Russia May Raise State Company Dividends to Help Budget

Russia’s Finance Ministry is calling for state-run companies to increase dividend payments to help boost budget revenues.

State-backed companies would have to pay at least 35 percent of profit under international accounting standards from 2016 under the proposal, Finance Minister Anton Siluanov told a parliamentary budget committee meeting today in Moscow. The ministry’s press service confirmed the comments by phone.

President Vladimir Putin has targeted dividends in a drive to raise budget revenue, lure foreign and domestic investors to the local exchange and turn Moscow into an international financial center. Russia began taking a “tougher stance on companies’ dividend policy,” First Deputy Prime Minister Igor Shuvalov said in an interview on June 21.

“The decision hasn’t been take yet” whether to increase the payouts to 35 percent from as early as 2015 or to wait until 2016, Shuvalov told reporters in Moscow late today. “It’s necessary to see whether the companies can handle it.”

The Economy Ministry is fighting the move. Payouts should be kept at 25 percent of profit until state companies have been consulted and moved to international-standard accounts, Olga Dergunova, a deputy minister, told reporters at the State Duma.

The jump to 35 percent of net income will bring as much as 106 billion rubles ($3.29 billion) of additional inflows into the budget, Siluanov said.

“Even if the payout starts from 2016 as the Finance Ministry is apparently proposing today, this would be a huge driver for Gazprom, Rosneft, Transneft, Alrosa and the whole market in general,” Julian Rimmer, a trader at CF Global Trading UK Ltd. in London, said by e-mail.

Trading Discount

OAO Gazprom, the state-run natural gas exporter, jumped as much as 1.5 percent, before closing down 1.3 percent in Moscow. The depository receipts fell 0.8 percent in London.

Russian stocks on average trade at a discount to developing-nation equities, with the Micex Index at 4.24 times estimated twelve-month earnings, compared with 10.54 times for the MSCI’s Emerging Markets Index. Gazprom trades at 3.20 times.

The government and the president must approve the Finance Ministry’s proposal for it to go into effect, Siluanov said.

“Our position is not to touch the 25 percent and make a road map for each of the companies to move to IFRS by 2016,” Dergunova said.

OAO Rosneft, the world’s biggest publicly traded oil producer by output, will “easily” be able to make a higher payout if required, Chief Executive Officer Igor Sechin said Sept. 14 in Sochi.

Shuvalov said in June that state companies will need to get the prime minister’s approval for exemptions from paying out the equivalent of at least 25 percent of profit under international accounting standards.

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