Talks on Cairn-Vedanta deal make little headway
07 February 2011
The petroleum and natural gas ministry's first meeting with a joint team of top executives from UK-based Cairn Energy Plc and Vedanta Resources on Sunday failed to break the deadlock over conditions for clearing Vedanta's proposed $9.6-billion deal for acquiring Cairn India.
But petroleum secretary S Sundareshan, who chaired the meeting, described the talks as "extremely constructive" and expressed hope of finding a "positive solution" to issues blocking Vedanta's bid to acquire control of Cairn's Indian arm that operates the Barmer oilfields and several other acreages. Cairn Energy said it hoped to complete the transaction on schedule by 15 April.
The government has kept Oil and Natural Gas Corp out of the deliberations, even though the state-run explorer and producer 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.
Bill Gammell, chief executive of Cairn Energy PLC, which is selling most of its 62.4-per cent stake in the Indian unit to Vedanta, and Cairn India chief executive Rahul Dhir attended the meeting, while Vedanta was represented by its chief executive M S Mehta and chief financial officer Tarun Jain. 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, was reportedly also present.
This was the first meeting held by the petroleum ministry in which both Cairn Energy Plc CEO Bill Gammell and Vedanta representatives, led by group CEO M S Mehta, were present. The discussions will continue today.
Reports said both sides stuck to their guns on the conditions for approval. The Cairn-Vedanta combine spent much of the 90 minutes of the meeting explaining their reservations on two of the 11 conditions that could be the dealbreakers - the royalty regime for the Barmer fields and accepting government's verdict as final in future disputes.
They argued that accepting any change in the royalty regime will hurt Cairn India's future profitability and will be challenged by minority shareholders. But the ministry made it clear that a way forward may be difficult without resolving the demand of ONGC for an equitable royalty regime. Currently ONGC pays the entire royalty although it has only 30-per cent equity in the Rajasthan fields.