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MarketScreener Homepage  >  Equities  >  Stock Exchange of Hong Kong  >  ENN Energy Holdings Ltd    2688   KYG3066L1014

ENN ENERGY HOLDINGS LTD

(2688)
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Toshiba shares slump after sale of U.S. LNG business cancelled

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04/12/2019 | 03:58am EDT
The logo of Toshiba Corp is seen at its headquarters in Tokyo

TOKYO (Reuters) - Toshiba Corp shares fell by the most in two months on Friday after an agreement to offload its U.S. liquefied natural gas (LNG) business collapsed, a blow for the Japanese company which has been shedding assets to turn around its business.

Toshiba said late on Thursday that China's ENN Ecological Holdings Co had scrapped an agreement to take over the LNG business due to a failure to get approvals from shareholders and a U.S. panel that monitors foreign investments.

Toshiba shares fell as much as 5.4 percent before closing down 2.7 percent, the biggest drop since Feb. 12. The broader market gained 0.7 percent.

Toshiba must now look for a new buyer for the business that it previously said may cause losses of as much as 1 trillion yen (£6.9 billion).

Spot LNG prices are trading at about half the level they were when Toshiba agreed to pay ENN more than $800 million to take over its U.S. operations.

A failure to find a buyer could derail Toshiba's recovery from the fallout of the bankruptcy of its U.S. nuclear power unit Westinghouse, analysts have said.

"The challenge in obtaining U.S. approvals provided an opportunity for ENN to walk away from a deal that will be out of the money in the near term following a collapse in LNG spot prices," said Saul Kavonic, head of energy research for Australia at Credit Suisse.

"At current LNG spot prices, it will be a challenge to bring U.S. LNG volumes into Asia on a cash cost basis, let alone factoring in an additional processing tariff," he said.


Graphic: Asian spot LNG price

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 potential Asian buyers of its turbines used in combined cycle gas-fired power plants.

The company signed up to take 2.2 million tonnes of LNG annually from the Freeport LNG export plant in Texas, construction of which is almost complete.

The arrangement requires Toshiba to pay a processing fee for the LNG, regardless of whether it takes the fuel.

The company has been trying to sell the business since at least 2015.

"Toshiba has around a year to find a new buyer or be faced with the prospect of paying for capacity that they aren't using," said Nicholas Browne, gas and LNG director at consultancy Wood Mackenzie in Singapore.

"Finding a buyer in this timeframe could be pretty difficult," he said.

(Reporting by Aaron Sheldrick; Editing by Stephen Coates)

By Aaron Sheldrick

Stocks mentioned in the article
ChangeLast1st jan.
ENN ECOLOGICAL HOLDINGS CO LTD 0.20% 10.11 End-of-day quote.2.31%
ENN ENERGY HOLDINGS LTD 0.06% 77.65 End-of-day quote.11.09%
TOSHIBA CORP -0.77% 3235 End-of-day quote.6.77%
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Financials (CNY)
Sales 2019 73 422 M
EBIT 2019 7 988 M
Net income 2019 4 979 M
Debt 2019 13 515 M
Yield 2019 2,16%
P/E ratio 2019 15,3x
P/E ratio 2020 13,3x
EV / Sales2019 1,23x
EV / Sales2020 0,99x
Capitalization 76 617 M
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Mean consensus OUTPERFORM
Number of Analysts 27
Average target price 75,61  CNY
Last Close Price 68,15  CNY
Spread / Highest target 29,5%
Spread / Average Target 11,0%
Spread / Lowest Target -40,4%
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Managers
NameTitle
Ji Shen Han Chief Executive Officer & Executive Director
Min Liu President & Executive Director
Yu Suo Wang Chairman
Jian Feng Liu Chief Financial Officer
Dong Zhi Wang Executive Director
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