Origin Energy Limited (Origin) says that following the significant recent depreciation of the Australian Dollar (AUD) against the United States Dollar (USD), an update regarding the AUD value of the expected payments by ConocoPhillips in relation to the transaction that was announced on 8 September 2008.

As previously announced, ConocoPhillips is to invest in a CSG to LNG Joint Venture by way of:

An up-front payment of USD 5.0 billion; Additional fixed contribution of AUD 1.15 billion to carry Origin’s share of costs to Final Investment Decision (FID) expected end 2010; and Additional payments of USD 500 million at the point that each of the four LNG trains is approved, to partly carry Origin’s share of costs. Origin has entered into currency hedging arrangements in respect of the USD 5 billion up-front payment to provide protection in the event that the Australian dollar appreciates above the exchange rate at the date of the initial announcement. The cost of implementing these hedging arrangements will be shared between Origin and ConocoPhillips upon completion of this transaction. Origin and ConocoPhillips will share the benefit of any depreciation in the value of the AUD between the date that the transaction was announced and the date that the transaction is completed.

The only outstanding condition on the transaction with ConocoPhillips is Foreign Investment Review Board (“FIRB”) approval. ConocoPhillips will make the up-front payment to Origin shortly after fulfilment of this condition and Origin will provide a further update of the actual AUD amount received at that time.

Following completion of the transaction, Origin will have no net interest bearing debt and a significant cash balance. This will result in an immediate and substantial increase in earnings for Origin from the interest benefit.

This strengthened financial position will enable Origin to fund both its future growth and undertake capital management initiatives for the benefit of shareholders.

Following completion of the transaction, Origin intends to undertake an AUD 1.5 billion capital management program:

An immediate payment of an additional dividend of 25 cents per share fully franked (AUD 225 million) to double the 2008 dividend, providing a new base for future dividends. Origin will now targetan increased dividend payout ratio of at least 60% of underlying earnings; and Commence an on-market buy-back of shares of up to AUD 1.275 billion.

Tags: ConocoPhillips, Origin Energy