, which we had supported by the board. We've started our Just Transition office. We started to collaborate and engage with many stakeholders from the region, Mpumalanga, to other stakeholders and business in terms of the Just Transition pathway that we want to follow. We've identified a number of areas where we have to prepare to address the Just Transition. I think early stages, strategy in place.
We're starting to, to execute on that. We've got the office going, so I think there are progress steps that, that we can, we can bank. With respect to the SAF projects, Priscillah will weigh in on the South African landscape, but in the, in the international landscape, as we get the merger control approval on the joint venture with Topsoe, we believe there are some exciting prospects that we are working on, of ranging from projects in Europe to projects in the US. Of course, the whole objective is to look at it on a joint venture basis, and the partners are quite keen to start maturing some of those. Of course, it is informed by the feedstock location and the offtakes, but we are making progress there.
Once we, we got operational, you know, steps in forming the joint venture, we then can really take off by joining our forces.
Thanks, Fleetwood. From a South African perspective, just start building on Fleetwood, on the SAF. Our joint venture has been shortlisted for submission of the bid to the H2Global in terms of offtakes, and we are preparing for that. It's expected to be by end of this financial calendar, calendar year 2024. We continue to be concerned, however, in terms of the EU regulations, so we have a team that's working very closely with both H2Global as well as EU reg to ensure that we are progressing these two projects in line with those regulations as well. Those developments are ongoing, but we encouraged by the positive shortlisting of the project. In terms of the first hydrogen project in Sasolburg, which is quite key for us because it's our catalytic project, we're making good traction.
In the Q2 of this year, we will be launching the hydrogen mobility with partners, and we hopefully, as we start to progress with the finalization of that, we'll start to bring in more, a broader consortium that can actually start to demonstrate and ensure that we've got a sustainable case study for the green hydrogen projects going forward. On the mega projects, we've progressed the one that we really focused on. We finalized the master plan for the jointly with Northern Cape. That has been handed over. We are now in terms of the next stage case for the pre-feasibility study. The key element of that was really the port development, so we're watching that with interest.
You've seen the recent developments, so we will engage with all partners to understand what the next steps looks like and make a decision afterwards.
Thank you. Thank you, Priscillah. I'm going to take one last question on today's call, and that's from Adrian Hammond. Adrian?
Morning. Thanks very much. Yes, I have two quick ones, just to clarify further on the impairment and what it means for the future and how realistic this impairment really is, because it seems, it seems quite self-penitent to me because it, it's premised off a, a climate change policy of your own. So just to be clear, what is the potential increase in recoveries from coal briquetting, and is that factored into this fair value calculation? And as well as the PSA, I was expecting an update on the recoverable reserves from the PSA. What's happened with that? And then secondly, for Priscillah, there's been some news flow from Kinetiko regarding some recent discoveries of coal bed methane . Is that an opportunity for Sasol? Thanks.
Thank you, Adrian. We will deal with it in two parts. The coal briquetting, in terms of, of the recovery on feedstock base, Simon will deal with, and then PSA, as well as the, the other question will be dealt with by Priscillah.
I'll start first, perhaps. Adrian, thank you. In terms of the assumptions for the impairment, we've assumed the extension of the plateau to FY 28, as we've previously indicated. In terms of our assumptions for all of our projects, PSA, PPA, as well as the current extensions that we are doing, we are assuming a P50, and that's what has been built into the assumptions up to FY 2028. As Fleetwood has indicated earlier on, we are continuing with our exploration as well, with our continued development around gas and all of those opportunities, which we call contingent resources, which we believe will be able to take us beyond the 2030, are not yet built into the assumptions. So we go through a very rigorous process before we actually extend the plateau and build the assumptions in.
Just to indicate the actual petajoules, we've assumed 70 petajoule for Secunda going forward, which is currently in line with our current reforming capacity that we have. That's for Secunda and gas. Specifically on PSA, we've actually made good progress in terms of the well that we've drilled is now connected, as I've mentioned in the previous discussion during half year. In addition to that, we've now finalized the 3D seismic, and we've been doing a lot of detailed modeling to be able to understand the resources much better, and that is now in the process of being finalized.
Our intention is that by the end of August into mid-September, we'll be submitting a field development plan to the Mozambican government, and that will go with a commercial agreement of offtake for the gas that will come to South Africa. While we're seeing some normal variation within the P50, we encourage that there is actually these are indicative numbers that we're not able to share until we've submitted to Mozambique. What is actually showing is that the upside, which is more the P90, has actually increased compared to our original assumption, so it's within the ballpark. It doesn't affect our FY28 assumptions because we've actually assumed a cap of 35 petajoules to South Africa, given the current arrangements with on the FDP.
Overall, I think we've got more upsides, but it's too early to comment on what that looks like, and we will follow a very rigorous process as we've done in the past. In terms of the opportunities in South Africa, we are noting that, we encouraged, and we continue to engage with the respective partners to be able to understand some of the key technical questions that we have around the opportunities. At the same time, we also want to understand the economic viability thereof. The technical questions deals with a number of subsurface issues, which I'm willing to address offline, as well as the surface issues in terms of the opportunities associated with timing. What does it mean, given the environmental requirements, given the land required, to be able to use that unconventional technology?
We are working closely together, but at the end of the day, it's going to be an economical assumption. If it's actually competitive to any of our other opportunities, it will be part of the all other contingent resources that we're exploring, and this is not the only one. We're also looking at opportunities in South Africa. We're looking at opportunities in Namibia as well. All of those will be compared as we move forward.
That's clear. Thanks.
Thank you, Adrian. We'll talk to you also a little bit more extensively later today. I'm going to wrap up with one final question.
Can we just do the coal briquetting ?
Apologies. Apologies.
That's Adrian.
No, no, thank you, Adrian. The coal briquetting has already been factored in post the 2030. I mean, all that it does is that it's a carbon source, so if you didn't have briquetting, you'd have to mine more. We've already factored that in. My assessment is post 2030, we have space in gasification, we've got space in the boiler plant, we've got space in the reforming plant, and the management team is going to work very hard, like Fleetwood has said, to see if we can fill up that space and recover the volumes.
Great. Final question, for you, Fleetwood Grobler, from Siyabonga Mbatha and Fairtree. "Any update on succession planning?
Yes, thank you, Sia. We have reported earlier this year that succession is a key focus area for the board. The board is still on track to go through the process to finalize that. As indicated last in the last time that we talked around this subject, it is gonna be announced early in the new year, if not even at the end of this year. There's a slight push for the for that outcome as well. I know that this will come to a fruition, and the board is fully committed to make that decision by early next year or earlier.
Thank you very much, Fleetwood. I'm going to close the session for today. Thank you very much to the Sasol management team for their participation and to all participants online and on chorus call. We look forward to further engagements with you over the next few weeks. With that, I'll close the call. Thank you.