Origin considers further APLNG stake sale

February 23, 2012

Origin Energy has left the door open for further reductions in its stake in the $20 billion Australia-Pacific liquefied natural gas (APLNG) project in Queensland after booking a strong interim net profit.

The energy producer and retailer on Thursday posted a net profit for the six months to December 31 of $794 million compared to a $136 million loss for the previous corresponding period, partly driven by a sell-down of its stake in the APLNG project to China's Sinopec.

Origin's acquisition of previously state-owned electricity assets in NSW made a significant contribution to a 61 per cent jump in underlying profit to $489 million, the company said in a statement.

Managing director Grant King said the $3.2 billion cost of the acquisition was "a lot", but the NSW assets were delivering as expected.

Higher commodity prices also helped boost Origin's underlying profit.

The company said it was well funded for the first phase of APLNG following a big capital raising program last year, with $5.5 billion in undrawn facilities currently, but needed more funds for a second processing `train' at the project.

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Origin had been targeting a final decision to proceed with the second train by the end of the current quarter, but now expects that will likely occur around mid-year.

Mr King said Sinopec was in the process of obtaining Australian and Chinese government approvals for the equity purchase, and there was "no issue" with the time slippage.

"We are not in control of that timetable ... and we're quite confident that they (government approvals) will be achieved," he told a teleconference on Thursday.

The deal, inked last month, will give Sinopec a 25 per cent interest in APLNG and leave Origin with a 37.5 per cent stake, from 42 per cent currently.

Executive director of finance and strategy Karen Moses said Origin could secure some of the additional funds it needs for the second train by selling further equity in the project, without indicating how much it could divest.

The rest would be debt funded.

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"Clearly, our dilution with APLNG bringing in Sinopec brings in funding," Ms Moses told the teleconference.

"Any further dilution would also do that.

"We know where the dollars can come from."

Morningstar analyst Mark Taylor said Origin would probably not need to secure extra debt funding in one hit.

"You could do it in increments because the expenditure is occurring over a number of years," Mr Taylor said.

Mr King said Origin had greatly diversified its funding sources last year, so now had many options.

"We've put the company in a very solid position.

"We, like many companies, are substantially expanding the way we access both debt and equity markets to make sure that, notwithstanding the financial conditions that the world finds itself in, we can continue to pursue the opportunities that we see available to us."

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