London. Heritage Oil has obtained the necessary permit from the government of Uganda to sell its entire stakes in blocks 1 and 3a to Tullow Oil for up to US $1.50 Billion. "The transaction is expected to complete within five working days following finalisation with Government of a mechanism, including arbitration, for dealing with any taxes lawfully payable from the disposal of the Assets," Heritage said today.
On completion of the deal Tullow is due to receive $1.35 Bn plus another $150 million deferred consideration in cash.
But there appears to be some wrangling over relates tax issues over the deal, with Heritage saying it has been advised that there is no tax payable on the deal in Uganda, while the one of the Ugandan government ministers is suggesting tax is payable on $404.925 m,
Heritage said the permission for the deal to its subsidiary Heritage Oil and Gas Limited (HOGL) is conditional on paying any taxes on demand which may arise from the disposal of the assets.
But the company goes on: "In a separate letter Mr. Kabagambe-Kaliisa, Permanent Secretary to the Ministry of Energy & Mineral Development, advised that if HOGL was to resolve the tax matter by arbitration in London, then such arbitration would be on the basis that HOGL deposit approximately US$121.5 million, representing 30% of the disputed amount of US$404,925,000 with the Uganda Revenue Authority and provide a bank guarantee for the balance. "
Heritage previously said on 17 June that it proposed to the Ugandan Government the option of arbitration in London.
"Heritage's position, based on comprehensive advice from leading tax experts in Uganda, the United Kingdom and North America, is that the disposal of the assets is not taxable in Uganda. Heritage is considering Government's response and will update the market in due course," the company said.
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