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Gammell: My sadness over India tax dispute

SIR Bill Gammell, the former ­Scotland rugby internationalist who founded Cairn Energy, has admitted his sadness that the company has become embroiled in a tax dispute in India where it made huge finds under his leadership as directors prepare to launch a charm offensive there.

REGRET: Outgoing chairman Sir Bill Gammell said Cairn Energy's tax dispute in India saddened him. Picture: Steve Cox
REGRET: Outgoing chairman Sir Bill Gammell said Cairn Energy's tax dispute in India saddened him. Picture: Steve Cox

Edinburgh-based Cairn's chief executive, Simon Thomson, said it will seek early talks with whichever government takes power following the recent election in the hope of getting a speedy resolution to a dispute that has caused it serious problems.

Cairn revealed it had secured $575m (£340m) debt to fund its North Sea operations in a move Mr Thomson said was brought forward because of the Indian tax dispute.

The company has been prevented from selling its remaining $1bn holding in its former Indian subsidiary by the country's authorities.

Mr Thomson said he could not predict when the matter might be resolved.

He underlined Cairn's enthusiasm for the North Sea, where the firm is working on the development of two giant fields it expects will generate lots of cash when they come onstream.

Mr Thomson told Cairn's general meeting the company could stay in the UK North Sea for years if there is fiscal stability in the area.

Speaking after the meeting, Sir Bill said the North Sea needs fiscal and political stability.

"For anybody looking at their investment wherever it may be, you look at incentive and you look at fiscal stablility and you look at political risk, so I think the important thing for the North Sea is that there's incentive and fiscal stability," said Sir Bill.

He would not be drawn on whether political stability could be reconciled with Scotland choosing the path of independence.

Sir Bill was speaking following his last general meeting as a board member at Cairn, which he founded in 1989.

Chief executive of Cairn until 2011, Sir Bill resigned as chairman after yesterday's general meeting, following three years in that post.

Sir Bill said he was proud of Cairn's achievements in India.

Cairn sold the bulk of its holding in its Indian subsidiary to Vedanta Resources for $5.5bn in 2011, and paid $3.5bn of the sale's proceeds to shareholders.

It planned to sell down the remaining 10 per cent stake to fund work on the portfolio developed by Mr Thomson, who became chief executive in 2011.

The portfolio combines potentially transformational exploration in areas like North Africa with lower risk field development activity in the North Sea.

"The only sadness I have is that we have a billion dollars tied up in India," said Sir Bill following the meeting. "That obviously was equity for partial sale and was part of the strategy and the overview of where Simon is taking the business and suddenly it's taken away from you."

Sir Bill said the dispute in India could be resolved within six months, but might last some time longer.

He warned that tax issues and uncertainty could frighten companies away from India.

Mr Thomson said Cairn would try to meet the new government as soon as possible. Cairn will highlight its record of achievement in India.

The company, which says it has paid all tax due, is also taking legal advice. Cairn said it will assess whether to write down the value of its holding in the Indian business in August.

Mr Thomson said Cairn is still "extremely enthused" by Greenland, where it has spent $1bn without making any commercial finds.

The company is focusing its attention on the Pitu block, but will not drill any wells on it before next summer at the earliest.

Cairn expects the Kraken and Catcher fields in the North Sea to come onstream by mid 2017.

Sir Bill said his time at Cairn had been a "fantastic journey".

Shares in Cairn Energy closed down 2.3p at 179.2p.

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