Origin Energy Limited · ASX:ORG
Origin Energy — Merger or Acquisition (February 2006)
33 slides from Origin Energy's merger presentation, Feb 20, 2006
Slide 1: Creating Australasia's largest integrated energy company
Creating Australasia’s largest integrated energy company Kevin McCann Chairman, Origin Energy Phil Pryke Chairman of Independent Directors, Contact Energy Grant King Managing Director, Origin Energy 20 February 2006
Slide 2: Kevin McCann – Chairman, Origin Energy Ltd
Kevin McCann – Chairman, Origin Energy Ltd 2
Slide 3: Origin Energy and Contact Energy have entered into a merger agreement
Origin Energy and Contact Energy have entered into a merger agreement • This will create a trans-Tasman integrated energy group with • 2.7 million customers • Interests in around 3,000 MW of gross installed generation • Extensive portfolio of oil & gas assets • Market capitalisation of over A$7 bill
Slide 4: Since listing on the ASX in February 2000 there have been many milestones
Since listing on the ASX in February 2000 there have been many milestones in the growth of Origin Energy… Quarantine Power station developed Acquired additional 5% (95MW) interest in BassGas Origin Energy has a project and 1% interest Acquired 50% interest in in Offshore Otway Basin Origin TSR: 289%
Slide 5: Since acquisition Origin has been pleased with its investment in Contact
Since acquisition Origin has been pleased with its investment in Contact • Contact’s business performance to date has been pleasing • It has added greater scale and diversity to Origin’s cash flows • It has provided appropriate returns to shareholders at the price paid 5
Slide 6: Combining the companies would create a leading energy business
In that time it has become clear that combining the companies would create a leading energy business……… • Produces and supplies energy to over 2.6 million electricity, natural gas and LPG customers throughout Australia, New Zealand and near Pacific region • Operates or holds interests in around 3,00
Slide 7: Combining the business will create additional value in three main areas
Combining the business will create additional value in three main areas………… • It eliminates conflicts at a strategic and operational level that arise under the current ownership structure; • The ability to manage its financial position on a unified basis; • The ability to better manage the strategic
Slide 8: Significant portfolio of growth opportunities across Australia and New Zealand
The combined business will have a significant portfolio of growth opportunities across Australia and New Zealand……….. • development of Origin’s gas reserves and exploration for gas and oil • help resolve fuel constraints in New Zealand • development of major generation projects in Australia and New
Slide 9: Origin considered alternative options for a combination
Origin considered alternative options for a combination of the two companies………. • cash takeover offer is not viable – Tried but unsuccessful on previous occasions • a scrip offer is even less attractive – New Zealand investors would lose access to primary listing on NZX, access to imputed dividends
Slide 10: As the 51.4% stakeholder in Contact, find a way to combine the companies
As the 51.4% stakeholder in Contact it was appropriate for us to find a way to combine the companies A merger by way of a DLC provides: • All the benefits of merging the organisations • Preserves the listing of Contact on the NZX and Origin on the ASX and retains the involvement of over 200,000 shar
Slide 11: Phil Pryke: Chairman, Independent Directors Committee, Contact Energy
Phil Pryke: Chairman, Independent Directors Committee Contact Energy Limited 11
Slide 12: Contact Energy was floated on the NZX in May 1999
Contact Energy was floated on the NZX in May 1999 and has developed a dynamic, integrated energy business… Contact TSR: 182% Contact Energy’s Awarded first integrated energy exploration permit business model has Acquired Taranaki delivered strong Consolidates energy Combined Cycle Confirms supply ag
Slide 13: Common strategic interest and alignment of skills
Since Origin’s acquisition of this interest it has been clear that there is a common strategic interest and alignment of skills • Origin and Contact are pursuing similar strategies of building an integrated energy business across fuel, generation and retail segments • Many issues faced by the compan
Slide 14: Combining the business will create additional value
Combining the business will create additional value • A business combination could bring together two very successful high performing Australasian companies that are complementary • Origin has exploration skills and interests Contact does not have while Contact is particularly strong in generation -
Slide 15: DLC merger will bring many benefits to Contact Energy shareholders
The independent directors believe that the DLC merger will bring many benefits to shareholders of Contact Energy…. • They will have the advantage of holding shares in the merged business through a New Zealand listed company thereby retaining primary listing on the NZX and access to dividend imputati
Slide 16: Origin approached Contact with the proposal to merge by DLC
Origin approached Contact with the proposal to merge by way of a dual-listed company structure…… • Independent Directors Committee (IDC) established consisting of Phil Pryke – Chairman, Tim Saunders, John Milne • Advisors engaged to assess the proposal, detailed financial modeling undertaken to dete
Slide 17: Grant King, Managing Director, Origin Energy Limited
Grant King Managing Director, Origin Energy Limited 17
Slide 18: Origin and Contact have agreed to merge as ContactOrigin
…Origin and Contact have agreed to merge by way of a dual- listed company structure named ContactOrigin • A$7 billion combined market capitalisation • Over A$1 billion EBITDA per annum • A$8.8 billion assets • A$5.5 billion sales • 2.6 million customers in Australia, New Zealand and Pacific • Intere
Slide 19: The merged business will create additional value in three main areas
The merged business will create additional value in three main areas………… • Elimination of conflicts at a strategic and operational level that arise under the current ownership structure; • Managing its financial position on a unified basis; • Better managing the strategic challenges that Contact Ene
Slide 20: A merged business will eliminate conflicts at a strategic and operational level
A merged business will eliminate conflicts at a strategic and operational level • The merged business will pursue its strategy unfettered by conflicts of interest – Aligns Origin and Contact’s interests in pursuing growth opportunities in New Zealand by combining Contact’s and Origin’s New Zealand a
Slide 21: The merger increases business scale and improves access to equity capital
The merger increases business scale and improves access to equity capital via shareholders in two markets… Increased market capitalisation Increased scale & financial flexibility Increases financial flexibility via greater 10 60% liquidity in equity Increased scale and markets 9 AGL Infra improved f
Slide 22: Operational and geographical diversity reduces financial risk
…while the increased operational and geographical diversity reduces financial risk. Origin Contact Contact Origin Networks Retail Networks Upstream 5% Upstream 15% 4% 19% 25% + = Generation Generation Business mix 32% 45% Retail 32% Retail Generation 38% 85% + = New New Australia Australia Geography
Slide 23: More options for growth and managing Contact's fuel challenges
The merger provides more options for growth and alternatives to better manage Contact’s future fuel challenges • Contact’s growth relies primarily on new thermal generation Carnarvon Basin • Contact has a limited timeframe to identify Cooper Basin Perth Basin Bowen/ Brisbane whether more gas will be
Slide 24: Description of the DLC
Description of the DLC • A DLC is a merger achieved by contract DLC structure – Creates a single economic group in which Origin and Contact shareholders have an identical economic interest • The economic interests of each group of Equalisation 1:1 Contact Origin shareholders is fixed by the merger r
Slide 25: On implementing the DLC
On implementing the DLC…. • No shareholder will have to sell or exchange their shares. • The companies will each retain their current stock exchange listing – Origin Energy will remain listed on the ASX with ticker ORG – Contact Energy will remain listed on the NZX with ticker CEN • Each share in Or
Slide 26: The merger ratio
The merger ratio • The merger ratio is determined by the relative economic value brought to the DLC by each company • The merger ratio has been agreed between the companies on the basis of the market capitalisation of the two entities over the last nine months as determined by the 9 month volume wei
Slide 27: Benefits to Contact Shareholders
Benefits to Contact Shareholders • Contact shareholders will benefit immediately from a special dividend which will be paid by way of taxable bonus share of 7.3 shares per 100 existing shares and a dividend of NZ 5 cents per share. • Contact Directors expect to declare a final dividend for current f
Slide 28: Benefits to Origin shareholders
Benefits to Origin shareholders • Origin Energy shareholders will receive a bonus issue of 18.3 shares per 100 shares currently held to give effect to the equalisation ratio • Origin shareholders will benefit from the DLC having improved cashflows while maintaining gearing on an enlarged capital bas
Slide 29: The ContactOrigin merger is focused on creating additional value
The ContactOrigin merger is focused on creating additional value…… • No immediate impact on operating activities of either business • Merged group should expand job opportunities for employees • Sydney and Wellington offices will remain • Origin and Contact brands to be retained • Business as usual
Slide 30: Implementation steps
Implementation steps • No action is required immediately by shareholders in either country • Shareholders will be sent explanation letters in the next week • After due approval processes have been followed shareholders in each company will be sent a detailed Explanatory Memorandum (expected to be se
Slide 31: What will the merged business look like
What will the merged business look like • Origin Energy currently consolidates Contact Energy within its accounts. • As a guide to shareholders, Origin Energy’s financial statements prior to the elimination of minorities serve as a useful starting point for the financial position of ContactOrigin. T
Slide 32: The DLC provides a unique opportunity for shareholders of both companies
The DLC provides a unique opportunity for the shareholders of both companies to benefit from the increased value arising from combining the businesses • Will create Australasia’s largest integrated energy group with a market capitalisation of A$7 billion and more than 200,000 shareholders across Aus
Slide 33: Disclaimer
Disclaimer Any forward looking information in this presentation has been prepared on the basis of a number of assumptions which may prove to be incorrect and these statements speak only as of the date of the announcement. This presentation should not be relied upon as a recommendation to buy or sell
Origin Energy — Merger or Acquisition (February 2006) on 6ix