Hanwha Group Bids for 50% Stake in Sasol’s Ethane Cracking Center

Hanwha Group is seeking to acquire a 50% in an ethane cracking center (ECC) of Sasol’s Lake Charles complex in Louisiana, according to a Business Korea report.

The acquisition is estimated to cost around 3.4 billion, according to industry sources. Hanwha Group has reinforced its financial power with support from local financial firms.

Hanwha Solutions participated in a tender for the sale of a 50% stake in Sasol’s ECC in Lake Charles, Louisiana on July 24. The lead manager of the sale is the Bank of America’s headquarters in the United States.

Among Korean companies, SJL Partners, a private equity fund operator, and LG Chem participated in a preliminary tender along with Hanwha Solutions. Overseas participants included U.S. Chevron Philips Chemical, U.S. ExxonMobil Corp. and the Netherlands’ LyondellBasell.

Hanwha Group took part in the tender by forming a consortium with Daishin Private Equity (PE), a medium-sized PE that has about 750 billion won ($630 million) under management. For the deal, Daeshin PE plans to invest some of its blind funds and establish a project fund to raise funds from major institutional investors.

The nation’s four largest financial holding companies are also betting on the Hanwha-led consortium. They presented to the consortium a letter of confirmation pledging to provide acquisition finance worth about two trillion won ($1.7 billion).

Lake Charles of Louisiana, a southern U.S. oil field, is also a hub of the shale gas revolution that has made the U.S. the world’s largest crude oil producer. So the city is quite symbolic. Sasol had invested more than $8 billion in the ECC, but decided to sell the facilities as its financial conditions deteriorated due to the economic downturn and a plunge in oil prices.

Hanwha Group is seeking to acquire the ECC to elevate its petrochemical business to the next level. The group’s petrochemical business is currently centered on naphtha cracking centers (NCCs), which use crude oil as their feedstock. ECCs use ethane produced from shale gas or natural gas, whose prices are less volatile than crude oil.