New Delhi: State-owned Oil and Natural Gas Corp (ONGC) on Thursday wrote to Cairn Energy Plc insisting that the UK-based firm will need its explicit nod before it can sell its India unit to Vedanta Resources Plc.
ONGC, which partners Cairn India in all of its three producing assets and most of the seven exploration acreage, today wrote to Cairn Energy Plc saying that it has the right of first refusal (RoFR) on these assets.
Cairn Energy, which holds 62.38 % stake in Cairn India, is selling 40-51 % stake in the India unit to London-listed Vedanta Resources for $8.48 billion.
“...in accordance with the terms of the relevant agreements, the consent of ONGC would need to be sought for the proposed transaction,” ONGC wrote to the Edinburgh-based firm.
Also, “ONGC would have the option of exercising its pre- emptive rights in relation to the participating interests held by Cairn India Ltd and/or its affiliates.”
Cairn Energy insists that the deal is a corporate transaction involving sale of shares and will not trigger ONGC’s pre-emption rights. Pre-emption right or RoFR, Cairn says, is triggered only in case of sale of interest in a asset like the Rajasthan block.
ONGC, however, stated that the change of control of Cairn India and acquisition of majority stake by Vedanta would “amount to an effective assignment of participating interests held by Cairn India Ltd.”
“We have therefore viewed that, in accordance with the terms of relevant agreements, the consent of ONGC would need to be sought for the proposed transaction, and ONGC would also have the option of exercising its pre-emptive rights in relation to the participating interests held by Cairn India Ltd and/or its affiliates,” ONGC wrote.
ONGC asked Cairn Energy to provide full details along with copies of the agreements and other arrangements entered into with Vedanta “and the details of proposed buyers financial strength, technical capability and past experience in the field of oil and gas.”
Cairn, on 16 August, announced the deal and approached the government for clearances about a month later.