Chiyoda Corp., the Japanese LNG engineering company working on the Golden Pass project in Texas that has been hit by the bankruptcy of the US Zachry construction group, has had to take a hit on its earnings for the fiscal year just ended.
Chiyoda, based in Yokohama, Japan, said it was revising full-year consolidated financial forecasts and was publishing its earnings late.
Zachry Holdings, the lead contractor in the $10 billion project to transform the Golden Pass LNG terminal in Texas into an export plant, filed on May 8, 2024, for Chapter 11 bankruptcy protection.
Chiyoda said its earnings adjustments were because of the withdrawal of Zachry, one of the engineering partners, and amid efforts by Houston, Texas headquartered subsidiary, Chiyoda International Corp (CIC), to reorganise an operational structure with remaining partner, the McDermott unit CB&I LLC.
Earnings forecast
“Under the circumstances, the cost required to complete construction was forecast and recalculated with sufficient margin based on the currently effective contracts,” Chiyoda explained.
“Consequently, sales and operating income are expected to decrease from the previous forecast,” said Chiyoda.
Ordinary income is expected to drop to 5.5 billion Japanese yen ($34.5 million) from 28Bln yen ($175.37M) in the previous forecast.
This is down from the 20.32Bln yen ($127.2M) logged in the previous 2022-2023 fiscal year.
“Short-term and long-term plans to complete construction will be agreed among the three parties Chiyoda, CBI and the Golden Pass (GPX) project) soon after Zachry’s official and formal withdrawal from the project,” said Chiyoda.
Chiyoda stated that it would strive to successfully negotiate a contract with GPX and restore its equity capital by counting the contract money in its financial results to re-estimate reserves for losses on construction contracts in or after the fiscal term of the second quarter of the fiscal year 2024.
Chiyoda's secure finances
“Chiyoda’s cash and cash equivalents on its consolidated financial statements after the end of March 2024 up to the present day is about 100 billion yen ($627M) and there is no risk of harm to its business operations,” the company declared.
The Golden Pass liquefaction facilities are being constructed at the existing terminal located on the Sabine-Neches Waterway in Texas.
Three liquefaction Trains are planned with a combined nameplate capacity of around 16 million tonnes per annum of LNG.
ExxonMobil and QatarEnergy own 30 percent and 70 percent respectively of the venture.
The Train 1 mechanical completion had been scheduled for the end of 2024 and with first LNG in the first half of 2025.
