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Cairn Energy to plan special dividend as India agrees to refund $1bn

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Workers load medical aid to be flown in an Air India aeroplane to India, at Israel's Ben Gurion Airport near Tel Aviv, on May 4, 2021. - India's total COVID-19 caseload neared 20 million as oxygen shortages in hospitals exacerbated a devastating second wave, and much-needed foreign assistance continued to pour in. (Photo by Menahem KAHANA / POOL / AFP) (Photo by MENAHEM KAHANA/POOL/AFP via Getty Images)
In a filing Cairn said it expects 'to end 2021 net cash positive excluding India proceeds.' Photo: Menahem Kahana/POOL/AFP via Getty

Oil and gas group Cairn Energy (CNE.L) said in its half-year report on Tuesday that it expects to return "up to $700m" to investors via a special dividend and buyback, as it closes in on a settlement of a long-running dispute with the Indian government. 

The tax arbitration, which exceeded $1bn (£724m), came to a conclusion after India's government in August approved a bill that would rescind a 2012 amendment which let it pursue taxes retrospectively. 

Cairn, Vodafone (VOD.L) and more than 10 other companies were implicated in what had turned into a mounting issue for the country's prime minister. 

Narendra Modi's government had been ordered to pay Cairn roughly $1.7bn in compensation following a seizure of its stake in Cairn India in 2014 — an amount that was refused by New Delhi. Cairn then attempted to target billions in overseas government assets. 

In a filing Cairn said it expects "to end 2021 net cash positive excluding India proceeds."

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Cairn offered the resolution of the dispute as a highlight of its half-year results, in which the company also said it was moving towards a net-zero energy transition. 

It said it had a "roadmap developed with key senior appointments to deliver Cairn's energy transition strategy."

The money to be returned to shareholders will be handed out via a dividend of $500m and a share buyback programme, where the company buys up shares on the open market, for $200m.

The rest of the money will be used to expand the business, which also announced plans to buy Shell’s (RDSB.L) western desert assets in Egypt.

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