Origin took its time. Sometimes you have to wonder about the performance of company boards and management -- no, make that, you should always worry about whether they are up to the task. After all, it’s our super money funding their adventures. Take Origin Energy. For years now, its board and managing director, Grant King, have obsessed about everything from unions, to costs, to all things greenhouse and climate change, and they charged deeply into the coal-seam gas and liquified natural gas (LNG) sector in Queensland, waving through billions of dollars. But for the past year, their revenue and profits have been disappearing out the door as global oil and gas prices fall and the $24 billion LNG project in central Queensland became a bigger and bigger debt burden and millstone on the balance sheet.
Ratings groups have reacted by lowering Origin’s credit standing, but for months now, the board and management have denied that any more action needs to be taken, especially a share issue to raise more capital. Origin seemed to be content that the roughly $2.4 billion of measures already taken would help it through. But suddenly, yesterday, out popped what can only be an emergency funding and restructuring package designed to stop any more credit downgrades (to junk, which would be very expensive) and end questions about the company’s viability. The shares are down nearly 48% so far this year and it was that message (and the pounding given to Glencore in the past couple of weeks) that seems to have changed thinking. So the board produced a $4.7 billion rescue package of measures, including a $2.5 billion entitlement share issue at $4 a share (a massive 34% discount to the closing price of $6.10, always a sign of the desperation of a board) designed to stave off critics and creditors. Seeing Origin is valued at $6.7 billion and it has $12 billion in debt, something had to give, and it was the board’s nerve. In the end, it was a decisive move from chairman Gordon Cairns, who is also chair of another basket case, Woolworths. -- Glenn Dyer