the times | Wednesday January 26 2022 43Business
government eventually amended its
tax laws and agreed to pay a rebate
worth $1.06 billion.
Capricorn also said yesterday that its
Egyptian assets had performed ahead
of expectations by producing an aver-
age of 36,300 barrels of oil a day from
their acquisition in September throughrumoured $900 million, which is
believed to have covered the cost of
acquiring the whole company.
It is Temasek’s biggest investment
since it acquired a stake of about 25 per
cent in AS Watson Holdings, the health
and beauty retailer, eight years ago for
$5.7 billion. The firm has a portfolio
worth more than £200 billion.
Jo Wetz, 45, Element’s chief execu-
tive, described the deal as a landmark
transaction in the sector and a “critical
step in the development of the group”.
He said that in the past decade the com-
pany had grown from 20 locations and
600 employees to more than 7,000
scientists, engineers and technologists
working in 200 laboratories in 30 coun-
tries, with turnover growing tenfold in
that period to $1 billion.
Element, which has been chaired
since 2017 by Allan Leighton, the City
big hitter who is chairman of The Co-
operative Group and a former chief
executive of Asda, was advised by Bank
of America, Goldman Sachs and
Rothschild.The City regulator has announced a
clampdown on financial firms that try
to sidestep paying compensation to
burnt customers by improperly using
insolvency techniques, with the pros-
pect of fines, bans and court action for
culprits.
The Financial Conduct Authority
said that there had been an increase in
the number of firms developing pro-
posals such as schemes of arrangement
or other restructuring plans to shield
themselves from liabilities to consum-
ers, particularly redress orders.
The warning comes in the wake of
moves by finance firms to walk away
from some of their liabilities, including
Amigo Holdings, the guarantor loans
company, and Provident Financial, the
high-cost credit business.
The regulator said that firms seeking
to cap their liabilities should provide
“the best possible outcome for custom-
ers... Failure to do so could result in the
FCA objecting to the firm’s proposals in
court. The FCA will also use its regula-
tory powers, including enforcement
actions for misconduct by firms or their
senior managers, when appropriate.”
It ruled out firms springing schemes
of arrangement on regulators at the last
moment, saying that it expected to be
informed as soon as a firm started
considering such a course of action.
The watchdog also rejected calls for it
to write “letters of non-objection” in
order to help to smooth the path of
schemes of arrangement, saying that it
was unlikely ever to agree to that.
Company directors seen to be
repeatedly “phoenixing” — closing one
firm to dodge liabilities and opening
another that assumes the old firm’s
assets — could be banned under fitness
and propriety tests.
Last May, a first attempt by Amigo to
limit payments to mis-sold borrowers
was rejected by the High Court after
the authority said that it believed
Amigo could afford to pay more. TheClampdown on
firms that dodge
compensation
Patrick Hosking company is now trying to push through
a second scheme, complete with a
capital-raising of £120 million to
£300 million, which could generate
more for the compensation pot. Exist-
ing shareholders, meanwhile, face
being drastically diluted in a proposed
rights issue that would increase the
number of shares in issue 20-fold.
In August Provident Financial was
cleared by the High Court to go ahead
with a scheme of arrangement for its
doorstep loans division, which enabled
it to walk away from some of the full
cost of redress — a plan that had been
opposed by the regulator
Sarah Pritchard, markets director at
the FCA, said: “Under existing com-
pany and insolvency law, firms have
options to limit their liabilities. When
making use of these, they still have a
responsibility to treat their customers
fairly. We will take action against firms
that don’t meet this obligation.
“The guidance we are consulting on
should help firms to understand our
expectations and ultimately help firms
to avoid proposing compromises that
are unacceptable to us because they fail
to provide the best possible outcome for
consumers.”
Philip Woodfield, a financial services
disputes partner with CMS, the law
firm, said: “The FCA’s mission is to
protect consumers from harm.
Throughout their lifecycle, firms need
to treat their customers fairly, including
when seeking to compromise creditor
claims. Firms, their principals and their
senior managers will take note of the
FCA’s powers of intervention, super-
vision and regulatory action to secure
those ends.”
Firms that applied for a compromise
agreement that envisaged them paying
less than full redress while continuing
to trade would come under particular
scrutiny because it undermined the
integrity of firms and reduced confi-
dence in the market, the FCA said.
The watchdog has asked for com-
ments by March 1.Temasek in its Element after
paying $7bn for tech group
Dominic WalshSingapore’s state-owned investment
group has acquired Element Materials
Technology from Bridgepoint in a deal
worth an estimated $7 billion.
The listed investment group’s sale of
Element was rumoured late last year
and Temasek, the Singapore fund,
quickly established itself as the favour-
ite by virtue of the 25 per cent stake it
had bought in the group in 2019.
The London-based Element, which
can trace its origins back 190 years,
provides testing, inspection and certifi-
cation for a wide range of products and
technologies, from mobile phones to
aircraft to chemicals, in advanced
industrial supply chains. More than
60 per cent of its work supports cus-
tomers improving sustainability.
Bridgepoint, which was floated on
the London Stock Exchange in July,
bought Element from 3i, another
quoted buyout group, in December
2015 for an undisclosed sum. It sold a
minority stake to Temasek in 2019 for atax settlement to spark share buyback
fund deals. Capricorn paid a $257 mil-
lion special dividend last year after sell-
ing its stake in a project off Senegal.
The London-listed company, which
changed its name from Cairn Energy
last year, is headquartered in Edinburgh.
It owns production assets in Egypt and
has exploration interests in areas includ-
ing the North Sea and Mexico.
The tax dispute with India dates from
2014 and relates to the reorganisation
and flotation of an Indian subsidiary in- Towards the end of 2020, an inter-
national arbitration panel ruled that
Capricorn should receive about $1.6 bil-
lion in compensation and interest.
Last year, the company made legal
moves to seize Indian state-owned
assets in places such as France and the
United States after being unable to
agree a payment schedule. The Modi
think tank and the London
School of Economics noted
the huge potential for growth
in UK services exports from a
trade agreement with India,
but their report warned that
Britain must avoid a
disruption similar to the
“China shock” that hit
American manufacturers
when they were faced with a
trade partner with cheaper
labour costs. If British firms
were undercut, services jobs
in London and the southeast
would be most at risk, they
claimed.
The government began
formal negotiations this
month over a potential tradesignificant domestic
production.
The report
highlighted huge
potential for growth
in services exports,
which underperform
in India relative to
other regions,
accounting for 1.8 per
cent of imports to India,
against 3 per cent in China
and 4.2 per cent in Malaysia.
Sophie Hale, principal
economist at the foundation,
said: “India is changing as well
as growing, so any trade deal
means accepting uncertainty
about the competition that
will face UK firms.”deal with India, which is
forecast to become the
world’s third largest
import market by- At present
companies exporting
to India face average
tariffs of 19 per cent,
compared with 2 per
cent in the United States.
An agreement on free
trade with India also could
give UK firms a “first mover”
competitive advantage over
rivals in America and the
European Union, which do not
have preferential access. It
could result in consumer
benefits from cheaper goods
where the UK does not have
sign
proh
p
in
w
in
oth
acco
cento
against 3
and 4.2 pe
Shiss.uld
over”
India’s
economy is
changing far
more rapidly
than more
advanced
economiesASHISH VAISHNAV/SOPA/LIGHTROCKET/GETTY IMAGESto the end of 2021. There is expected to
be a further rise this year, with guidance
of between 37,000 and 43,000 barrels
each day at a cost of between $4.50 and
$5.50 per barrel.
Capricorn, which had $133 million of
net cash at the end of December,
expects to spend about $200 million on
exploration and production during- The company has no drilling
commitments beyond this year.
It will receive $76 million in the
second quarter of this year from Wal-
dorf, the company that bought Capri-
corn’s stakes in the Catcher and Kraken
North Sea fields last year. Further sums
— based around minimum production
targets and average oil prices — are
expected between 2022 and 2025.
Shares in Capricorn Energy rose by
12¼p, or 6.6 per cent, to 199p.
Capricorn has had tax issues in India