(Bloomberg) -- South African fuel and chemical maker Sasol Ltd. took a 35 billion-rand ($1.9 billion) writedown on a facility at the heart of its operations and warned of regulatory uncertainty in the country as greenhouse-gas emissions rose.

The “significant impairment” on the Secunda liquid fuels plant is reflective of Sasol’s reassessment of costs and the “need to remain realistic and focus on delivery,” Chief Executive Officer Fleetwood Grobler said in an earnings presentation. 

Secunda makes products from coal, and generates more greenhouse gases than some major oil companies. Sasol failed in its bid to have the unit exempted from South African sulfur-dioxide emissions limits due to be imposed in 2025. It has since appealed the decision.

Sasol, South Africa’s second-biggest polluter, has set a goal of cutting emissions 30% by 2030 in an energy efficiency plan that involves turning down boilers, reducing coal use and integrating 1,200 megawatts of renewable power, it said Wednesday. The program assumes lower production volumes at Secunda after that period along with higher coal and capex costs.

While the company’s 62.3 million tons of greenhouse-gas emissions for the 2023 financial year is a 5% drop from its baseline and remains on target, higher production rates caused an increase from the previous period, it said. The emissions are expected to rise “slightly” in 2024 along with an increase in output, according to Grobler. 

Cutting emissions for Sasol involves displacing one fossil fuel with another. Reducing the 40 million tons of coal it uses to make fuel each year by a quarter will mean replacing it with cleaner natural gas. The company reported five new wells brought online in Mozambique along with a new gas discovery. Grobler ruled out liquefied natural gas imports due to high prices.

Regulatory Challenges  

South Africa’s “uncertain regulatory environment” is one of Sasol’s persistent near-term challenges, it said in its earnings presentation. Gas pricing, carbon tax clarity and constraints on the grid to add more renewable plants are other obstacles the company faces.

“The environment is complex,” Grobler said in an interview, adding that the company is confident about its appeal on the Secunda decision. “On some issues there’s less certainty.”

Sasol Chief Financial Officer Hanre Rossouw has previously warned that the nation’s carbon tax could potentially cut into the business and its green transition plans.

A longer-term goal of reaching net zero emissions by 2050 involves a green hydrogen project on South Africa’s west coast, which Sasol hopes will provide an even cleaner fuel to replace gas. 

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