IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

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Global Equity Research Ltd

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Event-Driven

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<li>
<a href="https://www.smartkarma.com/entities/origin-energy-ltd" target="_blank" data-smartkarma-citation="entities:797:1" rel="noopener">Origin Energy (ORG AU)</a> has disclosed a revised non-binding proposal from Brookfield/EIG. The headline price has been lowered by -1.1% from A$9.00 to A$8.90 per share.</li>
<li>Under the revised proposal, shareholders’ first 100,000 shares get A$8.90. Beyond that ownership, the offer is A$4.334 plus US$3.194 per share (currently worth A$8.99 per share). </li>
<li>While the recut introduces FX rate risk, the average implied value is A$9.01 since 10 November. Both the offeror and the Board seem keen to get a binding offer.</li>
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Origin Energy (ORG AU) has disclosed a revised non-binding proposal from Brookfield/EIG. The headline price has been lowered by -1.1% from A$9.00 to A$8.90 per share.
Under the revised proposal, shareholders’ first 100,000 shares get A$8.90. Beyond that ownership, the offer is A$4.334 plus US$3.194 per share (currently worth A$8.99 per share). 
While the recut introduces FX rate risk, the average implied value is A$9.01 since 10 November. Both the offeror and the Board seem keen to get a binding offer.


Origin Energy (ORG AU): Recut Deal Is a Win-Win

New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

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Thematic (Sector/Industry)

<ul><li>North Island generators to deliver the growth: We anticipate most generator/retailers will lift 1H23 EBITDAF earnings</li><li>Outlook commentary should be positive from GNE and MCY, less so from CEN</li><li>Key themes likely to be development pipelines, inflation, and NZAS</li></ul>

North Island generators to deliver the growth: We anticipate most generator/retailers will lift 1H23 EBITDAF earningsOutlook commentary should be positive from GNE and MCY, less so from CENKey themes likely to be development pipelines, inflation, and NZAS

Electricity Sector: NI Hydro Powers 1H23 Sector Earnings

Equity Bottom-Up

<ul><li>Genesis Energy (GNE) has benefitted from record 1H hydro generation, breaking 2TWh for the first time, such that we anticipate record 1H EBITDAF of NZ$312m</li><li>2Q23 was as good as 1Q23 from a hydro perspective and so the lack of a guidance upgrade is disappointing</li><li>The higher opex has also reduced our target price -5cps (-1.9%) to NZ$2.65</li></ul>

Genesis Energy (GNE) has benefitted from record 1H hydro generation, breaking 2TWh for the first time, such that we anticipate record 1H EBITDAF of NZ$312m2Q23 was as good as 1Q23 from a hydro perspective and so the lack of a guidance upgrade is disappointingThe higher opex has also reduced our target price -5cps (-1.9%) to NZ$2.65

Genesis Energy: Record Hydro Not Enough — 2Q23 Op Stats

<ul><li>December rounded out 2022 with another month of high renewable electricity generation (96%) and low wholesale electricity prices (Otahuhu [OTA] prices averaged just NZ$19/MWh) with North Island hydro generator’s Mercury (MCY) and Genesis Energy (GNE) having the best of the conditions</li><li>Looking ahead to 2023, we expect many of the themes that dominated 2022 to continue, with a key focus on new developments</li><li>We see share price risks to the downside, with the electricity sector’s defensive characteristics less beneficial during a market recovery</li></ul>

December rounded out 2022 with another month of high renewable electricity generation (96%) and low wholesale electricity prices (Otahuhu [OTA] prices averaged just NZ$19/MWh) with North Island hydro generator’s Mercury (MCY) and Genesis Energy (GNE) having the best of the conditionsLooking ahead to 2023, we expect many of the themes that dominated 2022 to continue, with a key focus on new developmentsWe see share price risks to the downside, with the electricity sector’s defensive characteristics less beneficial during a market recovery

Power Points: Looking Ahead to 2023 — January 2023

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<a href="https://www.smartkarma.com/entities/origin-energy-ltd" target="_blank" data-smartkarma-citation="entities:797:1" rel="noopener">Origin Energy (ORG AU)</a>’s exclusivity agreement with Brookfield/EIG expired on 24 January. Brookfield/EIG is reportedly continuing its due diligence on its A$9.00 per share offer.</li>
<li>Time often kills deals. There is speculation that recent price caps would result in Brookfield/EIG walking away or trying to recut the deal terms. ACCC approval is also an overhang.</li>
<li>Peers' share prices have risen despite the price cap which weakens the case for a recut to the deal terms. Brookfield/EIG clearly want Origin as it twice bid against itself. </li>
</ul>



Origin Energy (ORG AU)’s exclusivity agreement with Brookfield/EIG expired on 24 January. Brookfield/EIG is reportedly continuing its due diligence on its A$9.00 per share offer.
Time often kills deals. There is speculation that recent price caps would result in Brookfield/EIG walking away or trying to recut the deal terms. ACCC approval is also an overhang.
Peers' share prices have risen despite the price cap which weakens the case for a recut to the deal terms. Brookfield/EIG clearly want Origin as it twice bid against itself. 


Origin Energy (ORG AU): Risk/Reward Profile

New Zealand

Genesis Energy Ltd. generates, transports, and retails electricity. The Company owns and operates hydroelectric generating stations to produce electricity, as well as explores natural gas and bottled liquefied petroleum gas.

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Genesis Energy (GNE NZ)

Origin Energy (ORG AU): Recut Deal Is a Win-Win

The revised terms imply a modest deal cut and acceptable FX rate risk. Expect a binding offer soon. Regulatory risks will be the key overhang.

Arun George

Electricity Sector: NI Hydro Powers 1H23 Sector Earnings

1H23 is all about record North Island hydro generation, powering both Genesis Energy (GNE) and Mercury (MCY) to record half year results; Combined,...

Forsyth Barr

Genesis Energy: Record Hydro Not Enough — 2Q23 Op Stats

Genesis Energy (GNE) has benefitted from record 1H hydro generation, breaking 2TWh for the first time, such that we anticipate record 1H EBITDAF of...

Forsyth Barr

Power Points: Looking Ahead to 2023 — January 2023

December rounded out 2022 with another month of high renewable electricity generation (96%) and low wholesale electricity prices (Otahuhu [OTA]...

Forsyth Barr

Origin Energy (ORG AU): Risk/Reward Profile

The risk-reward profile is favourable as the downside due to a deal break (-11% estimated decline) is lower than the upside (+23%) to the...

Arun George

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