Repsol has provided a provision of 837 million euros, which will be charged to its 2019 accounts, after knowing a “partial” award unfavorable to its interests recently issued by an arbitral tribunal in the framework of the arbitration procedure that the oil company initiated in 2016 Chinese public Sinopec and its subsidiary Addax Petroleum against Talisman, the Canadian oil company that the Spanish acquired in 2015 for 10.4 billion euros. The arbitration is related to the purchase to that Canadian company of 49% of a subsidiary in the United Kingdom in 2012, for which Sinopec claims about 5.5 billion dollars.
“Although the amount of the possible compensation (if any) is not known with certainty, given that the dispute still has a long way and numerous pending decisions, in view of the partial award issued, Repsol has prudently provided a provision of 837 million euros for the entire litigation, which will be reflected in its financial statements as of December 31, 2019, “Repsol explained in a note sent to the National Securities Market Commission (CNMV). The oil company already announced in December that it would register a 4.8 billion adjustment in their 2019 accounts for impairments related to depreciation of assets due to the energy transition.
In its note to the CNMV, Repsol recalls that “the Arbitral Tribunal issued a first partial award in 2017 rejecting the claims of Addax and Sinopec based on breach of contractual guarantees.” However, “in 2020 the Arbitral Tribunal has issued a second partial award on one of the five issues of the liability phase and, although Repsol had considered – based on the external advice that had been provided to it – and continues to consider that the corresponding claims are unfounded, “the Court has decided that the two defendant subsidiaries” are accountable to Sinopec and Addax regarding that matter. “
Repsol notes that this new award “addresses one of the five claims regarding liability” and it is unknown when those pending resolution will be issued. “In principle, once all of them have been decided, a new procedural phase will be necessary to determine the amounts, the schedule of which has not yet been established” and “it is likely that this calendar should include deadlines for new writings of allegations, contribution of tests, statements of additional experts and a new oral hearing. “
“It is estimated that the phase related to the determination of the amount, without taking into account any possible challenges to the awards, will not be resolved before the first quarter of 2022. The company is analyzing the different actions that fit this partial award and foresees his challenge to the courts of Singapore. “
In the arbitration, “regarding events that took place in 2012, before the acquisition of Talisman by Repsol in 2015 – and that does not imply any action taken by Repsol -, Addax and Sinopec requested, in the event that their claims an estimated total amount of US $ 5.5 billion was estimated, which according to your requests, would correspond to the amount of your initial investment in TSEUK and any subsequent investment increases, made or to be made in the future, as well as losses of opportunity that could have occurred, “recalls the oil company.