Repsol approves $5bn deal from Argentina over YPF expropriation

25 February 2014 22:47 Source:ICIS News

MEDELLIN, Colombia (ICIS)--Repsol’s board of directors has approved a definitive $5bn compensation package from the Argentine government for the expropriation of the company’s majority share in Yacimientos Petroliferos Fiscales (YPF), the Spanish oil giant said in a statement on Tuesday.

The deal, which still needs to be passed by Repsol shareholders and the Argentine Congress, is around half the $10.5bn the Spanish firm had been seeking since Argentina seized 51% of YPF in May 2012 following a dispute over under-investment and dwindling production.

“I believe that reaching a friendly agreement in this dispute, which has gone on for two years, is extremely positive,” said Repsol Chairman Antonio Brufau in a video message that accompanied the statement.

“The agreement we have reached will without doubt mean a boost to what we are currently working towards,” he added. “Another financial boost that will allow us to look towards the future with more hope and with a higher guarantee of success.”

Under the terms of the agreement, which is in line with a deal signed between both parties in November, Argentina will pay the amount in dollar-denominated public bonds that Repsol can either keep until maturity or sell.

Argentina guaranteed that Repsol would receive the full amount even if the market value of the bonds decrease.

In return, Repsol agreed to drop legal proceedings against the Argentine government, as well as YPF and subsidiary company YPF Gas, and waive any future claims.

Argentina had been eager to resolve the dispute as it seeks partners to help develop the country’s huge shale reserves. However, following the seizure of YPF, potential investors had been cautious.

In a briefing with journalists, Argentine Cabinet Chief Jorge Capitanich described the deal as a “qualitative breakthrough that will secure and streamline financing, and promote investments that will allow energy self-sufficiency”.

By Simon West