From Fairfax:
Origin has portrayed the sale of its 53.09 per cent stake in Contact as a significant move to reduce financial risk at the power and gas supplier given the reduction to its debt, which has grown to about $12 billion due to spending on the $24.7 billion Australia Pacific liquefied natural gas project in Queensland.
But Credit Suisse analyst Mark Samter said he struggled to reach the same conclusion given earnings would become more volatile with the loss of Contact.
“The immediate impact of the transaction is actually negative in terms of Origin’s credit metrics and cash flow,” Mr Samter said in a note to clients.
“It’s not until steady state production from APLNG, which we do not expect until FY18, that the sale of Contact becomes an incremental positive.”
Deutsche Bank analyst John Hirjee took a different view, describing the sale as “a prudent measure and an incremental positive given it improves Origin’s debt metrics, increases financial flexibility and helps to ensure it retains its BBB- credit rating in a volatile oil price environment.”
When the huge APLNG writedowns come, that debt will be very uncomfortable.
