Australia: Origin Energy Raises AUD 680 Million Hybrid Capital to Fund APLNG

Origin Energy Limited announced the successful pricing and allocation of a €500 million hybrid issue (approximately A$680 million).

Standard & Poor’s has confirmed to Origin that the hybrid will receive 100 per cent equity credit and Moody’s has confirmed to Origin that the hybrid will receive 50 per cent equity credit for ratings purposes, thereby supporting Origin’s BBB+/Baa1 credit ratings. Standard & Poor’s and Moody’s press releases are attached to this announcement.

Origin Executive Director, Finance and Strategy, Ms Karen Moses said, “Origin has historically enjoyed strong support from investors across both debt and equity markets. This is demonstrated by the success of the recent $2.3 billion equity raising, the syndication of a $2.15 billion and US$350 million bank debt facility earlier in 2011, together with execution of this hybrid issue.”

“We continue to assess a range of options in relation to the funding requirements for the Australia Pacific LNG project. The hybrid proceeds strengthen Origin’s balance sheet ahead of our contribution to this project” Ms Moses said.

Australia Pacific LNG continues to make good progress towards a final investment decision, when capital estimates for the project will be approved. The joint venture remains in discussion with customers regarding further off-take arrangements and equity participation.

The hybrid security is Euro-denominated and will be hedged into US dollars, is subordinated, matures after 60 years and can be redeemed by Origin at years 7 and 12 or any distribution payment date thereafter. The hybrid pays fixed semi-annual distributions at a rate of 7.875% per cent per annum for the first 7 years and thereafter at reset or floating rates in accordance with the terms and conditions (refer to Annexure A for a summary of key terms). After hedging, the cost to Origin will be 7.48% per cent per annum in US dollar terms for the first 7 years. The hybrid instrument is treated as debt for accounting and taxation purposes. The hybrid terms do not include any rights to convert into Origin ordinary shares.

The hybrid securities will be issued by Origin Energy Finance Limited (a subsidiary of Origin) and will be guaranteed on a subordinated basis by Origin Energy Limited.

J.P. Morgan and UBS were Structuring Advisers on the hybrid raising and Deutsche Bank, J.P. Morgan and UBS were Joint Lead Managers.

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Source: Origin Energy, June 10, 2011;