Toshiba to take more than US$800mil loss to exit US LNG busi­ness

The Star Malaysia - StarBiz - - Foreign News -

TOKYO: Ja­pan’s Toshiba Corp said it will pay more than US$800mil to an uniden­ti­fied over­seas “buyer” to exit its US liq­ue­fied nat­u­ral gas (LNG) busi­ness as part of a five-year plan to shed money-los­ing as­sets.

The sale is the dis­ap­point­ing cul­mi­na­tion of a ven­ture that puz­zled an­a­lysts when it was an­nounced in 2013. Asian LNG prices (LNG-AS) have plunged 42% in the past five years. The po­ten­tial for fu­ture losses spurred Toshiba’s exit, the com­pany said in a state­ment.

Un­der the deal, Toshiba will trans­fer to the uniden­ti­fied buyer its Toshiba Amer­ica LNG Corp unit and its roughly US$7bil com­mit­ment start­ing in 2020 to pur­chase 2.2 mil­lion tonnes per year of the fuel over 20 years from Freeport LNG in Texas. Toshiba will pay the buyer a one-off pay­ment of US$821mil, or about 93 bil­lion yen, the com­pany said.

The com­pany booked a charge of 93 bil­lion yen (US$818mil) for ex­it­ing the LNG busi­ness in its earn­ings it an­nounced yes­ter­day.

The Nikkei busi­ness daily re­ported, with­out cit­ing a source for the in­for­ma­tion, that the buyer is a unit of Chi­nese gas com­pany ENN Group.

How­ever, Toshiba said in its state­ment that it would only iden­tify the buyer when the fi­nal sales con­tract is signed.

An ENN Group spokesman said he was not aware of the deal when con­tacted by Reuters.

The com­pany has spent years try­ing to ei­ther sell the gas to power cus­tomers or off­load the busi­ness the con­tract.

Toshiba’s an­nual cost of its deal with Freeport was a bit over US$360mil dol­lars, mean­ing the com­pany is pay­ing about two years of those costs to ENN to take the obli­ga­tions, said Ni­cholas Browne, direc­tor of Asi­aPa­cific gas and LNG at Wood Macken­zie.

“For ENN this rep­re­sents a rel­a­tively low cost and im­me­di­ate way to source sig­nif­i­cant US vol­umes,” Browne said.”

For Toshiba, it clearly ends their short foray in the LNG busi­ness.

“ENN has been very open that it plans to set up an LNG trad­ing busi­ness. As such, these vol­umes will con­tribute to their port­fo­lio and some will not end up in China.”

Still, the deal is a “pos­i­tive sign for US LNG de­vel­op­ers that China is still open for busi­ness,” amid a trade war be­tween the world’s two-big­gest economies.

Toshiba stunned the mar­ket in 2013, when it de­cided to en­ter the LNG busi­ness. With no ex­pe­ri­ence in ship­ping or the lo­gis­tics of the gas and LNG busi­ness it seemed an odd fit, an­a­lysts said at the time.

Toshiba’s plan was to pitch LNG sup­plies as a sweet­ener to likely Asian buy­ers of its tur­bines used in com­bined cy­cle gas-fired power plants. — Reuters

Cap­i­tal needed: The logo of the ANZ Bank­ing Group is dis­played in the win­dow of a newly opened branch in cen­tral Syd­ney, Aus­tralia. APRA wants the coun­try’s four big­gest lenders to raise their avail­able cap­i­tal by four to five per­cent­age points by 2023 from the cur­rent 14.5% of to­tal risk-weighted as­sets. — Reuters

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