Repsol denies bowing to external pressure

Repsol was forced to assert its independence on Monday amid reports that the Spanish oil and gas group had backed out of a deal with Lukoil two years ago under pressure from the government.

The company, which is again being courted by Lukoil, said it had held talks with the Russian energy group about a possible cross-shareholding at the end of 2006.

The aim was to replace some of the oil and gas reserves wiped out by an embarrassing writedown on South American assets about a year earlier.

However, Repsol dropped the idea in January last year after Sacyr Vallehermoso, the construction company, bought 20 per cent of the Spanish energy group as part of a state-sponsored campaign to keep foreign companies out of the sector.

The decision not to proceed with the Lukoil deal was taken by its own negotiating team, without any "external petition", Repsol said in stock market filing on Monday.

Its comments came in response to Spanish media reports suggesting the company had buckled to pressure from the socialist government of Jose Luis Rodriguez Zapatero.

Sacyr is now trying to offload its Repsol holding to avoid breaching covenants on a €5.1bn ($6.5bn) syndicated loan extended by banks for the original share purchase, and Lukoil has emerged as a leading candidate to buy it.

The potential sale has unnerved the government, which fears a full-blown takeover for the country's only integrated oil and gas group. However, as one of the few alternatives to northern Africa and Latin America as a source of oil and gas, Russia is viewed as an important ally in the quest to secure supplies.

The government is also concerned about the effect of a default by the heavily-indebted Sacyr on the Spanish banking system, and on the country's image abroad.

La Caixa, the Catalan savings bank that is both a Sacyr creditor and a Repsol shareholder, indicated on Friday it was open to selling some of its 12.5 per cent stake. Other institutional shareholders have also said they would sell.

La Caixa has also assumed the role of lead negotiator between Lukoil and Sacyr's creditors, led by Santander, Spain's largest bank.

One idea involves the Russian group assuming all or some of Sacyr's debt related to Repsol in return for the 20 per cent stake. It would then buy a further 9.9 per cent from La Caixa, using vendor financing.

Shares in Repsol on Monday closed up 7.8 per cent at €15. Sacyr's shares dropped 4.9 per cent to €8.

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