épisode du 5/4/11

[frédéric]

HOT NEWS: Vedanta wins Cairn Deal
Auj. à 15:05
Vedanta Wins Regulatory Approval to Buy Part of Cairn India in Open Offer

bloomberg
By Abhishek Shanker and Rakteem Katakey - Apr 5, 2011 12:24 PM GMT+0200

Vedanta Resources Plc (VED)’s unit won regulatory approval to buy part of Cairn India Ltd. (CAIR) in an open offer as the mining company plans to spend $9.6 billion on assets including the nation’s biggest inland oil deposit.

Sesa Goa Ltd. (SESA)’s proposal to minority shareholders for 20 percent of Cairn India was cleared by the Securities and Exchange Board of India, and the offer will open subscription next week, Vedanta Chairman Anil Agarwal said in Mumbai today. N. Hariharan, spokesman for the regulator, declined to comment through a mobile-phone text message.

Vedanta, a mining company with no previous experience in producing oil or gas, is still awaiting the Indian Cabinet’s approval to buy as much as 60 percent of Cairn India, including Sesa’s open offer, eight months after announcing the proposal. Approvals have been delayed after Oil & Natural Gas Corp. sought to change contracts to recover royalty payments it paid on behalf of partner Cairn India.

“There was uncertainty over the deal till today and now with this approval, the conclusion is one step closer,” said Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. in Kochi. “Cairn India can now start to benefit from high oil prices. Sesa Goa will actually end up buying the shares at a discount to current market prices.”

The transaction, which has yet to receive approval from the Cabinet, may be cleared shortly, Oil Secretary S. Sundareshan, the top bureaucrat in the oil ministry, said yesterday.
Shares Prices

Cairn India declined 0.6 percent to 365.20 rupees and Sesa Goa climbed 6.9 percent to 314.35 rupees. The benchmark Sensitive Index of the Bombay Stock Exchange fell 0.1 percent.

Vedanta shares advanced 2.3 percent to 2,467 pence in London trading, the highest level since March 4, at 11:05 a.m. Cairn Energy gained 1.5 percent to 469 pence, the highest since March 31.

Crude oil in New York trading increased 18 percent this year and climbed 44 percent since Vedanta and Cairn Energy Plc (CNE) announced the transaction on Aug. 16. Crude for May delivery fell as much as 0.5 percent to $107.92 a barrel in electronic trading on the New York Mercantile Exchange, and was at $108.05 at 8:56 a.m. London time.

While Vedanta Resources offered Cairn Energy 405 rupees a share, including a non-compete fee of 50 rupees a share, Cairn India’s minority shareholders are being offered a lower price. Sesa Goa has offered 355 rupees a share, according to a statement to the Bombay Stock Exchange on Aug. 18.

The final number of shares sold by Cairn Energy to Vedanta will depend on the result of the open offer.
Vedanta Debt

Vedanta has raised $6 billion in debt to fund the acquisition, Agarwal said today. He expects the nation’s Cabinet to approve the transaction before April 15.

The money will be borrowed from Barclays Capital, Citigroup Inc., Credit Suisse Group AG, Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley, Royal Bank of Scotland Group Plc and Standard Chartered Plc, Vedanta said in a Nov. 19 statement.

Sesa Goa plans to fund the purchase of Cairn India shares with its own cash, Managing Director P.K. Mukherjee said on Aug. 16. The company estimates it will have a cash balance of 120 billion rupees ($2.7 billion) by the end of March next year that will help to fund the purchase, he said.
Change Contract

State-run ONGC, Cairn India’s partner in the biggest oilfield in Rajasthan state, is seeking to change a contract that makes it liable to pay royalty on all the crude oil produced from the area even though it owns 30 percent stake. ONGC may pay 140 billion rupees as royalty payments on Cairn India’s behalf over the life of the field, according to the New Delhi-based company.

“We now only need approval from the Cabinet, which we expect to get before April 15,” Agarwal said today. “There is a royalty issue between Cairn India and ONGC and that has to be dealt with separately.”

India’s oil ministry has “almost withdrawn” the requirement that royalties paid for the Rajasthan oilfield by ONGC be equitably shared, Press Trust of India reported March 2, citing unidentified officials with direct knowledge of the matter. U.K. Prime Minister David Cameron sought early approval of the deal, Indian Oil Minister S. Jaipal Reddy said in February.

To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.

[LesCrozes]

Govt likely to clear Cairn-Vedanta deal tomorrow: Sources
New Delhi, Apr 5, (PTI):

The Cabinet Committee on Economic Affairs headed by Prime Minister Manmohan Singh is likely to clear London-listed mining group Vedanta Resources' USD 9.6 billion acquisition of Cairn India tomorrow after overruling the law ministry's opinion on state-owned ONGC's rights.

"The Cabinet Committee on Economic Affairs (CCEA) has been scheduled for tomorrow afternoon...in all likelihood, it will give an in-principal approval to the Cairn-Vedanta deal," an official privy to the development said.

The Cabinet panel, which will besides Prime Minister, includes Finance Minister Pranab Mukherjee, Home Minister P Chidambaram, Oil Minister S Jaipal Reddy, Environment Minister Jairam Ramesh, Law Minister M Veerappa Moily and Corporate Affairs Minister Murli Deora, may overrule opinion of the Solicitor General of India that Vedanta must agree to equitably share royalty on oil produced from Cairn India's mainstay Rajasthan oilfields before the government nod.

"The pre-condition will be overruled by arguing that the government's take from Rajasthan oilfields will be impacted if Rs 18,000 crore royalty ONGC will pay in excess of its share in the oilfields is cost recovered from revenues," the official said. "The government revenues will be dented by USD 1 billion."

Incidentally, the government is committed to reimbursing in full the royalty ONGC pays in excess of its 30 per cent share in Rajasthan oilfields in case it is not cost recovered.

Oil and Natural Gas Corp (ONGC) had in July 2010, more than a month before Edinburgh-based Cairn Energy announced sale of majority stake in its Indian unit to Vedanta, cited provisions in the field contracts to say royalty, like any other levy, is cost recoverable.

Cairn India, which holds 70 per cent stake in the 6.5 billion barrels Rajasthan block, does not pay any royalty and is opposed to making it cost recoverable as it will dent its profits.

Besides opposing cost recovery of royalty, Cairn Energy has maintained that its stake sale to Vedanta does not require the government nod and had through its Indian unit made a conditional application in November-end on insistence of the oil ministry. The application also rejected rights of ONGC, which has stake in eight out of 10 properties of Cairn India.

The official said CCEA may ask Cairn to seek ONGC's no-objection. Oil Ministry's Cabinet note lists royalty being made cost-recoverable as a pre-condition for approval as an option. Alternatively, it has suggested that the government gives its consent to the deal without any pre-condition and "appropriate decision" will be taken to enforce ONGC's right.

SGI, whose opinion has been endorsed by Moily, has, however, opposed the second option saying "the second option which has been suggested in the Cabinet note i.e. pursuing rights under the PSC (production sharing contract) to recover the rightful dues of ONGC, would involve an undesirable amount of time and resources to be spent and would be contrary to the public interest."

Officials said the oil ministry in the Cabinet note has admitted that Cairn could later play a hooky as it was doing in the arbitration case on payment of cess on Rajasthan oil.

Cairn says it is not liable to pay Rs 2,500 per tonne cess on its 70 per cent share of production from the Rajasthan blocks and the same has to be paid by ONGC.

The Cabinet note says that Cairn has alleged that the non-inclusion of cess payment in the PSC was "either a mutual or a unilateral mistake by the government by playing fraud by diverting (original operator) Shell's attention away from cess during the contract negotiations."

"Vedanta Resources may also take a similar position at a later point of time to its advantage on the issue of cost recovery of royalty. Therefore, a suitable safeguard may be put in place as the ministry feels that the cess is payable by the contractor and royalty is cost recoverable under the PSC," it says.

"If the competent authority does accord its consent to the transfer of participating interest from Cairn to Vedanta, the same should be granted subject to the stipulation/condition regarding the recoverability of the cost of the royalty," SGI said in his opinion.

SGI's opinion was taken on insistence of Finance Ministry which wanted to know the legality of ONGC's demand.

The Oil Ministry Cabinet note on the issue lists two alternatives. In the first, five preconditions, including royalty being made cost-recoverable, Cairn India withdrawing arbitration disputing its liability to pay cess, Cairn India obtaining partner ONGC's no-objection and Vedanta providing performance and financial guarantees have been listed.

The alternative to the precondition of royalty and cess suggests that the government shall pursue all legal recourses for establishing its rights under the Production Sharing Contract (PSC) in the case of cess.

On royalty, it should take appropriate decision to enforce the provisions of PSC to make royalty cost- recoverable.

In both the options, ONGC's consent or no-objection is a pre-requisite. ONGC owns 30 per cent stake in the Rajasthan block, but pays royalty on the entire quantum of crude oil produced from the fields. Over the life of the field, the royalty burden works out to be Rs 18,000 crore, of which ONGC also has to bear Cairn's share of about Rs 12,600 crore.

Cairn has also disputed any liability to pay Rs 2,500 per tonne cess on its 70 per cent share of production from the Rajasthan blocks, which totals Rs 9,202 crore for ONGC over the life of the field.

Sources said ONGC wants royalty and cess to be cost-recoverable, like capital and operating expenses. Under the PSC, capital and operating expenses are first deducted from the sale of oil and the profits shared between the stakeholders, including the government, thereafter.

Cairn and Vedanta are opposed to the move as it would lower Cairn India's profitability.
More than three months after announcing the sale of its up to 51 per cent stake in the Indian unit to Vedanta, Cairn Energy Plc on November 23 last year had made a conditional application to seek the government's nod but refused to accept partner ONGC's rights.

ONGC holds stakes in eight out of Cairn India's 10 assets, including the mainstay Rajasthan oilfields.

Cairn Energy and Vedanta have set a deadline of April 15 to close the transaction. After the clearance by the government, the two firms can approach their shareholders seeking an extension of the April 15 deadline, saying the conclusion now remains a mere formality.

[Thierry]

Le 15 avril comme date butoir, c'est bien ça ?...

[LesCrozes]

India set to rule on Cairn-Vedanta deal

NEW DELHI/LONDON | Tue Apr 5, 2011 9:24pm IST
(Reuters) - The government could decide as early as this week whether to let Vedanta Resources take control of Cairn India in a $10 billion deal that would give the UK-listed miner its first taste of oil.

The Cabinet Committee on Economic Affairs, headed by the prime minister, will discuss the sale on Wednesday and is expected to reach a final verdict, almost eight months after the deal was first announced.

Following are possible verdicts and their likely impact on deal:

DEAL APPROVED WITH ISSUES TO BE RESOLVED LATER

Currently seen as the most likely outcome, although leaves both Vedanta and Cairn with uncertainty.

Cabinet could approve the deal but defer the thorny issues of royalties and taxes that have been holding it back, leaving those questions to be decided after the acquisition has gone through.

Cairn Chief Executive Bill Gammell said last month the royalty issue, a dispute between the government and state-controlled Oil and Natural Gas Corp (ONGC), should be kept separate from the deal itself, "and that is what I believe will happen".

Vedanta's chairman, Anil Agarwal, said on Tuesday he thought the royalty issue should be treated separately.

ONGC has a 30 percent holding in the Cairn-operated Rajasthan fields, a key asset, but pays 100 percent of the royalties.

Vedanta could go down the legal route to dispute royalty payments, while Cairn could dispute its tax payments.

DEAL APPROVED WITH CONDITIONS

This outcome would provide welcome certainty for shareholders on both sides of the deal.

Options include cutting ONGC's royalty payments with its partner paying up to 70 percent, or changing the way royalties appear in accounts to make them an allowable cost out of revenues -- effectively reducing profits available to partners.

The contract for the Rajasthan block, unlike other such contracts, is silent on whether royalty could be made a component of cost -- leaving it open for interpretation.

The oil ministry has backed ONGC's claim that royalties should be "cost recoverable".

There is also a possibility that the government could partly compensate ONGC for royalty payments to make its investment in the block profitable.

Analysts in London said the details of the conditions were critical to a deal that has been made more palatable for Vedanta shareholders thanks to rising oil prices.

DEAL APPROVED, NO CONDITIONS

Unlikely.

The government is likely to set conditions which would make the deal more palatable to ONGC, which had already raised concerns over the profitability of its Rajasthan investment before the Cairn deal was announced.

DEAL REJECTED

Unlikely.

India's government is keen to maintain business confidence and attract future foreign investment into the country. The world's fourth-biggest crude importer also needs to foster domestic supplies for its hungry economy, growing at around 8 percent per year.

There was very limited interest from foreign majors in India's latest exploration round which closed last week.

But international oil major BP has just agreed to jump into the sector with Reliance Industries in a multi-billion dollar deal -- showing that foreign players can be tempted if the terms are right.

Vedanta declined to comment on the deal and likely outcomes. A Cairn spokesman said it continued to work constructively with India to secure all necessary consents and approvals.

[jbd48]

Non, Thierry:

Cairn Energy and Vedanta have set a deadline of April 15 to close the transaction. After the clearance by the government, the two firms can approach their shareholders seeking an extension of the April 15 deadline, saying the conclusion now remains a mere formality.

Le 15 avril était la date précédemment fixée. Une extension de ce délai est toujours possible, ce qui supposerait que VED et Cairn retournent vers leurs actionnaires pour demander cette extension.