Japanese trading house to sell stake in LPG unit

Japanese trading house Nissho Iwai Corp. has confirmed a report in the financial daily Nihon Keizai Shimbun that it will sell a majority stake in its wholly owned LPG subsidiary to Osaka Gas Co. Ltd. by September. The company did not disclose the value of the deal or the size of the stake to be sold, saying no details have been fixed, but according to Nihon Keizai Shimbun, the deal is worth about �10 billion.


TOKYO�Japanese trading house Nissho Iwai Corp. has confirmed a report in the financial daily Nihon Keizai Shimbun that it is to sell a majority stake in its wholly owned LPG subsidiary to Osaka Gas Co. Ltd. by September. The company did not disclose the value of the deal or the size of the stake to be sold, saying no details have been fixed, but according to Nihon Keizai Shimbun, the deal is worth about �10 billion.

The LPG unit, Nissho Iwai Petroleum Gas, sells about 550,000 tonnes/year of LPG to retailers and households through 14 sales subsidiaries nationwide. Osaka Gas sells about 330,000 tonnes/year of LPG. Osaka Gas, Japan's second-largest city gas utility, is aiming to become the first major gas utility to sell LPG nationwide.

Nissho Iwai is struggling under a mountain of debt, and the divestiture is part of an ongoing restructuring program.

Osaka Gas says the purchase of Nissho Iwai's LPG operations is part of its strategy to diversify into other energy sectors, including the retail electric power business, in the wake of deregulation of that sector in March. The country's largest gas utility, Tokyo Gas, says that it, too, plans to enter the retail power sector.

Meanwhile, Kansai Electric Power Co. Inc., which serves the same region as Osaka Gas, has announced that it will begin competing with Osaka Gas in the sale of LNG. It has set up a joint venture with Iwatani International Corp. to build an LNG storage and vaporization base close to the city of Osaka. The facility will be used to supply LNG to outlying areas. Kansai Electric says it expects LNG sales to total �20-30 billion by 2010.

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