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Origin Energy Ltd. (ORG), ConocoPhillips (COP)’s partner in an Australian liquefied natural gas project, may raise debt or sell A$1 billion ($1 billion) of shares to fund the development, Bank of America Corp. said.
The third option for Origin is selling a stake in the A$23 billion Australia Pacific LNG venture in Queensland state, Simon Chan, a Sydney-based analyst at the bank, wrote in a report yesterday. Origin has said it’s seeking to reduce its ownership of the project to 30 percent from 37.5 percent.
While meeting Origin’s shortfall with debt would probably lead to its credit rating being cut to BBB from BBB+, the option “has some merit,” according to the report. The equity market may not distinguish between the two ratings, and selling a stake in the venture may be difficult, Chan wrote.
“Origin has a strong balance sheet, with sufficient liquidity to fund its share of Australia Pacific LNG through to 2015, as well as meet the ongoing needs of Origin’s business,” Origin said in an e-mailed response to questions.
Origin has fallen 17 percent in Sydney this year, compared with an 11 percent gain for Australia’s S&P/ASX 200 Index. The shares rose 0.6 percent to A$11.06 at the close.
“Origin says the sale process won’t be complete until March next year, but we believe Origin’s share price reflects the market’s expectation that a sale will be tough,” Chan said.
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