BREAKFAST DEALS: Origin fires up

Origin Energy and ConocoPhillips go live on their $US14 billion LNG project in Gladstone and the local energy major now needs to quickly find customers to get the second train up and running, with an equity raising a possibility. Meanwhile, Myer cuts middle management, David Jones gives discounting the boot and retail executive Mark McInnes has a tough message for the Gillard government. In other news, former ACCC boss Graeme Samuel is to run Greenhill Caliburn's Melbourne office and James Murdoch keeps his chairman seat at BSkyB as the phone hacking scandal hits new lows. Elsewhere, Tiger Realm Coal completes its IPO, and is Gail Kelly the next big bank CEO on the way out?

Origin, ConocoPhillips

The coal seam gas story in Queensland continues to gather pace with Origin Energy and ConocoPhillips signing off on their $US14 billion Australia-Pacific LNG project. The project will be the third one to come to life in the state, with the BG Group-led QCLNG project and Santos' GLNG project already on their way, and a fourth venture between Royal Dutch Shell and PetroChina scheduled for final investment approval in 2013. All in all that adds up to about $US46 billion of investment and that's good news for Queensland's state government, which is pinning its hopes on the gas bonanza to fill its coffers and revive its ailing economy. As for Origin, the local energy major and its partner were originally hoping to approve a two train venture but they had little choice but to go ahead with a single train project greenlight given that they promised to start delivery to foundation customer Sinopec by 2015. Origin and ConocoPhillips sealed a $US1.5 billion deal with Sinopec in April and the Chinese giant will now emerge with a 15 per cent stake in the project, cutting Origin and Conoco's stake to 42.5 per cent. The focus for Origin will now be on securing more customers for its gas to get the second train, which is set to cost around $6 billion, up and running as quickly as possible. Finding these customers is critical because while Origin has raised the necessary equity for phase one of the project, there is talk that it may need an equity raising to fund the second train. The size of this potential equity raising will depend on just how much stake the new customers would be willing to take in the project. Meanwhile, The Australian reports that Origin's decision isn't just good news for the Bligh government but also for engineering firms like Bechtel and McConnell Dowell. Both firms are already reaping the rewards of the existing work underway at Gladstone and the Origin-Conoco venture is only going to add to their project pipelines and balance sheets.  

Myer, David Jones, Mark McInnes

The local retail sector is in a funk and with an impending rate rise set to dampen the mood further the likes of Myer and David Jones need to get their act together fast. Well, both department store operators are in the headlines, with talk of a management cull at Myer and David Jones taking the axe to discounting. According to The Australian Financial Review, Myer boss Bernie Brooks has cut down middle management, with electronics division head Algy Pereira, electronics business manager Neil Merola and human resources national manager Tracey Yeates all losing their jobs. Myer, which has not confirmed the identity of the executives made redundant, told the paper that the cuts were not performance related. Meanwhile, David Jones boss Paul Zahra has launched a new advertising campaign to reinvigorate flagging consumer interest and said that the retailer is going to cut back on discounting. Zahra has flagged a more practical and balanced promotions approach rather than the helter skelter discounting aimed at cost conscious consumers. The money saved on promotions is now on its way to feed the advertising campaign. Elsewhere, Premier Retail boss and Zahra's predecessor at David Jones Mark McInnes has a warning for both department store operators, telling Business Spectator that the scourge of online retail is going to hit them the hardest. McInnes' point is that if you are in the business of stocking international brands, which consumers get a whole lot cheaper through online destinations, then you are in trouble. He has also taken aim at the federal government's policy to exempt GST on online purchases under $1000, saying that the policy makes things harder for local retailers by giving online retailers an unfair advantage. The end result, according to McInnes, is more job losses and more store closures.  

Graeme Samuel, Telstra, ACCC

Well, it hasn't taken former Australian Competition and Consumer Commission boss Graeme Samuel much time to secure a corporate position, with the former competition czar to lead independent investment bank Greenhill Caliburn's Melbourne office. Samuel will join the firm as managing director and head of the Melbourne office next month. Meanwhile, Telstra is ready to give incoming ACCC boss Rod Sims his first present, with the telco reportedly set to lodge its structural separation undertaking to the regulator next week. The move is a critical step in paving the way for the completion of the $11 billion NBN agreement with the Gillard government. The ACCC needs to approve the plan before Telstra can put it to shareholders and the telco's boss David Thodey has previously told the AFR that any implementation of tough regulation on the existing deal may force Telstra to reconsider the deal. It's unlikely that Sims will choose to impose punitive measures against Telstra and risk further delaying or worse, dismantling the existing deal. However, just how Telstra offers access to its rivals to the copper network while the NBN is built may be a bone of contention. For the time being, Telstra shareholders are still on track to vote on the deal on October 18.

James Murdoch, News Limited, BSkyB

James Murdoch has managed to retain his seat as chairman of UK cable broadcaster BSkyB, getting unanimous support from the board. However, the success comes at a time when the phone hacking scandal reportedly continues to reveal more evidence of grievous misdeeds at News of the World. According to The Guardian, Scotland Yard has uncovered evidence that Sara Payne, the mother of eight-year-old murder victim Sarah Payne, was also targeted by NOTW. The latest revelations will bring further scrutiny on James' handling of the hacking scandal and more importantly the extent of his knowledge and complicity in the operations. Meanwhile, there is talk that News Corporation is reaching out to its largest shareholders about their thoughts on who is going to fill Rupert Murdoch's boots at the media empire. Apart from the succession issue, the survey is also reportedly gauging their opinion on News Corp's corporate governance standards and the dual equity class structure. The results of the survey are set to be presented at New Corp's next board meeting in the next couple of weeks.

Tiger Realm Coal, Whitehaven Coal, Xstrata

Moving to the mining sector, Owen Hegarty backed Tiger Realm Coal has raised $45 million at 60 cents a share through an initial public offering. The $45 million is better than the $30 million mark the miner was looking at earlier this week but a whole lot less than the original figure of $250 million to $300 million that it was hoping to raise. Unfortunately, there was substantial resistance from fund managers and the offer did not attract a cornerstone investor. Tiger Realm will list with a market cap of about $215 million early next month, and has achieved the fourth biggest IPO of the year. Meanwhile, Whitehaven Coal may have cancelled its sales process in May but interest in Macarthur Coal has reignited speculation that the miner. According to the AFR, Alpha Natural Resources may be interested in making a play for Whitehaven, while China's Yancoal may also revive its push after missing out in the original process. Elsewhere, mining giant Xstrata has lobbed an $US153 million all-cash bid for privately held Canadian miner First Coal Corporation, to gain access to the coal fields in British Columbia. According to Xstrata, the Canadian target's board has recommended the $C1.75 a share deal.

Wrapping up

With the succession issue now resolved at Commonwealth Bank of Australia there is renewed talk that Westpac may be the next to have a look at bringing in a change at the top. Talk of Westpac boss Gail Kelly has been around for a good while now and seems to be the favourite topic for restless investment managers. One reason for that is that NAB boss Cameron Clyne and ANZ boss Mike Smith both seem to have plenty on their plates – one is still keen to kick goals in the local market while the other is pressing on with his Asian agenda. That leaves Kelly, who told a business function yesterday that Australians are overly pessimistic about the economy, and has so far had the staunch support of incoming Westpac chairman Lindsay Maxsted. However, the AFR suggests that the renewed talk may have been sparked after the technical glitch earlier this week and talk that offshore outsourcing may be on the agenda for the bank. In other banking news, Japanese electronics giant Sony has confirmed that it is considering applying for an Australian banking licence. The group's online banking unit reportedly plans to open an office in Sydney in late August and begin a feasibility study, with operations to tentatively start in April 2012. Elsewhere, Wesfarmers has confirmed that it is still in the race for Burrup Fertilisers, saying it was still interested in acquiring a share of the Pankaj Oswal's fertiliser empire. Rare earth miner Lynas has informed the market in its quarterly report that it is on track with its planned processing facility in Malaysia and admitted that it had not done its homework previously when it came to addressing the community's concerns. Elsewhere, Allens Arthur Robinson has boosted its workplace relations practice with the appointment of a new partner and special counsel to the team. Simon Dewberry will join the firm next week as a partner based in Melbourne, with Luke Gattuso appointed as special counsel in the same office.