(Corrects company code in text to 6502.T, not 6501.T)
By Aaron Sheldrick and Osamu Tsukimori
TOKYO Feb 17 Japan's Toshiba,
scrambling to fill the balance sheet hole left by a $6.3 billion
hit to its nuclear operations, is also on the hook to pay
billions of dollars for a U.S. natural gas contract.
The computer chips-to-nuclear conglomerate surprised many in
2013 when it announced plans to buy 2.2 million tonnes of
liquefied natural gas (LNG) annually from Freeport LNG in Texas,
exposing it to more than $7 billion in charges over a 20 year
The company still has no firm commitments to sell the gas, a
Toshiba spokesman said on Friday.
Toshiba's contract requires it to either procure natural gas
to liquefy in Freeport's facility and resell as LNG or pay a
fixed gas processing fee to Freeport of about $370 million per
year for the life of the contract.
The Toshiba spokesman said the company had an agreement with
Japan's Jera, the world's biggest single buyer of LNG, to help
sales and marketing of the fuel from 2019, when the contract
with Freeport goes into effect.
A Jera spokesman said there have been no discussions about
buying the Toshiba gas supplies.
Toshiba signed the deal at the height of Japan's energy
crisis after the 2011 Fukushima nuclear disaster led to the
shutdown of all the country's power reactors, forcing Japan to
spend huge sums on imported fossil fuels at a time when prices
for oil, gas and coal were high.
Still, many question why Toshiba was making a foray into the
world of big gas trading.
"Signing up for the gas is another example of Toshiba's poor
management oversight," said Tom O'Sullivan, an energy consultant
and former investment banker with many years experience in
"It is also an example of a conglomerate strategy unique to
Japan, where many of these corporations pursue so many different
lines of business," he said.
Japan's government promoted these gas supply agreements from
the United States' shale gas production as a panacea for its
Toshiba's deal seemed like a good bet at the time as Asian
LNG prices LNG-AS surged to a record. Now, however, they are
two-thirds below their 2014 peak, half of what they were when
Toshiba signed the deal, amid a flood of new production.
By 2015, Toshiba was trying to sell its LNG commitment
rather than use it as a sweetener for gas turbine sales, as
reported by Reuters.
Shares in Toshiba sank a further 9.2 percent on Friday,
after credit ratings firm S&P Global said it might
slash Toshiba's rating several notches.
(Additional reporting by Henning Gloystein in SINGAPORE;
Editing by Christian Schmollinger)