CAIRN Energy is facing fresh frustration in India where the timetable for the resolution of a bitter tax dispute the company says has cost it more than a billion dollars (£0.75bn) has slipped.
Edinburgh-based Cairn had expected the matter to be resolved early next year. However, it has been told the arbitration panel considering the case will not make a decision until August 2018.
The slippage could be costly for Cairn and disappointing for shareholders in the company.
Chief executive Simon Thomson has held out the prospect success in the case could pave the way to big payouts to investors.
Cairn has been prevented from selling the remaining stake in its former Indian business, valued at around $860m, pending resolution of the dispute.
The company is seeking $1.1bn compensation from the government, including the fall in the value of the holding during the dispute.
This has soured the legacy of the success Cairn enjoyed with the drill bit in India, where the company made bumper finds under founder Sir Bill Gammell, including Mangala in 2004.
Cairn has made big discoveries off Senegal and developed a significant North Sea business under Mr Thomson, who took charge in 2011.
However, the dispute has been a costly distraction for management since 2014 when the Government of India launched its $1.6bn claim against the firm.
The claim concerns the company’s tax bill for 2007, during which Cairn completed a £980m initial public offering of the former subsidiary in India.
Cairn has always maintained it has met all of its liabilities in full.
Mr Thomson has visited India in the hope of finding a resolution.
He wrote to prime minister Narendra Modi in December 2015 highlighting the damage suffered by Cairn, which had been a model corporate citizen in the country.
The preceding month Mr Thomson said the government’s action had forced the company to shed around 40 per cent of its workforce and sell off assets to raise cash.
The UK Government has offered support for Cairn, amid warnings the saga could deter other firms from investing in India .
However, the Government of India appears to have remained unmoved.
In June it prevented Cairn getting $105m dividends sue from Cairn India and a $249m tax refund for 2011-12. Barclays Capital said the dispute had created material uncertainty around Cairn’s net asset value.
It is subject to a formal arbitration process that started in January last year.
Cairn had expected the tribunal considering the matter to deliver a verdict in March next year. The company said yesterday the final hearing has now been scheduled for August 2018.
It noted: “The Tribunal ... expects the parties to strictly adhere to the deadlines set out in the amended procedural calendar.”
After Cairn’s general meeting in May Mr Thomson said the firm would consider making payouts to investors if it won the dispute.
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