Stake sale to Vedanta hinges on completion of open offer: Cairn

New Delhi: Cairn Energy Plc's deal to sell a majority stake in its Indian arm to Vedanta Resources for up to $8.48 billion is contingent upon the billionaire Anil Agarwal-led group completing an open offer to minority shareholders of Cairn India, reports PTI quoting a senior official.

Vedanta Resources Group is yet to get the Securities and Exchange Board of India's (SEBI) approval for an open offer to acquire up to a 20% stake from minority shareholders at a price of Rs355 a share, Rs50 less than what it is paying Cairn Energy for a majority stake.

The conclusion of the deal is "conditional to completion of open offer in India," Cairn Energy CEO Bill Gammell said today after a 45-minute meeting with Oil and Natural Gas Corporation (ONGC) chairman and managing director R S Sharma here.

The open offer, as per the schedule announced by Vedanta last month, is to open on 11th October.

Mr Gammell said Cairn Energy will call an extraordinary general meeting (EGM) of its shareholders in early October to seek ratification of the Vedanta deal.

But the shareholders' nod will mean nothing unless Vedanta is able to complete the open offer in India, he said.

Mr Gammell met Mr Sharma for the second time since announcing the deal to sell a 40% to 51% stake in Cairn India - the firm that operates the giant Rajasthan oilfield - to Vedanta on 16th August.

ONGC insists that Cairn Energy cannot sell a stake to Vedanta without its approval, as it has the pre-emption or right of first refusal by virtue of its participating interest in the Rajasthan oilfield and two other producing assets of Cairn India.

Mr Gammell said his meeting with Mr Sharma was "good."

Cairn Energy, he said, believes that the deal does not trigger ONGC's pre-emption right as it is a corporate transaction between two parties and not the sale of stake in any particular field that normally gives partners right of first refusal (RoFR).

He, however, refused to say if ONGC had diluted its position. "But I am very positive."

ONGC has a 30% interest in the 6.5 billion barrel Rajasthan fields, the centrepiece of the Cairn-Vedanta deal.

Mr Gammell said the state-owned firm had not asked for operatorship of the Rajasthan field in return for waiving its pre-emption rights.

Cairn Energy had last week written to ONGC saying its nod for the Vedanta deal is not required, as Cairn India will continue to exit.

"There is no real change (happening at) Cairn India," he said today. "This is just a corporate deal (involving sale of shares by one party and purchase by another)."

Vedanta is paying Cairn Energy Rs405 per share for a 40% to 51% stake in Cairn India. This includes a Rs50 non-compete fee to keep the Edinburgh-based firm out of India, Pakistan, Bangladesh and Sri Lanka for three years.

In another related development, Cairn Energy Plc today said it will pay all taxes due, both in India and the United Kingdom, on the $8.48 billion it will gain from selling a majority stake in its Indian arm to Vedanta Resources.

"We will pay all the taxes (due) in UK and India," Mr Gammell said here today.

Averaged across both countries on the gross proceeds, "It will be in the low teens. What is paid will be determined eventually by the final proceeds," he said.

He did not elaborate, but analysts said the 'low teens' being referred to by Mr Gammell may be the 13%-14% tax liability on gross proceeds of the sale.

If Cairn Energy was to eventually sell only 40% out of its 62.38% stake in Cairn India for $6.65 billion, the combined tax liability in India and UK would be around $868 million. But if it was to sell 51% for $8.48 billion, the tax liability would be $1.1 billion.


Govt studying order quashing clearance granted to Lafarge

New Delhi: The government is studying the green tribunal order quashing clearance granted to French giant Lafarge promoted Rs900 crore integrated cement plant in Himachal Pradesh, reports PTI quoting environment minister Jairam Ramesh.

Stung by criticism of his officials doing a "shoddy job" while approving the project in Mandi district, Mr Ramesh said all aspects will be looked into in detail.

"We are studying the National Environment Appellate Authority (NEAA) order revoking the environment clearance to the Lafarge's project. Appropriate action will be taken in the matter," the Union minister told PTI.

The ministry may too have to reject the clearance to the project in the wake of the adverse NEAA order.

The NEEA had recently quashed the green licence granted by the environment ministry to the cement complex comprising a cement plant with a capacity of 3 million tonnes per annum (mtpa) and 2 mtpa of clinker, and a captive limestone extraction mine with a capacity of 3 mtpa.

In its order, the tribunal ruled that the plant threatens the agriculture-based local economy and the nearby Majathal Wildlife sanctuary, which is just five km away from it.

However, criticism of the Expert Appraisal Committee (which analyses the environment impact assessment, or EIA, and forwards its recommendations for a final decision to the ministry) by the appeal body has come as an embarrassment for the Union minister.

Mr Ramesh at various fora has been promising to ensure transparency and consideration for environmental and livelihood concerns of the locals while approving any project.

Putting halt to any activity at the site, the NEAA order also slammed the ministry and its EAC for not having correctly assessed the impact of the project on land, water and air, and failing to appreciate its affects on the livelihood of the people in the area.

The observation came after a visit by an investigation team set up by the appellate at the proposed site when it found that the environment impact assessment report did not sufficiently reflect the opposition of villagers and the "dispossession, impoverishment and trauma" attached to their displacement.

The NEEA in its order said, "Taking into consideration all the relevant aspects, the authority is convinced that on environmental and social considerations, it is neither desirable to mine the Talehan village nor put up the cement plant in Ghanger."

The NEAA is a single-member appeals body created by an act of Parliament.

The environment ministry had granted clearance to the integrated cement plant and captive limestone mine project in June 2009 but it was challenged by the locals alleging that they were not taken into confidence nor their livelihood was taken into consideration while approving the plant.

The NEAA noted that the company had only got the consent of 16 out of the 381 landowners so far and its claim that the mining area was not cultivable was untrue.


NPCIL to begin business talks with major US N-suppliers

Mumbai: The Department of Atomic Energy (DAE) and Nuclear Power Corporation (NPCIL) will begin negotiations with American nuclear energy majors following clearance of the Nuclear Liability Bill, reports PTI quoting a top NPCIL official.

"We are all set to begin talks with American companies, Westinghouse Electric Company and General Electric, and discuss how the business can happen and conclude the talks as early as possible," chairman and managing director of NPCIL S K Jain told PTI.

"Since the 'arrangements and procedures' are in place, we have to find ways and means to implement it and move forward in having collaboration with American companies in building civilian nuclear power plants during the next two decades," Mr Jain said.

The representatives of American nuclear industries also confirmed that they have been invited by DAE and NPCIL to discuss business plans inspite of the new law.

On 30th August, Parliament had adopted Nuclear Liability Bill with the government insisting that the compensation package for victims matches that of the US and it was still open to accommodate some suggestions.

Reacting to the legislation, the US yesterday said there are "couple of issues" raised by American companies about the new law and it would be "wise" for India to ensure consistency between its regulations and that of other countries.

After the passing of the legislation both DAE and Atomic Energy Regulatory Board have begun framing rules for the nuclear liability law, DAE officials said.

Regarding power plants, coming up in collaboration with Russia at Kudankulam Atomic Power Project (KAPP) in Tamil Nadu, Jain said first two units of 1000 MW each are nearing completion and fuel loading for Unit 1 is expected to take place in December and will be commissioned in January next.

The KAPP Unit 2 will be commissioned around May or June next year, he added.

About progress of KAPP Units 3 and 4, Jain said technical and commercial negotiations with Russians have been finalised and details have been worked out on indigenisation in these two units, which will be up to 60%-65% unlike the Units 1 and 2 where 100% equipment supply was from Russia.

When asked about negotiations on price, NPCIL CMD said, "few rounds of talks have taken place and few more rounds will be held to finalise it."

Levelling of ground for KAPP Units 3, 4, 5 and 6 have been completed, and tenders have been floated for excavation work for power plant Units 3 and 4, Mr Jain said.

"We are expecting first pour of concrete for Units 3 and 4 by June next year. Construction of peripheral infrastructure is being carried out on a war footing.

The fuel supply for KAPP has also been received which will last for five years from the day of commencement of plant operation, Jain said.

On imported uranium supply for Indian plants, which are under international safeguards, he said besides France, Russia and Kazakhstan (who are already supplying uranium), NPCIL is also negotiating with few more potential suppliers.

"We are also in process of keeping the units of Kakrapar Atomic Power Station (KAPS) in Gujarat under India specific IAEA safeguards by end of this year (instead of 2012 as per separation plan of the Indo-US deal) so that two more Indian plants can start using imported fuel and run the plants at 100% rated capacity."

"We have already intimated to IAEA (International Atomic Energy Agency) in this regard and surveillance instrumentation and other required arrangements for placing KAPS under IAEA safeguards are going on, and will be completed by October," Mr Jain said.

Mr Jain said the imported fuel helps NPCIL in augmenting its power producing capacity and five units of Rajasthan Atomic Power Station (RAPS) are running at full rated capacity and increased power production by more than 25% in 2009.

On the status of indigenous fuel supply, Mr Jain said Uranium Corporation of India has increased its production capacity to 60%-70% compared to last year. Hence, the plants outside the international safeguards are running at 70%-75% capacity.

Recently, the Narora Atomic Power Station (which will be placed under IAEA safeguards in 2014) received indigenous fuel and is operating at a higher rated capacity.

The construction of Kaiga Atomic Power Station Unit 4 has been completed and is waiting for Indian fuel and "We expect the commissioning of the plant to take place in November this year," Mr Jain said.

On new power plants, he said four indigenously developed 700 MW pressurised heavy water reactors will come up in the next few years with two units each at Kakrapar (Gujarat) and Rawatbhatta (Rajasthan).

Excavation work at Kakrapar is over and first pour of concrete will take place in next 2-3 weeks.

In Rajasthan, the work will commence in May or June next year but procurement and fabrication of all critical equipment and components have commenced at various Indian manufacturing industries, Mr Jain added.


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