French energy major Total is paid $800M to take over Freeport LNG deal of troubled Toshiba
French energy major Total has signed an agreement with Toshiba Corp. to take over the troubled Japanese group’s interests in the Freeport liquefied natural gas export project at Quintana Island in Texas for a sum of $800 million.
Total has signed an agreement with Toshiba to take over its 20-year tolling agreement for 2.2 million tonnes per annum of LNG from Freeport LNG’s Train 3 and the corresponding gas transportation agreements on the pipelines feeding the plant.
The Freeport facility’s Train 3 is expected to come on stream by the second quarter of 2020.
Under the transaction, Total will acquire all the shares of Toshiba America LNG for a consideration of $15M to be paid by Total to Toshiba and will be assigned all contracts related to their LNG business for a consideration of $815M to be paid by Toshiba to Total.
The agreement means that Total will receive from Toshiba a net cash consideration of $800M payable at the closing date of the transaction, expected by the end of 2019.
Toshiba’s energy business began to decline in 2017 when it decided to withdraw from the nuclear business outside Japan after huge losses forced its Westinghouse Electric unit to file for bankruptcy.
The Japanese group entered the LNG market in 2013 by signing its agreement with Freeport. Its tolling and pipeline deals meant financial commitments in the future it wanted to avoid as it restructured, hence its willingness to pay a third party to take over its agreements.
Toshiba had previously discussed a deal with ENN Group for China, an expanding player in the LNG business, before opting for Total.
“The takeover of Toshiba’s LNG portfolio is in line with Total’s strategy to become a major LNG portfolio player,” said Philippe Sauquet, President of Gas, Renewables and Power at Total.
“Adding 2.2 MTPA of LNG to our existing positions in the US, in particular Cameron LNG, will enable optimizations of the supply and operations of these LNG sources,” added Sauquet.
“Already an integrated player in the US gas market, Total is set to become one of the leading US LNG exporters by 2020 with a 7 MTPA portfolio,” he stated.
The Freeport transaction gives the French group a portfolio of around 40 MTPA of LNG through its stakes in leading export ventures in about a dozen countries, including Australia, Nigeria, Russia and Qatar.
