Kane Energy hints that India’s tax dispute is coming to an end

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Kane Energy PLC update

Cairn Energy expects to return “up to $700 million” to investors because the British oil and gas group said it had reached a multi-year dispute with the Indian government over a tax arbitration of more than $1 billion.

The Indian Parliament approved a bill last month to repeal a 2012 amendment that allowed it to retroactively collect taxes on Kane, Vodafone and a dozen other companies.

After the International Arbitration Tribunal ordered India to pay approximately US$1.7 billion in damages to Kane last year, the tax has become a growing problem facing the government of Prime Minister Narendra Modi.

New Delhi’s refusal to honor the award prompted Kane to try to seize billions of dollars worth of Indian government’s overseas assets, including real estate and aircraft.

But New Delhi said last month that if the two companies agree to accept only the principal, waive interest and costs, and waive any pending legislation, it will refund its tax-collected payments, including the $1 billion collected from Cairn.

The Edinburgh-based company said its first sign of its willingness to resolve the dispute is [the] The Indian government speeds up the provision of documents and payment of refunds” and is willing to forgo the additional US$700 million owed under international rulings.

Kane said the deal may be finalized in “a few weeks.” The company expects to receive a payment in rupees totaling approximately 79 billion rupees, which will then be converted into U.S. dollars.

It will return up to $700 million to shareholders through a special dividend of $500 million and a stock repurchase program of up to $200 million, subject to approval.

Cairn stated that the remaining $300 million “will be used to further expand a low-cost, sustainable production base.”

After Kane won the arbitration award, the dispute made the Indian government more and more embarrassed. New Delhi argued that the ruling violated its taxation sovereignty.

But Kane obtained an order from a French court in July to freeze property owned by the Indian government in Paris as a step to recover his debts. It also filed a lawsuit in a US court for the seizure of the aircraft of the state-owned airline Air India in lieu of payment.

Modi’s Bharatiya Janata Party opposed the retrospective tax when it opposed it in 2012. He hoped that abolishing the tax and reconciling with Kane and other companies would help repair the country’s reputation as an investment destination. He is seeking foreign investment to help the Indian economy recover from the impact of the Covid-19 pandemic.

JPMorgan Chase analysts said the move “reduces” the risk of about $1.06 billion in the expected rewards, and more than two-thirds of the funds are expected to be returned to Kane before the end of the year.

Chief Executive Officer Simon Thomson said: “The progress made in resolving our Indian tax issues and active portfolio management enables Kane to achieve growth through sustainable business and focus on creating more for shareholders. Value and return.”

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