We saw very differing approaches to capital raisings this week from two of the country’s biggest energy utilities (both based in Sydney) – Origin (ORG) and AGL (AGK).
Instead of raising cash in the local market (from its shareholders), Origin is heading offshore to low cost euro markets for its money, while AGL is doing its raising at home.
Both companies had a similar experience selling electricity and gas to customers, having to battle soft markets and sluggish consumer demand.
Looking at Origin, it saw underlying earnings slip to $713 million in the year to June from $760 million a year earlier.
The result was under analyst estimates of $742 million
And, despite telling the market earlier in the year that it would be raising around $US800 million via a share sale to raise (to help finance the purchase of WA offshore gas assets in the Browse Basin). The company will now use a hybrid issue in the euro market to take advantage of ultra low interest costs.
Origin said yesterday that it will now focus on completing its Queensland export gas export project, holding the $24.7 billion capital cost for the project within its guidance, with first production slated for mid-next year.
Origin said fiscal 2015 "will be a transitional period" for it "with the commencement of LNG production in Queensland and in particular by Australia Pacific LNG in mid-2015".
"Increasing LNG production will result in expanding gas margins and an improving supply/demand balance in electricity markets.
"Origin’s energy markets businesses are maturing and operating in a consolidated, lower growth and more competitive environment. Investment in generation and retail systems is essentially complete," the company said.
And for shareholders can expect a return from the surge in cash as the Queensland export gas project comes on stream. Origin said it is targeting paying out 60% of underlying profit in dividends.
The company will pay an unchanged final of 25 cents a share, for a steady full year payout of 50 cents a share.
Origin shares closed up 4.1% at $14.78.
AGK vs ORG 1Y – Weak demand hits Origin, AGL, as both hunt for cash
A day earlier, AGL Energy launched a $1.232 billion capital raising to fund its $1.5 billion acquisition of NSW power producer Macquarie Generation after posted it reported a small fall in underlying profit for the year to June.
The company said the 3.9% dip in underlying profit to $562 million, came in "difficult" market conditions. AGL’s net profit for the full-year jumped 52% to $570 million, from $375 million.
Revenue for the year dipped 1.8% to $9.54 billion
The long warm autumn and early winter depressed customer demand for gas and electricity, as well as the weak wholesale power market and tough competition.
The capital raising will take the form of a one-for-five renounceable entitlement offer, with the shares being sold at $11 each, a 20.2% discount to the standard benchmark price.
AGL halted its shares from trading at $14.68 pending the capital raising.
Managing director Michael Fraser said in a statement the company was "delighted" it could finally proceed with the purchase of the giant NSW electricity producer from the NSW government.
"The takeover followed a hard-fought battle with the Australian Competition and Consumer Commission in the competition tribunal to win approval to complete the purchase," he said.
AGL said on Wednesday it expects MacGen to add $75 million to underlying net profit after tax this financial year.
AGL declared a final dividend of 33 cents a share, unchanged from last year. The interim was a steady 30 cents a share.
That makes a steady total payout for the year of 63 cents a share.
