ONGC out of Cairn-Vedanta meet
The government has kept state-run Oil and Natural Gas Corp out of the much-talked about February 6 meeting called to delibrate on approval for the Vedanta Resources' $9.6 billion acquisition of Cairn India.business Updated: Feb 04, 2011 16:36 IST
The government has kept state-run Oil and Natural Gas Corp (ONGC) out of the much-talked about February 6 meeting called to delibrate on approval for the Vedanta Resources' $9.6 billion acquisition of Cairn India.
Bill Gammell, CEO of Cairn Energy Plc, which is selling most of its 62.4% stake in the Indian unit to Vedanta, and Cairn India CEO Rahul Dhir will be attending the meeting while Vedanta would be represented by its CEO M S Mehta and CFO Tarun Jain, sources privy to the development said.
ONGC, which has stake in most of the 10 oil properties held by Cairn India including its mainstay Rajasthan block and has asked government not to approve the sale unless its concerns are addressed, has not been invited for the meeting.
The meeting may be stormy as Omkar Goswami, independent director on Cairn India who is part of a two-member committee of independent directors constituted to look into the interest of minority shareholders in the proposed stake sale, would also be present, sources said.
The government is prepared to give approval to the deal subject to Cairn/Vedanta meeting certain conditions including agreeing to ONGC's demand for recovering the Rs 14,000 crore royalty the state firm will have to pay over and above its 30% share from the Rajasthan fields, from sale of oil.
Acceptance of the demand would impact Cairn India's valuation as its future profits will go down. Vedanta in a January 28 letter has already sounded oil ministry about it being "challenged by Cairn India's minority shareholders."
While ONGC has been kept out of the meeting, Vedanta has been invited for deliberations even though the London-listed mining group has clearly stated that it cannot agree to any condition as it will be "merely a shareholder" of Cairn India after completion of the transaction, source said.
ONGC being partner in most of the 10 properties held by Cairn India including the giant Rajasthan block, has claimed pre-emption rights or right of first refusal, a demand that has been backed by the Solicitor General of India (SGI).
Sources said while Vedanta is agreeable to most of the 11 pre-conditions that oil ministry is setting for giving approval, it is particularly opposed to royalty being made cost recoverable and Cairn India giving up its rights in present and future disputes.
"Cairn India and its subsidiaries are the signatories to and counter-parties in the various Production Sharing Contracts (PSCs) entered into with Government of India. " Mehtra wrote to Oil Secretary S Sundareshan, who will chair the Sunday meeting.
"As Vedanta would not be a party to any of these contracts, and would be merely a shareholder of cairn India (after completion of the deal), it would be neither possible nor appropriate for Vedanta to agree to any conditions," Mehtra added.