Frank Calabria has had a brilliant start to his tenure as chief executive of Origin Energy but the true measure of his performance will be determined by how he deals with the APLNG asset in Gladstone, writes The AFR's Chanticleer columnist Tony Boyd.
He continues:
Since Calabria was named as CEO to replace Grant King on September 1, the oil price has risen 20 per cent and the Origin share price has jumped upwards by 30 per cent.
In a cyclical business like oil and gas it helps to have the key commodity price moving in your favour and Calabria has that in spades.
He now has the chance to end the serial underperformance of Origin. It has failed to beat the performance of the S&P ASX 200 and S&P ASX 200 Energy indices over 1 years, 2 years, 3 years, 5 years and 10 years.
Investing in oil and gas has always been about making a call on the oil price but the boards of several leading companies including Origin and Santos lost sight of that during the heady days when oil was selling for $US100 a barrel.
There was an assumption that the good times would continue forever and that led to some high risk decision making. Both Origin and Santos stretched their balance sheets beyond prudence in order to complete their respective LNG export projects in Gladstone.
In the case of Origin, it ended up with a 37.5 per cent stake in the APLNG project in partnership with ConocoPhilips and Sinopec. This is a world class project with 16,174PJ of 3P reserves. It is exceeding expectations with the second LNG train proceeding ahead of schedule.
But APLNG's cash cost breakeven estimate is a relatively high $US42 a barrel of oil equivalent because of project finance interest and principal repayment costs of about $US15 a barrel.
The bottom line is that Origin has too much debt because of its expansion into an area that was not its core business. The excessive debt has prompted analysts to apply a discount to their valuations for the company.
That is a big incentive for Calabria to cut the debt load as quickly as possible.
Here's the RBA governor's statement on why it kept rates on hold:
At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.
The global economy is continuing to grow, at a lower than average pace. Labour market conditions in the advanced economies have improved over the past year. Economic conditions in China have steadied, supported by growth in infrastructure and property construction, although medium-term risks to growth remain. Inflation remains below most central banks' targets, although headline inflation rates have increased recently. Globally, the outlook for inflation is more balanced than it has been for some time.
Commodity prices have risen over the course of this year, reflecting both stronger demand and cut-backs in supply in some countries. The higher commodity prices have supported a rise in Australia's terms of trade, although they remain much lower than they have been in recent years. The higher prices are providing a boost to national income.
Financial markets are functioning effectively. Government bond yields have risen further with the adjustment having been orderly. Funding costs for some borrowers have also risen, but remain low. Globally, monetary policy remains remarkably accommodative.
In Australia, the economy is continuing its transition following the mining investment boom. Some slowing in the year-ended growth rate is likely, before it picks up again. Further increases in exports of resources are expected as completed projects come on line. The outlook for business investment remains subdued, although measures of business sentiment remain above average.
Labour market indicators continue to be somewhat mixed. The unemployment rate has declined this year, although some measures of labour underutilisation are little changed. There continues to be considerable variation in employment outcomes across the country. Part-time employment has been growing strongly, but employment growth overall has slowed. The forward-looking indicators point to continued expansion in employment in the near term.
Inflation remains quite low. The continuing subdued growth in labour costs means that inflation is expected to remain low for some time, before returning to more normal levels.
Low interest rates have been supporting domestic demand and the lower exchange rate since 2013 has been helping the traded sector. Financial institutions are in a position to lend for worthwhile purposes. These factors are assisting the economy to make the necessary adjustments, though an appreciating exchange rate could complicate this.
Conditions in the housing market have strengthened overall, although they vary considerably around the country. In some markets, prices are rising briskly, while in others they are declining. Housing credit has picked up a little, although turnover of established dwellings is lower than it was a year ago. Supervisory measures have strengthened lending standards and some lenders are taking a more cautious attitude to lending in certain segments. Considerable supply of apartments is scheduled to come on stream over the next couple of years, particularly in the eastern capital cities. Growth in rents is the slowest for some decades.
Taking account of the available information, and having eased monetary policy earlier in the year, the Board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.
The Reserve Bank has kept its cash rate on hold in the lead-up to Christmas, amid simmering concerns over sliding business investment and a likely collapse in economic growth to keep the rate at 1.5 per cent.
This is enough to keep standard variable home loan rates near 5 per cent and discounted home loan rates near 4.15 per cent.
Official growth figures will be released on Wednesday. Market economists are expecting the data to show the economy either barely grew in the September quarter or went backwards.
"If the economy did go backwards, it will serve as a wake-up call for Australia's politicians," Commonwealth Securities economist Craig James said.
"The message from consumers and businesses is that the major parties need to flesh out reforms, especially on taxation, that will give Australians confidence to spend, invest and employ."
Keeping interest rates on hold until the next RBA board meeting in February will allow the board to react to two months of developments, including a December US Federal Reserve board meeting considered certain to tighten US rates, the inauguration of US president-elect Donald Trump, and an update on Australia's ultra-low inflation rate of 1.3 per cent.
CoreLogic head of research Tim Lawless said building the case for a cut were sluggish inflation, the likelihood of a low or even negative GDP reading, record low wage growth of 1.9 per cent in the year to September and the loss of about 50,000 full-time jobs in the year to October.
The case against includes a rebound in housing markets and housing investor activity, a surge in commodity prices, and potentially a lower Australian dollar as the US prepares to lift rates.
Futures market pricing has an interest rate cut remaining more likely than an increase until November 2017, when an increase becomes much more likely, becoming a near-certainty by mid-2018.
Treasurer Scott Morrison will release updated economic forecasts in the mid-year budget review on December 19.
The Aussie dollar is slightly lower immediately following the announcement at 74.5 US cents.
As mentioned oh-so briefly below, BHP Billiton has won a historic bid to partner with Mexican state oil company Pemex in a joint venture to develop a potentially lucrative deep water field in the country's untapped Gulf waters.
The local unit of BHP secured the rights to tie-up with Pemex on its Trion light oil field, less than 80 km from the US-Mexico maritime border.
BHP outbid Britain's BP, the only other company that participated. BHP offered an upfront payment of $US62.4 million and pledged to conduct a "minimum work program" worth about $US320 million.
That spend is expected to cover a couple of years of seismic work and a small number of exploratory wells.
If the partners agree to progress beyond the minimum work program, BHP would have to make a further appraisal payment of $US250 million and subsidise Pemex's development costs to the tune of $US624 million.
There is also a 4 per cent royalty payable, meaning the total agreement is worth about $US1.2 billion if the partners agree to push beyond the minimum appraisal work.
BHP's petroleum president Steve Pastor indicated the play would require more assessment before a decision over development was made.
"We see attractive potential in Trion and the Perdido trend, and we are pleased to have the opportunity to further appraise and potentially develop this prospective frontier area of the deep-water Gulf of Mexico," he said.
Brace for the first quarter of negative economic growth in five years, and only the fourth in Australia's enviable run of 100 quarters without a recession (ie two consecutive quarters of contraction).
Today's components of the GDP calculations - government spending and net exports - both disappointed on the low side and are expected to shave a combined 0.3 percentage points off third-quarter GDP, which is due to be released tomorrow.
The soft data has prompted economists to lower their already bearish forecasts for tomorrow's key figure. Most experts had been predicting the economy grew by a paltry 0.2 per cent over the quarter, following 0.5 per cent growth in the previous three months.
Now, several economists have followed NAB, Morgan Stanley and Nomura in tipping a contraction, with others suggesting there will be zero growth.
Today's data virtually cements a negative quarterly print tomorrow, said UBS economist Scott Haslem.
"Notwithstanding a healthy rise in the income side of the accounts from the terms of trade and better wage income, the surprisingly co-ordinated weakness across public capex, private capex and resource export volumes in the third quarter likely presents too great a headwind for as yet unknown household consumption in Q3," he said.
UBS has revised its forecast from +0.2 per cent to -0.2 per cent, suggesting the annual pace of growth will slow sharply from its above trend 3.3 per cent in the last quarter to just 2.1 per cent in Q3.
If the economy did go backwards it will serve as a wake-up call for Canberra, said CommSec chief economist Craig James, who is predicting a 0.1 per cent rise.
"The message from consumers and businesses is that the major parties need to flesh-out reforms, especially on taxation, that will give Australians confidence to spend, invest and employ."
The Reserve Bank is unlikely to be too fazed by today's numbers and is seen as a sure bet to leave rates on hold when it announces today's decision at 2.30pm.
And indeed, most economists reckon the third-quarter slump will be a bit of an aberration, coming after two quarters of surprisingly strong growth and before the latest mini-rally in commodity prices works its magic in the national accounts.
"While the slowdown in growth looks likely to come as a surprise to the RBA, whose forecasts imply (annual) growth of around 3 per cent, we continue to expect the RBA to keep the cash rate on hold with an easing bias," said ANZ head of Australian economics Felicity Emmett.
"Firstly, the soft patch looks likely to be temporary with recent retail sales strength suggesting that household spending accelerated into Q4. And secondly, the bank seems firmly focused on wage growth and inflation, and on this front the average wages number in the GDP report looks likely to show some modest improvement."
Adani has promised not to use 457 visas at its $21.7 billion Carmichael Mine in central Queensland.
Premier Annastacia Palaszczuk made the announcement in Townsville today after meeting with Gautam Adani about the project, which is expected to generate some 10,000 jobs.
The Premier and Mr Adani also confirmed the headquarters of the controversial mine would be in Townsville.
Contract miner CIMIC is up 2 per cent after Allan Gray, which is a substantial shareholder UGL, "reluctantly" accepted CIMIC's takeover offer of $525 million for rival UGL.
Allan Gray managing director Simon Mawhinney, who owns 19 per cent of UGL, said he was "disappointed" by the board's "short term" approach to CIMIC's offer of $3.15 per share in cash.
"Shareholders are often blamed by boards and management teams for short-term thinking," Mawhinney said. "In this instance the shoe is on the other foot; in UGL, we have a company with excellent long-term value sold at what we consider to be a significant discount."
Four directors on UGL's five-member board, including chairman Kate Spargo and chief executive Ross Taylor, initially recommended investors accept CIMIC's offer after independent expert Grant Samuel found it "fair and reasonable" and valued the contractor between $3.11 and $3.94 a share.
Allan Gray would have been left as a minority shareholder in UGL if it did not accept the offer, with CIMIC having gained 61 per cent of the contractor by Monday.
Allan Gray's acceptance will push CIMIC over 75 per cent, allowing it to extend the bid a further two weeks beyond Friday's deadline. Once CIMIC has 90 per cent of the company, it can compulsorily buy the remaining shares and de-list the company.
UGL shares are up 0.2 per cent at $3.155.
Metals futures in China are continuing to soar, with Dalian iron ore up another 3.5 per cent at 657.5 yuan ($US88), helping fuel gains in local mining stocks.
The rise in the iron ore futures looks set to push the spot price back above $US80 a tonne later tonight, after it was set at $US78.62 last night, up 1.1 per cent.
Zinc futures in Shanghai have jumped more than 4 per cent.
The steep rise in the futures is buoying local miners, with BHP up 2.3 per cent, Rio adding 2.2 per cent, Souoth32 rallying 3.5 per cent and Fortescue up 2.1 per cent.
BHP, which also has significant oil interests, also got a lift from winning a bid to partner with Mexican state oil company Pemex in a joint venture to develop a potentially lucrative deep water field in the country's untapped Gulf waters.
Shake-up at Surfstitch: co-founders Lex Pedersen and Justin Stone and two non-executive directors will step down from the board in a move aimed at pacifying angry shareholders who have blamed directors for approving a series of overpriced acquisitions.
Pedersen, who co-founded Surfstitch almost ten years ago with former chief executive Justin Cameron, and Stone, who founded Surfstitch's UK-based Surfdome business, will step down at the end of December to focus on their executive roles.
Former David Jones finance director Stephen Goddard and Jane Huxley, the managing director of internet radio service Pandora, will also retire at the end of this month.
Surfstitch's new chairman, veteran retailer Sam Weiss, has appointed Harry Hodge, the founder and former chairman of Quiksilver Europe and former executive director of Quiksilver as a non-executive director, effective immediately.
Surfstitch shares are flat at 16 cents. Surfstitch was the worst performer on the market last year, losing $500 million in market value as its shares fell from a high of $2.09.
The current account deficit was $11.3 billion in the September quarter, down sharply from $15.9 billion in the previous quarter, but net exports will still subtract 0.2 percentage points from GDP or more than expected.
That's because the surplus on goods and services fell by $871 million, which had a negative impact on growth in the September quarter.
Forecasts centred on a deficit of $13.5 billion, and net exports to have zero effect on third-quarter growth.
Australia's terms of trade on goods and services rose 4.5 per cent in the quarter, fuelling nominal growth. The terms of trade are the prices of exports relative to the prices of imports.
So are we going to focus on 3rd highest terms of trade rise on record or possibility of negative Q/Q GDP in Q3? #ausbiz #RBA
— Sophia Rodrigues (@srodrigues45) December 6, 2016
And in the last piece of the GDP puzzle, government spending for consumption dipped 0.2 per cent in the third quarter to an inflation-adjusted $77.64 billion.
Investment spending by the government and public enterprises fell 10.4 per cent to $18.8 billion, implying total spending was likely a small drag on economic growth.
We'll soon get some economist estimates on what today's data mean for tomorrow's third-quarter GDP numbers, but at first glance it's unlikely to lift the already soggy estimates.
Economists have been predicting just 0.2 per cent growth in the September quarter, down from 0.5 per cent in the previous three months, but some analysts are tipping we'll get the first quarter of negative growth in four years.
Origin shares are hanging onto their gains after the company announced it plans to spin off its oil and gas assets via an IPO, helping it cut debt
Origin said the move is a "strategic decision" so it can focus on its retail and unconventional gas businesses, a reversal from September when the company said such a spin-off was not under consideration.
The company will retain its $25.9 billion LNG venture in Queensland and its retail energy business, while the new vehicle will include assets in Australia
and New Zealand.
Origin hasn't put a value on the assets to be sold. But JPMorgan analyst Mark Busuttil estimated they are worth $1.8 billion, while adding that on the multiple that Beach Energy trades on the value could reach $3.7 billion.
"We ... note that in the current tight gas market environment they could look more attractive as a standalone entity," Busuttil said.
The spin-off, which does not require Origin shareholder approval, is targeted for 2017.
RBC analyst Ben Wilson Strong would like more details on the timing and the quantity of debt to be attached to the new listed entity but said the plans made sense.
"We think the timing of the announcement is likely related to the bump in oil prices following the OPEC decision last week," he said in a note to clients.
"We think it is also reasonable to believe that the decision to list the E&P business is perhaps related to an inability to sell the Perth Basin and Cooper Basin assets on an individual basis."
Wilson estimated the new business would have an enterprise value, which includes debt, of $1.6 billion to $1.8 billion.
Origin shares are up 3.7 per cent at $6.66.
The housing boom, low interest rates, a currency that is just right, and strong employment figures have buoyed retailers this year. Now they are feeling more upbeat ahead of Christmas than they have in years.
More than 90 per cent of retailers expect consumer confidence to hold steady or increase next year, a survey has found, and almost two-thirds expect their earnings to increase by at least 5 per cent.
And more than 70 per cent plan to increase their store footprint this financial year in the face of greater competition from foreign invaders, according to the survey by accounting firm Deloitte of 52 executives from retailers big and small.
As revealed by Fairfax Media, Amazon and Germany's Kaufland hypermarket are among retailers eyeing off Australia.
"We've done this [Deloitte Retailers' Christmas Survey] for five years and it's probably the most optimistic that we've seen," said David White, national leader, retail, wholesale & distribution group.
It comes as ANZ weekly consumer confidence jumped 2.8 per cent to a 10-week high, boding well for the Christmas shopping period.
"Importantly, households' views of their current finances are particularly upbeat – with the index well above its long-run average," said ANZ economist Giulia Lavinia Specchia.
"This indicator tends to correlate well with consumer spending, suggesting that the outlook for consumer spending remains positive despite the recent lull."
For any currency traders out there getting excited about a rumoured massive 10 per cent devaluation in the yuan - it seems to be just that, a rumour.
Foreign Policy is reporting that Beijing has devalued the currency and the XE.com website is showing the move on its charts, but there's nothing to be seen on Bloomberg, and other traders are sceptical.
It's circulating China has devalued the yuan 10% tonight. Not sure if this is BS or not yet. Careful!!!
— Steve Collins (@TradeDesk_Steve) December 5, 2016
While Beijing still considers the yuan overvalued, a devaluation of that scale would no doubt rock financial markets - just remember what last year's much smaller official depreciation did.
A move of that size is also likely to spark the ire of Donald Trump, who just yesterday used a Tweet to once again accuse China of currency manipulation.
We'll keep you updated.
I'm gonna repeat this - USD/yuan is NOT anywhere near 7.4 https://t.co/AaD1GCKTWB #forex, #forextrading
— John Hall (@ForExtraReview) December 5, 2016
An age-old debate was re-ignited last week, when the Organisation for Economic Cooperation and Development called for higher interest rates to rein in Australia's resurgent housing market.
Should central banks actively "lean" on asset bubbles by raising the cost of credit, or ignore asset prices and focus purely on hitting their inflation targets?
Today's combination of debt-fuelled rises in asset prices and low inflation means this question is as relevant as ever.
A new book on perhaps the best-known central banker in history, former US Federal Reserve chairman Alan Greenspan, makes a compelling case for central bankers being leaners.
Sebastian Mallaby's biography of Greenspan, The Man Who Knew, challenges the conventional view that the US Fed chairman was effectively asleep at the wheel in the build-up to the global financial crisis.
Based on five years of research and extensive access to Greenspan, it provides new evidence the Fed chairman who presided over the sub-prime lending spree was indeed aware of the big risks posed by bubbles.
In an interview with BusinessDay, Mallaby said this awareness was evident in documents released under Freedom of Information laws, which reveal Greenspan and other Fed officials talking about the need for tougher regulation of sub-prime lending.
Yet as we all know, he didn't prevent the poor lending that led to the sub-prime crisis, one of the biggest bubbles ever.
"Greenspan didn't believe in efficient markets, he understood that finance was dangerous, he wasn't naive about it at all. He was the man who knew, but he was not the man who acted," Mallaby says.
Why then, did Greenspan fail to act more decisively? And what lessons does this experience hold for central banks today?
"I think that if you accept my argument that the Fed tried a bit to regulate the extremes of the risk, but politics got in the way ... then it seems to me that when an asset bubble is inflating then you probably ought to use a different tool to fight it, and that would be interest rates," he says.
Shares follow the overnight trend and rebound smartly after yesterday's losses, with miners doing nicely again while bond proxies sell off.
The ASX 200 is up 40 points or 0.7 per cent to 5440. BHP has climbed 2.8 per cent, Rio 2.3 per cent and Fortescue 2.2 per cent as the mining rally extends towards Christmas and strategists get more comfortable that 2017 won't bring about a swift reversal.
The big banks are reversing yesterday's selling, CBA, NAB amd Westpac up by around 1 per cent and ANZ 1.6 per cent.
Origin Energy is up 3.3 per cent after announcing the spin-off of some of its assets into a separate listed entity.
It's looking a bit like a return of the Trumpflation trade, with bond proxies such Transurban and Sydney Airport dropping along with gold miners, even though bond prices didn't move much overnight. Utilities are down, perhaps retreating a little following the bid for DUET Group, which is off 1.1 per cent. QBE - a winner from higher yields - is up 1.3 per cent.
Blue-chip names such as Wesfarmers, Woolies and CSL are all lower.
JP Morgan has upped its price forecasts for coal, iron ore and copper, although it's adopted a more cautious stance on gold.
Iron ore should average $US60/tonne in 2017, the JP Morgan team said, lower than the closer to $US80 price now, but 11 per cent higher than the bank's previous forecasts. That led them to upgrade Alumina and Whitehaven Coal to overweight, while they like Rio and Fortescue more than BHP.
"We continue to prefer Rio over BHP, based on more attractive valuation metrics, and higher chance of capital management," the JP Morgan analysts write. "Fortescue is still a key pick given its strong free-cash-flow yield will start to migrate its way to a dividend yield as it hits its US$3bn net debt target in the next year."
"Newcrest Mining is our least preferred on stretched valuation and likely gold sector derating," they say. "For investors seeking gold exposure we recommend Regis Resources given solid FCF yield, and organic growth.
Meanwhile, Citigroup has given a clarion call for commodity bulls, predicting that most raw materials are expected to perform strongly next year as global economic growth picks up, the oversupply that's dogged markets finally dissipates and investors plow in more funds.
Citi is bullish on oil, copper, zinc, and wheat on a six to 12-month horizon, with global growth seen at 2.7 per cent from 2.5 per cent in 2016, according to an emailed report. But it's bearish on coal and iron ore - describing this year's out-performance in bulks as a fluke - and gold and soybeans.
Commodities have made a comeback this year after sinking to a quarter-century low in January as the oil market shows signs of rebalancing after a glut, and base metals rally on prospects for rising demand. Citigroup has flagged its optimism about raw materials in 2017 since at least July, and other banks have also turned more positive. Last month, Goldman Sachs recommended an overweight position for the first time in four years.
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Italy's vote was another hard lesson for markets, writes IG strategist Chris Weston:
The Italian referendum has added to the schooling that market participants have had to endure this year around what's expected, what's priced in and the sheer reality of what actually happens in price action around events. Perhaps the magnitude of the loss for Matteo Renzi's initiative was the biggest factor here, but still the President of Italy has urged him to push back his resignation and we still await details of the make-up of a new government.
Fear not though, as markets have done another huge about turn, with EUR/USD trading to $1.0506 before hitting a high of $1.0796 in US trade. We even had a super strong US services ISM data release (the index printed 57.2) and the USD still found no love, with the broader USD index falling 0.7%. Emerging markets will naturally like this.
EUR/JPY had an even more impressive 3.2% rally from the low point and despite the Italian banks rather predictably finding sellers, the Italian MIB sharemarket index closed down just 0.2%.
There was no real stress in the bond market either with the premium demanded to hold Italian debt over German bunds (10-year paper) increasing a mere three basis points, but of course everyone is saying 'don't worry Mario has got this', in reference to Thursdays' ECB meeting.
AUD/USD will remain in focus today, with the Q3 balance of payments at 11:30 (AEDT) enlightening economists with the contribution net exports provide to the Q3 GDP calculation. As things stand the consensus is that net exports will provide no contribution at all, and thus we will see fairly lacklustre growth on the quarter of around 0.2%, when we hear the Q3 GDP tomorrow.
The RBA also meet later in the session at 14:30 (AEDT), but markets are just perfectly neutral on potential monetary policy changes over the coming 12 months, that there really seems little the RBA can say to spur any real volatility today.
Local shares are set to rebound strongly as investors correct yesterday's knee-jerk reaction to the outcome of the Italian referendum, which European markets seem to have taken in their stride.
Here are the main overnight movements:
- SPI futures up 51 points or 0.9% to 5448
- AUD +0.1% to 74.70 US cents
- Euro jumps 1% to $US1.0762
- On Wall St, Dow +0.2%, S&P 500 +0.6%, Nasdaq +1%
- In New York, BHP +1.9%, Rio +1.2%
- In Europe, Stoxx 50 +1.3%, FTSE +0.2%, CAC +1%, DAX 1.6%
- Spot gold -0.3% to $US1173.65 an ounce
- Brent crude +0.9% to $US54.95 a barrel
- Iron ore up 83 cents to $US78.62 a tonne
- Coking coal -1% at $US285, thermal coal -0.7% at $US86.8
- Comex copper +2.7%
- 10-year bond yield: US 2.37%, Germany 0.33%, Italy 1.98%, Australia 2.79%
Origin Energy has opted for a full sale of its conventional oil and gas assets to focus on its energy markets and LNG business in a scaled-back version of the demerger that has long been desired by many investors.
Origin intends to float its upstream oil and gas business and list it on the ASX next year to accelerate debt reduction and reduce spending requirements, the company said this morning.
But in a move that may concern some investors keen to see a lower-risk Origin, the $25 billion Queensland LNG project and the coal seam gas business that feeds it will be retained within the main company.
The sale is a major move by new chief executive Frank Calabria, who only took over from long-standing predecessor Grant King in October.
"The day I was appointed I said the focus would be on accelerating debt reduction," he said.
Mr Calabria said Origin's board had considered many options and decided that an IPO of the oil and gas business was the best.
"We just think that's where the most value is created," Mr Calabria told The Australian Financial Review.
The spin-off, which does not require Origin shareholder approval, is targeted for 2017. The business will include Origin's gas projects in the Otway, Cooper, Bass and Bonaparte Basins in Australia, as well as the Perth Basin interests, which will now not be sold, Origin said. It will also include the New Zealand interests in the Kupe gas project and in the Canterbury basin.
Macquarie Capital and UBS are advising Origin on the proposed IPO. Origin won't keep a stake in the spun-off company, dubbed NewCo, with the proceeds mainly going on reducing debt.
Chairman Gordon Cairns said the sale would allow Origin to focus on its energy markets business and the "simplified" integrated gas business.
"The decision to divest is consistent with Origin's strategy to focus the business, reduce debt and improve returns for shareholders," Mr Cairns said.
"Given Origin's ability to invest capital in NewCo assets is constrained, their long-term value will be better supported by them being an independent business."
Looks like yesterday's selling in Asian markets was a head fake after stocks in the US and Europe advanced and the euro jumped an impressive 3 US cents after initially crumbling to a 20-month low.
Political risk from Italy hasn't spread beyond its borders as markets were correctly positioned for the anti-establishment mood sweeping around the world. This was a departure from the Brexit referendum and Donald Trump's surprise election, when traders were caught out by populist votes. Additionally, US data bolstered confidence in the world's largest economy, sparking gains in industries that benefit from an acceleration in growth.
"After Brexit, it took three days for markets to shake it off, with Trump it took three hours, with Italy it took three minutes," said Guillermo Hernandez Sampere, head of trading at MPPM EK in Germany. "The outcome was not as much of a surprise as many expected it to be -- markets learned their lesson."
Renzi's resignation could open the door to an early election next year and the possibility of the anti-euro 5-Star Movement gaining power, though many investors and analysts see it as more likely that a caretaker government will be put in place until an election in 2018. The size of the "No" vote, at 59.1 per cent, was more emphatic than had been forecast.
"The market had a lot of time to prepare for a no vote ... there is nothing as yet imminently more negative than what the market had anticipated," said Shahab Jalinoos, global head of FX strategy at Credit Suisse in New York.
Expectations that the European Central Bank (ECB) will hint at reducing its bond purchase program when it meets this Thursday is also seen as adding to strength to the single currency.
"The imminence of the ECB meeting is another factor that has led to the recovery of the euro today," Jalinoos said.
The euro gained 1 per cent to $US1.0774, after earlier rising to $US1.0796, the highest since November 15. It briefly weakened to $US1.0503, the weakest since March 2015, in the immediate aftermath of the Italian vote.
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