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23 AUG, 2011, 01.21PM IST, PTI
Accept all govt conditions on Vedanta deal: Cairn Energy to Cairn India

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Read more on »Vedanta Resources|UK|Stake sale|royalty|Rajasthan oilfields|Cess|Cairn India Ltd.|Cairn Energy Plc


Cairn India Ltd.
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NEW DELHI: UK's Cairn Energy Plc today said it wants Cairn India to accept all the government's conditions and agree to pay royalty and cess on the Rajasthan oilfields so as to facilitate its stake sale to Vedanta Resources.

Cairn Energy, which owns a 52.11 per cent stake in Cairn India, "has voted to accept (government) conditions", the company said in a press statement.

The Edinburgh-based firm, which is selling a 40 per cent stake in Cairn India to Vedanta, has till now maintained that forcing its Indian unit to pay royalty and cess on the mainstay Rajasthan oil block was against the signed contract and would hurt minority shareholders' interest.

"Two of the government of India conditions -- cess and royalty payable -- are currently with Cairn India shareholders for approval, Cairn has voted to accept these conditions, with voting results due on September 14," the statement said.

Together with Vedanta's 28.5 per cent shareholding, Cairn Energy has enough votes to get any proposal passed by its shareholders, ignoring the resolution passed by the Cairn India board in February opposing the value demolishing preconditions.

Minority shareholders at Cairn India's AGM in Mumbai last week had booed Cairn Energy for changing track to get USD 6.02 billion from the stake sale to Vedanta. Cairn Energy had previously said it would rather call off the deal than force Cairn India to accept these conditions.

Cairn India had on July 26 stated that its April-June quarter net profit would halve to Rs 1,435 crore if it was asked to share royalty on the Rajasthan crude oil.

The company currently does not pay any royalty on its 70 per cent interest in the Rajasthan fields. The royalty, as per the contract, is paid by state-owned ONGC, which got a 30 per cent stake in the 6.5 billion barrel field for free.

The Cabinet Committee on Economic Affairs (CCEA) on June 27 gave consent to the Cairn-Vedanta deal, subject to Cairn or its successor agreeing to charge or deduct the royalty paid by ONGC from the revenues earned from the sale of oil before the profits are split between partners.

This cost-recovery of royalty will lower Cairn India's profitability.

Also, the CCEA said Cairn India must pay a Rs 2,500 per tonne cess on its 70 per cent share of oil production. Cairn maintains that cess, like royalty, is a liability of ONGC and had initiated arbitration against the government on being forced to pay cess.

23 AUG, 2011, 12.58PM IST, REUTERS
Cairn Energy says focused on closing Vedanta deal

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Read more on »vedanta|Oil firm|Lebanon|Cairn India Ltd.|Cairn Energy


Cairn India Ltd.
BSE
264.85
-01.06%-02.85
Vol:179545 shares traded
NSE
265.10
-00.60%-01.60
Vol:1814028 shares traded
Prices|Financials|Company Info|Reports
RELATED ARTICLES
Vedanta cuts bridge loan size to $ 270mn for Cairn stake buy
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LONDON: British oil firm Cairn Energy said it was focussing on concluding a long running deal to sell a stake in its Indian unit to Vedanta , but was also looking at opportunities to explore for oil and gas in Lebanon.

"Cairn is encouraged that the Vedanta transaction is moving towards completion," said the company in a statement alongside its interim results on Tuesday.

"The conclusion of the Vedanta transaction in the coming months is a key focus for the group."

In June, India granted conditional approval for Vedanta to buy a stake in Cairn India in a $6 billion deal that was first announced in August 2010 .

The parties are currently working to satisfy the conditions for the deal to complete, said Cairn.

Part of the cash returned from the Indian transaction could be used to fund exploration in the Eastern Mediterranean where Cairn said it has teamed up with a Lebanese private company and UK-based explorer Cove Energy .

The company said it wanted to participate in a licencing round in Lebanon, expanding its reach to a new frontier basin.

Cairn also plans to spend $600 million in Greenland this year drilling up to four wells in its attempt to open up a new oil province, but has so far had little success in the Arctic territory.

The company said it had cash of around $1 billion on June 30, with a production of around 167,000 barrels of oil in the first half, and revenues of $1.3 billion.

Shares in Cairn, which have fallen 26 percent in the last month, closed at 289.7 pence on Monday, valuing the company at around 4 billion pounds ($6.6 billion).