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Toshiba to pay ENN more than $800 million to exit U.S. LNG business

Reuters  |  TOKYO/SINGAPORE 

By Tsukimori and Jessica Jaganathan

TOKYO/SINGAPORE (Reuters) - Japan's will exit its U.S. liquefied (LNG) business by paying China's more than $800 million to take over the unit as part of a 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 have plunged 42 percent in the past five years and the potential for future losses spurred Toshiba's exit.

Under the deal, Toshiba will sell its unit to ENN Ecological, a unit of ENN Group, for $15 million, the Japanese company said in a statement on Thursday.

However, once that sale is complete, Toshiba will then make a one-off payment of $821 million to ENN to pass on its roughly $7 billion commitment, starting in 2020, to purchase 2.2 million tonnes per year of LNG over 20 years from LNG in

"The project posed a huge risk, because no one knows how the situation will be over the next 20 years," Toshiba's told reporters at a press conference.

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

"The deal is our second major step to expand in the overseas upstream business. We expect to get 2.2 million tonnes of relatively low-cost LNG starting in 2020 to meet growing domestic demand," said Clarissa Zhang, of ENN Ecological. Toshiba has spent years trying to either sell the gas to power customers or offload the business.

Toshiba's annual cost of its deal with was a bit over $360 million dollars, meaning the company is paying about two years of those costs to ENN to take the obligations, said Nicholas Browne, of gas and LNG at

"For ENN this represents a relatively low cost and immediate way to source significant U.S. 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 "

Still, the deal is a "positive sign for U.S. LNG developers that 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

"The company probably wanted to add value to its power plant business by selling not only the power plants but also fuel, but for plant builders, it's always better to do it all via tenders," said Junzo Tamamizu, of in

($1 = 113.7200 yen)

(Additional reporting by Makiko Yamazaki in and Meng Meng in BEIJING; Writing by Aaron Sheldrick; Editing by Christian Schmollinger)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, November 08 2018. 14:34 IST
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