Origin told Contact yesterday it had entered into an agreement for the sale of its 389.3million shares, which are expected to be sold to a range of Australian, New Zealand and international equity market institutional investors and New Zealand retail investors.
Yesterday's confirmation of the sale ends months of market speculation, including Origin having denied a sale process was under way.
Contact also advised yesterday it intends to list on the Australian Stock Exchange during the next four to six weeks.
In late June Contact paid all its shareholders, including Origin Energy, a special 50c per share dividend - totalling $367million - after reversing from an unpopular proposal to invest in overseas geothermal plants.
Craigs Investment Partners broker Peter McIntyre said the cornerstone sale was seen as positive, removing surplus cash off Contact's balance sheet, and the share sale would improve the liquidity of its shares.
Origin would use the cash to either pay down debt, or invest in new projects, Mr McIntyre said.
''And Tiwai has been resolved to a certain extent,'' Mr McIntyre said.
Earlier this week Rio Tinto-owned New Zealand Aluminium Smelters struck a deal with Meridian Energy for the continued supply of electricity for the smelter, until at least 2018, with Contact having struck a supply deal with Meridian to supply about 80MW of power.
Ratings agency Standard & Poor's said the share sale did not affect its existing BBB/Stable/A-2 credit rating on Contact.
The company's interim chairman, Phil Pryke, said ''We thank Origin for their support over the last 11 years as we have reinforced Contact's position as a leading New Zealand-based energy company''.
Origin said it would use the proceeds to reduce debt and to redeem $200million in redeemable preference shares, NZME. reported.
The transaction has been underwritten at $4.65 a share by Macquarie, raising about $1.8billion.
Origin said it would continue to hold production and exploration interests in New Zealand.
The Australian energy giant has in the past invested heavily in liquid natural gas plants in Queensland that were about to come on stream at the same time oil prices plunged.
Contact is scheduled to report its June year result on August 17, and said it expected its earnings before interest, tax, depreciation, amortisation and financial instruments to be about $525million.
It expected its underlying earnings after tax to be about $161million and its free cash flow to come in at $363million, NZME. reported.
