Update on transaction with ConocoPhillips
ASX/Media Releases
13 Oct 2008
Origin Energy Limited (“Origin”) today announced that following the significant recent depreciation of the Australian Dollar (“AUD”) against the United States Dollar (“USD”), it wishes to provide an update regarding the AUD value of the expected payments by ConocoPhillips in relation to the transaction that was announced on 8 September 2008.
As previously announced, ConocoPhillips is to invest in a CSG to LNG Joint Venture by way of:
- An up-front payment of USD 5.0 billion;
- Additional fixed contribution of AUD 1.15 billion to carry Origin’s share of costs to Final Investment Decision (FID) expected end 2010; and
- Additional payments of USD 500 million at the point that each of the four LNG trains is approved, to partly carry Origin’s share of costs.
Origin has entered into currency hedging arrangements in respect of the USD 5 billion up-front payment to provide protection in the event that the Australian dollar appreciates above the exchange rate at the date of the initial announcement. The cost of implementing these hedging arrangements will be shared between Origin and ConocoPhillips upon completion of this transaction. Origin and ConocoPhillips will share the benefit of any depreciation in the value of the AUD between the date that the transaction was announced and the date that the transaction is completed.
The only outstanding condition on the transaction with ConocoPhillips is Foreign Investment Review Board (“FIRB”) approval. ConocoPhillips will make the up-front payment to Origin shortly after fulfilment of this condition and Origin will provide a further update of the actual AUD amount received at that time.
Following completion of the transaction, Origin will have no net interest bearing debt and a significant cash balance. This will result in an immediate and substantial increase in earnings for Origin from the interest benefit.
This strengthened financial position will enable Origin to fund both its future growth and undertake capital management initiatives for the benefit of shareholders.
Following completion of the transaction, Origin intends to undertake an AUD 1.5 billion capital management program:
- An immediate payment of an additional dividend of 25 cents per share fully franked (AUD 225 million) to double the 2008 dividend, providing a new base for future dividends. Origin will now target an increased dividend payout ratio of at least 60% of underlying earnings; and
- Commence an on-market buy-back of shares of up to AUD 1.275 billion.
Further capital management initiatives will be considered following a review of additional near term investment opportunities available to Origin.
For further information please contact:
Investors
Angus Guthrie
Manager Investor Relations
Ph: 02 8345 5558
Mobile: 0417 864 255
Media
Michelle Hindson
Acting General Manager, Corporate Communications
Ph: 02 8345 5217
Mobile: 0414 207 049
About Origin Energy
Origin Energy is Australasia’s leading integrated energy company focused on gas and oil exploration and production, power generation and energy retailing. Listed in the ASX top 25 the company has over 3,500 employees, is the largest holder of proved and probable gas reserves in eastern Australia and is the second largest energy retailer in Australia, servicing over 3 million electricity, natural gas and LPG accounts. Origin’s strategic positioning and portfolio of assets provides flexibility, stability and significant opportunities for growth in the ever changing energy industry. Origin is also the major shareholder in Contact Energy of New Zealand. The company has a strong focus on ensuring the sustainability of its operations, and in 2007 the company received the Ethical Investor 2007 Sustainable Company of the Year award.