Utilities Sector Update

Submitted by Share Trading on 28 April, 2008 - 11:48

An Australian utilities sector update provided by market analyst UBS.

Utilities Sector

ORG Gas netbacks reviewed:

We estimate ORG's undeveloped, measured, contingent gas resource to be worth about $0.41 per GJ if sold into an LNG project that earns a 12% IRR and has an LNG Price of US$10 mbtu. We summarise a sensitivity analysis derived from a straightforward NPV model that estimates field gate netbacks. On that base we leave our ORG valuation unchanged. The model uses a spot exchange rate. Returns to the LNG component would increase materially at the UBS long term commodity exchange rate of US$1=A$0.75.

DUE NPV revised to $3.61:

We've reviewed our DUE NPV and now calculate an estimate of $3.61. We note that we are valuing DUE's equity interest in Duquesne at over A$600 virtually double the price paid only 2 years ago once we adjust for the higher exchange rate. There is also an implied 20X ebitda multiple on the Dampier to Bunbury pipeline reflecting the strong returns on that investment and its ongoing growth.