Vedanta deal does not trigger ONGC's pre-emption rights: Cairn
UK's Cairn Energy Plc has again informed Oil & Natural Gas Corporation that its decision to sell majority stake in its Indian unit to Vedanta Resources does not trigger the state-owned company's pre-emption rights.business Updated: Nov 03, 2010 22:20 IST
UK's Cairn Energy Plc has again informed Oil & Natural Gas Corporation that its decision to sell majority stake in its Indian unit to Vedanta Resources does not trigger the state-owned company's pre-emption rights.
Replying to an ONGC letter dated October 21, Cairn on October 29 wrote that its selling 40 to 51 per cent stake in Cairn India was a corporate deal and so the state-owned company's pre-emption or right of first refusal is not triggered, sources said.
When contacted, Cairn Energy spokesperson said, "As part of the ongoing process Cairn can confirm that it has submitted a letter to ONGC. Cairn remains committed to working to secure all the necessary consents and approvals that are needed for this transaction."
While the spokesperson refused to elaborate, sources said Cairn in the letter has stated that the Vedanta deal was not an assignment of participating interest as claimed by ONGC and, therefore, will not trigger pre-emption rights.
The Edinburgh-based firm also said that Cairn India was an independent company, which does not draw any technical support from Cairn Energy Plc.
It also said Cairn India will continue to exist as normal and the new owner Vedanta Resources has far greater financial muscle than the present owner.
Cairn Energy holds 62.38 per cent stake in Cairn India and is selling 40 to 51 per cent stake to London-listed Vedanta Resources.
ONGC in its letter to Cairn had said that it had pre-emption rights and asked for value of each of the 10 assets held by the British firm's Indian unit so as to enable it to decide on the future course of action.
Citing provisions of Production Sharing Contract and Joint Operating Agreements, ONGC in the letter said it had right of first refusal in all the three producing fields held by Cairn India including the 6.5 billion barrels Rajasthan block and Cairn Energy Plc needs its no objection before it can transfer ownership of these to Vedanta.
ONGC asked Cairn Energy to give written notice to ONGC with complete terms of its Vedanta deal for it to "consider the matter of exercising its right to acquire (Cairn India's) interest (in a block like Rajasthan)."