Oil & Natural Gas Corporation (ONGC) has firmed up its funding strategy for acquiring the UK-listed Imperial Energy, which has a significant presence in Russia?s oil & gas sector. ONGC said on Friday that it would fund as much as $1.59 billion of the $2.59 billion required by its overseas arm, ONGC Videsh Ltd (OVL), for the acquisition. The remaining $1 billion will be raised as bridge loan by OVL.
ONGC chairman & managing director RS Sharma said the company has sufficient cash balance to fund an acquisition five times the size of Imperial. The company has a cash balance of more than Rs 25,000 crore, besides equity holdings worth Rs 6,100 crore (as on September 15) in state-owned oil & gas firms?Indian Oil Corporation and GAIL (India) Ltd. ONGC holds 8.83 % stake in IOC and 4.83 % in GAIL.
?We have sufficient options to fund the Imperial acquisition. Funds are not a constraint for ONGC or its subsidiary OVL. If need be, we can always unlock our holdings in IOC and GAIL, as also funds locked in government bonds. But that won?t be required for the Imperial acquisition. Even the bridge loan of $1 billion has been planned so as to bring in more credibility to the transaction. Loan could be a mix of local and overseas borrowings,? Sharma said.
ONGC hopes to get the go ahead from Kremlin for acquiring Imperial. If Kremlin approves the deal, Imperial would be OVL?s biggest overseas acquisition. OVL paid $1.7 billion to buy a stake in Exxon Mobil Corp?s Sakhalin-I field in Russia and $785 million for a stake in the Greater Nile project in Sudan, both in 2003. Imperial Energy will give OVL, which already has a 20 % stake in Sakhalin-1 project in Far East Russia, access to Siberia, a region believed to hold huge hydrocarbon deposits.
The OVL-Imperial deal is contingent upon Kremlin?s approval as Imperial has assets in the Tomsk region of western Siberia. A committee headed by the Russian Prime Minister Vladmir Putin, which screens foreign investments in strategic sectors, is to decide on OVL?s acquisition of Imperial soon. Petroleum minister Murli Deora had spoken to Russian President Dmitry Medvedev, who had promised to support the deal.
?We have received a verbal assurance that the Russian government has no objection to our deal but we are still awaiting a written communication,? an OVL director said. ?We expect to hear something from them next week,? he indicated.
The board of Imperial had last month recommended OVL?s 1,250-pence-a-share bid. But Kremlin may want OVL to sell a part of the Imperial stake to a Russian state oil group such as Rosneft, which OVL said it is open to.