Origin Energy Limited (ASX:ORG) announced this morning that is has entered into an underwriting agreement for the sale of its 53.09 per cent shareholding in NZSE listed Contact Energy Limited (NZE:CEN) held by its New Zealand wholly owned subsidiaries. The transaction has been underwritten at a fixed price of NZ$4.65 per share.
The fully underwritten sale, which will be conducted via a bookbuild process while Contact shares are in a trading halt, will provide approximately NZ$1.18 billion in net proceeds to Origin which will be used to repay debt and redeem NZ$200 million of redeemable preference shares issued by Origin Energy Contact Finance No.2 Limited. A noticed of redemption for the preference shares will be issued shortly after settlement of the Sale.
Origin MD, Grant King commented, “Today’s announcement is consistent with Origin’s stated intention to continue to take action to reduce operating and capital costs, realign debt across group entities, and, where appropriate, divest assets. The proceeds from the sale will provide increased financial flexibility in the short to medium term.”
Upon the completion of the sale, Origin’s credit rating from Standard & Poor’s will remain BBB-, while its rating with Moody’s will be increased from Baa2 (negative outlook) to Baa3 (stable).
Origins Executive Director of Finance and Strategy, Ms Karen Moses said “This transaction provides a genuine reduction in financial risk through the repayment of Origins debt as well as the deconsolidation of Contact’s debt.”
Settlement is due to take place on the 10 August 2015, however Origin will continue to hold upstream production and exploration interests in New Zealand.
The last twelve months have not been kind to Origin’s share price. Drilling and financial results have been below investor’s expectations and as a result Origins share price has declined. How investors view the sale and subsequent reduction in debt will be revealed once the market opens this morning.
Author: Ben Visser
Aug 04, 2015
Ben is a Wise-owl equity analyst focusing on ASX blue-chips stocks. Ben has a Bachelor of Business in Finance majoring in property valuations and management. In his role at Wise-owl Ben conducts in-depth fundamental and technical analysis which helps him to find profitable investment opportunities on the ASX and abroad.