OIL PACT

Repsol’s board approves deal on YPF compensation

Talks to flesh out details on post-expropriation package to start soon as Spanish company demand payment “guarantees”

Spanish oil company Repsol’s board of directors on Wednesday approved an in-principle compensation deal for its YPF unit, which was expropriated last year by the Argentinean government.

The deal, which was brokered by the Spanish, Mexican and Argentinean governments on Monday, calls for Repsol to be compensated with “liquid” assets, which the company has insisted should not have any strings attached to them, meaning it can dispose of those assets as it deems fit.

The amount of compensation has yet to be fixed but a figure of five billion dollars (about 3.7 billion euros) has been bandied about, around half of what Repsol believes its investment is worth.

“The board of directors have analyzed and positively valued the in-principle agreement announced by the Argentinean government with respect to compensation for the expropriation of the 51-percent stake in YPF held by Repsol,” the company said in a statement. “With the object of developing this in-principle agreement, Repsol has decided to shortly initiate talks between its management and the Argentinean government with a view to finding a just, efficient and prompt solution to the dispute.”

Repsol said any agreement must be accompanied by “appropriate guarantees.” There has also been some talk of Repsol being offered dollar-denominated Argentinean government bonds, which may not be acceptable to the company.

As of June, the value of the 51-percent controlling stake Argentina appropriated in Repsol’s books was 5.436 billion euros, meaning that the Spanish company will have to take a loss if the final figure agreed upon is five billion dollars. However, because of tax factors, the net loss might only amount to 500 million euros.

The advantage of accepting the deal is the avoidance of having to continue to pursue lengthy and costly legal means to recover its investment, with no certainty of the outcome of arbitration.

The Argentinean government needed to seal a deal in order to be able to attract much-needed foreign investment.

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