It is thought Origin will use the acquisition to clear the cupboard of non-core assets in Australia with its stake in the SEA Gas pipeline between South Australia and Victoria the popular choice among industry insiders.
Origin has an extensive range of vertically integrated energy assets. Its generation assets range from 100% of the 8MW OneSteel cogen plant to 100% of the 288MW Mt Stuart power plant. Its 50% stake in the Osborne, Bulwer Island and Worsley facilities may however be marked for divestment.
In addition to conventional oil and gas production, it has a significant LPG distribution and retail network.
Origin Energy managing director Grant King said that the company will take this opportunity to review its portfolio over the next year.
Commentators also believe most of Contact’s 105,000 minority shareholders will reject Origin’s NZ$5.67-a-share bid for the blue-chip company, a view echoed by King, who is reported as being “comfortable” with Origin holding just Edison Mission Energy’s 51.2% stake in Contact, is reported to have wanted more equity.
"Based on Edison Mission's previous attempts to acquire more than 51 per cent, based on analysts' views of the value of Contact, we think it unlikely that a large number of minority shareholders will accept the offer."
Origin yesterday announced it was to pay NZ$1.675 million to buy EME’s 51.2% shareholding in Contact. Origin shares soared A34 cents to A$6.14, a record close, on the ASX yesterday while Contact shares initially slumped NZ22 cents but recovered to NZ$5.88, down NZ6 cents on Tuesday’s close.
Commentators in New Zealand were pleased Origin had outbid Australia Gas Light Company for a controlling stake in Contact.
“AGL is pretty much a staid pipeline owner, albeit a huge company, while Origin can be pretty aggressive and is a much better fit for Contact, with their almost complementary power generation assets,” one told EnergyReview.Net today.
“I wonder, though, what impact the Origin buy might have on Contact’s exploration activities, given that Origin is already active on both sides of the Tasman?”
However, another commentator said Origin might actually end up expanding Contact’s upstream team, utilising existing experience and skills, and essentially running it as a kiwi EP branch office.
Last March Contact announced an NZ$80 million drilling fund, in conjunction with Mighty River Power, to accelerate gas exploration in this country; while last month it won an offshore exploration permit PEP 38493.
King told a media conference in Sydney yesterday that he expected further power price hikes in New Zealand as this country moved into the end of the Maui era. Increases had averaged about 10% per annum for the past three years and he expected similar rises for the next year or so.
