Russian Billionaire Owners to Block TNK-BP Dividend

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TNK-BP Billionaires Consider Dividend Halt
The TNK-BP Holding company headquarters in Moscow. Photographer: Alexander Zemlianichenko Jr/Bloomberg

BP Plc’s billionaire partners in the TNK-BP oil venture plan to stop a $1.8 billion dividend payment as a dispute about the U.K. explorer’s alliance with Russia’s biggest oil company worsens.

“The decision for now is not to approve the dividend” that was planned to be paid this quarter, said Stan Polovets, the chief executive officer of AAR, which represents the Russian partners in TNK-BP, today by phone from London. TNK-BP’s board is scheduled to meet Feb. 18, he said.

The partners last week asked a London court to halt a share swap and Arctic exploration agreement between BP and state-owned OAO Rosneft, saying it violates the exclusivity provisions of TNK-BP’s shareholder agreement and may erode the competitive advantage and value of the venture.

The dispute threatens a second breakdown in relations between TNK-BP’s shareholders. In 2008, current BP Chief Executive Officer Robert Dudley was ousted as head of TNK-BP as the billionaires and BP argued over strategy. The 50 percent holding in TNK accounts for about a quarter of BP’s output and a fifth of reserves.

AAR’s board met today to discuss halting dividends for the fourth quarter and having TNK-BP hoard cash. The board comprises Russian billionaires Mikhail Fridman, Viktor Vekselberg and German Khan and U.S. businessman Len Blavatnik.

Halting Payments

TNK-BP’s management also accused David Peattie, BP’s head of Russia and representative on the Moscow-based venture’s board, of a potential breach of fiduciary duty for his part in a deal between the London-based company and Rosneft, according to a copy of a letter sent to him and read by Bloomberg News.

“The BP-Rosneft deal risks sidelining TNK-BP, i.e. excluding it from access to additional development and production acreage in Russia and from overseas expansion,” said Chris Weafer, chief strategist at UralSib Financial Corp. in Moscow. “That is an intolerable situation for the AAR shareholders and led to this action to force a new deal or to open an exit route.”

Robert Wine, a spokesman for London-based BP, said yesterday that dividend payments were a matter for the TNK-BP board and not just the Russian shareholders. TNK-BP spokesman Dmitry Sergeev declined to comment on dividends, saying it’s a matter for shareholders.

‘Expedited Arbitration’

BP agreed on Jan. 14 to swap about $7.8 billion of its own stock for 9.5 percent of Rosneft. The two also agreed to explore an area of Russia’s Arctic waters about the size of the U.K. North Sea. London’s High Court will consider AAR’s application for an injunction on Feb. 1.

BP has proposed that AAR “consent to an expedited arbitration process in Sweden as soon as possible,” Vladimir Buyanov, a Moscow-based BP spokesman, said by e-mail. “We are in full compliance with the shareholder agreement and are honoring our obligations, including any that might be related to the Rosneft deal.”

Prime Minister Vladimir Putin praised the BP and Rosneft partnership as one that “may become large-scale and have a serious impact on the global oil and gas industry,” during a meeting with Dudley and Peattie near Moscow the day the deal was announced in London.

BP provided details on the deal with Rosneft to TNK-BP management on Jan. 27, almost two weeks later, according to the letter to Peattie.

Received Letter

“TNK-BP considers that the failure by you to advise the TNK-BP board” is a “potential breach of your fiduciary duty as a director of TNK-BP” said the letter, signed by TNK-BP’s executive vice president for legal support, Igor Maydannik.

Peattie said in an e-mail that he received a letter from Maydannik and declined to comment on its contents.

TNK-BP Investments Ltd., the 50-50 venture, had planned to pay at least $4.8 billion in dividends for 2010, or about $5.6 billion if the venture doesn’t acquire BP assets in Venezuela and Vietnam, said a person with knowledge of the matter.

In October, BP agreed to sell operations in Vietnam and Venezuela to TNK-BP for $1.8 billion. BP pledged to sell $30 billion of assets to help cover costs after its Macondo well leaked crude into the Gulf of Mexico for 87 days last year, the worst spill in U.S. history.

BP is likely to bring back a dividend and may pledge sales beyond the $30 billion target when it outlines strategy and announces full-year results on Feb. 1, investors said last week.

BP’s shares have fallen 2.9 percent since the deal was announced on Jan. 14, declining as 0.4 percent today to 484.9 pence as of the 4:30 p.m. London close. TNK-BP Holding, the traded unit of the 50-50 venture, has dropped 8.3 percent in the period, sliding 1.9 percent today to 82.8 rubles in Moscow, while Rosneft has gained 9.6 percent to 254.6 rubles.

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