UPDATE: Chinese firm ENN to buy Toshiba’s US LNG operations

Author: Roman Kazmin


SINGAPORE (ICIS)--LNG market watchers are waiting to see how a Chinese buyer of Japanese conglomerate Toshiba Corp’s US LNG operations will fare after the firm announced it would exit the business by the end of the first quarter of 2019.

In order to transfer its business, Toshiba said it will sell the LNG business to China’s ENN Ecological Holdings for $15 million as part of a complex transaction that includes one-off payment of $806m to take over the company’s capacity in the US. Toshiba identified ENN as the buyer after Nikkei said the Chinese independent energy company had concluded a deal. ENN did not immediately reply to ICIS for a request for comment.

Freeport LNG consists of three trains of 4.6mtpa each to start-up in phases from the third quarter of 2019. A fourth train is under discussion in initial agreements that involve Japan’s Sumitomo Corp.

US China trade tensions

As a Chinese company, the new capacity holder could face difficulty marketing these volumes in China given the recent strain in trade relations with the United States that saw Beijing in September slap a 10% import tariff on US origin LNG. Under the current framework, Toshiba controls of 2.2m tonnes per annum (mtpa) of capacity at Texas-based Freeport. All contracts related to the sale of LNG on the basis of this capacity will either be transferred to a third party or cancelled, the company also said. ICIS has reported earlier this year that Toshiba was negotiating transfer of its capacity at Freeport LNG with numerous counter-parties, several of which were China-based.

Take-or-pay commitment

Toshiba unveiled a five-year restructuring plan on 8 November that included shedding the $7bn, 20-year take-or-pay commitment at the facility. Toshiba has signed the initial deal with Freeport LNG back in 2013, hoping to market LNG to its customers mainly in power sector who bough equipment such as turbines.

The disposal comes as no surprise to the LNG market, as Toshiba has made very little visible effort to either secure shipping capacity for its volumes or set up trading operations for LNG, market sources said. “The move was anticipated,” one source said.

Story was updated with the name of the buyer.