* Frank Calabria to take over as CEO in October
* Debt reduction remains priority
* New CEO "not a precursor to demerger", chairman says (Adds chairman, analyst comments, share price)
By Sonali Paul
MELBOURNE, Sept 9 (Reuters) - Origin Energy Ltd ORG.AX , Australia's top power and gas retailer, on Friday promoted its energy markets boss to replace long-time chief executive Grant King, and said it would focus on cutting debt before deciding whether to spin off its gas production business.
Chairman Gordon Cairns said it made sense to hand the reins now to Frank Calabria, 48, as the company had made good progress in reducing debt and as its A$25 billion ($19 billion) Australia Pacific LNG project (APLNG) would be complete in a few months.
"This is not a precursor to a demerger," Cairns told Reuters. "You can't demerge when you have A$9 billion in debt."
King, 62, has long been a market darling having led Origin since it peeled off from Boral Ltd BLD.AX in 2000 and having headed the energy arm of Boral for six years before that. Calabria will take over from Oct. 19.
Calabria comes into the top job just as Origin is recovering from a drop in its share price to a 12-year low in January. Sentiment soured last year as the company was hit by a slump in oil prices just as its debt soared while building APLNG.
It was forced to raise A$2.5 billion in a share sale last September to help cut net debt to A$9.1 billion. It also put a number of assets up for sale to raise A$800 million by June 2017.
"The company's focus in the short term remains on accelerating debt reduction and improving returns. This will lead to the opportunity for further strategic and structural choices," Cairns said.
Analysts said Origin would need to reduce debt by a further A$4 billion and clear project finance hurdles tied to APLNG before it could spin off the project.
"I think the trajectory they're on and where the oil price is puts them at a point where in 12 to 18 months they will be able to make that choice," said an analyst with a fund manager, who declined to be named due to the sensitivity of the issue.
Calabria, popular within the company, joined Origin in 2001 as chief financial officer and moved across to head the energy markets business in 2009. He said pushing into renewable energy was a "key opportunity for us".
Origin's shares jumped nearly 6 percent in a weaker market on Friday following the CEO announcement.
($1 = 1.3067 Australian dollars)