Moody’s puts Origin Energy on downgrade review

Moody’s Investors Service said it placed Origin Energy Ltd.’s Baa2 issuer rating and P-2 short-term rating on review for downgrade following news that the company divested its entire 53% equity interest in Contact Energy Ltd.

Origin Energy Finance Ltd.’s senior unsecured ratings of Baa2 and preference stock ratings of Ba1 also were placed on downgrade review, Moody’s said.

Origin has entered into an underwriting agreement with Macquarie Capital (Australia) Ltd. to sell its entire 53.1% holding in Contact Energy at N$4.65 per share, the agency said.

The downgrade review reflects the negative impact of the divestment on Origin Energy’s credit profile, mainly because it will reduce the group’s revenue diversity without materially improving financial leverage, Moody’s said.

As Contact’s earnings are uncorrelated with the rest of the group and because it has lower financial leverage on a standalone basis, the divestment will further increase Origin’s existing exposure to oil price volatility, the agency added.

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