Australia-based Origin Energy has signed an underwritten agreement to sell its 53.09% stake in New Zealand electricity generator and retailer Contact Energy, for NZ$1.81bn ($1.19bn).

The company has appointed Macquarie Capital to manage and underwrite the sale of the 389,314,921 ordinary shares in Contact Energy for NZD$4.65 ($3) per share.

The shares, which are held by Origin’s subsidiaries including Origin Energy New Zealand, Origin Energy Pacific and Origin Energy Universal, are expected to be sold to international institutional investors and retail investors in New Zealand.

Origin managing director Grant King said: "Today’s announcement is consistent with Origin’s stated intention to continue to take action to reduce operating and capital costs, realign debt across group entities, and, where appropriate, divest assets.

"The proceeds from the sale will provide increased financial flexibility in the short to medium term."

Origin will continue to own upstream production and exploration interests in New Zealand.

Origin finance & strategy executive director Karen Moses said: "This transaction provides a genuine reduction in financial risk through the repayment of Origin’s debt as well as the deconsolidation of Contact’s debt."

The transaction is planned to be completed on 10 August.

Contact generates power from gas, geothermal and hydro stations.