Origin to dump APLNG?

From Reuters:

Origin Energy has appointed Macquarie Capital to advise on a potential spin-off of Origin’s gas production businesses, including its $25 billion liquefied natural gas plant, two sources familiar with the matter said on Friday.

Australia’s largest energy retailer believes shareholders receive little benefit from owning an integrated business which includes a stake in debt-saddled Australia Pacific LNG, power plants and a power and gas retail business, one source said.

The spin-off would shift debt to the gas production business and help protect Origin’s investment-grade credit rating, which is currently one notch above junk, the source said.

Doesn’t say much for APLNG prospects. A vertically integrated Chinese buyer would make sense though that would not do much for Australian energy security and may be an issue. Perhaps Shell could snap it up and fully integrate with QCLNG. Whoever it is, they’ll need a mighty balance sheet.

Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the fouding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

Comments

  1. THe management of fro example Origin, Shell, British Gas, have no idea. They get into a business cos the other guy was getting in and they didn’t wish to be exposed to criticism from the board for having their own opinion (if they were intelligent enough to have one in the first place)
    As this un ravels squillions will be lost and the lives of ordinary punters ruined.
    We need the man from the Phillipines!

  2. Stormy Waters

    “Australia’s largest energy retailer believes shareholders receive little benefit from owning an integrated business”

    When does King go? Before the spin-off, or after it demonstrates that a sale will require a multi-billion dollar write-off on the trains?

    • Quite an about face given King has for years sprooked the benefit to shareholders of an integrated business model. Whatsmore he has put shareholder money weher his mouth os borrowing ruinous amounts of money chasing and over paying for assets to get realise his his explicit integrated energy business vision.

  3. Sounds to me more like the board have decided that APLNG has zero book value and they want to distance themselves from it before they are locked into accepting a negative book value.

  4. I imagine we will see how much one of these plants are really worth, something is really only worth what someone will pay you for it.

  5. You know there was a little international turf war as to who got to fabricate the gas train modules? The Chinese shareholders who were about to sign into the project wanted the work to go to a Chinese yard. The Americans would have none of that so that sped up procurement so the work would go to a Thai yard with American links. Procurement for pipe and valves was expedited so American companies won orders. Australia industry participation was virtually nil despite some Origin managers on a good little frequent flyer junket earner travelling to fabricators yards up and down the east coast of Australia saying they wanted to maximise local fabricated input. Total BS the decision was made to offshore with the FEED studies were being made