Australia's Origin Rejects BG Group Bid

Origin Energy, an Australian energy producer and retailer, advised shareholders to reject a $13.1 billion bid from British gas company BG Group and reiterated its coal seam gas reserves
position.

BG's bid was launched on June 24 after an earlier attempt at an agreed deal was rejected by Origin at the last minute.

Origin said in a statement that, following the earlier rejection, the firm had seen continued strong interest in the coal seam gas (CSG) sector.

BG was keen to acquire Origin's CSG reserves to feed its planned liquefied natural gas plant in northern Queensland state.

Origin's Chairman Kevin McCann said the company still saw better value in making separate deals to either sell its CSG assets or jointly develop them.

A deadline of 7 p.m. local time on Friday has been set by the company for expressions of interest on the CSG assets, and Origin said it would update shareholders on the process soon.

Shares in Origin, which have consistently traded above BG's bid price of A$15.50 a share, were down 0.5 percent at A$16.20 in the early morning session.

Origin countered BG's claims that Origin might have overvalued its coal seam gas reserves, reiterating that its proved, probable and possible (3P) reserves were 10,122 petajoules (PJ).

"The 3P reserves position has been certified by an independent expert and is consistent with the methodology used for other Queensland CSG operators," Origin Managing Director Grant King said in a statement.

King also said the stated 3P reserves position took into account potential reversion rights to other operators, and that none of the 3P reserves were likely to revert to third parties under current market conditions and planned developments.

Separately, Origin said it had agreed to buy Babcock and Brown Power's 640 megawatt gas-fired Uranquinty Power Station for an enterprise value of A$700 million (US$673 million).

It said it would also go ahead with its 550 megawatt Mortlake Power Station project in southern Victoria state at an expected cost of A$640 million.

Copyright 2008 Reuters. Click for restrictions.