Russia’s Budget Plan Shows Dividend Increases Delayed to 2016

OAO Gazprom and VTB Group are among Russian state-controlled companies getting a two-year transition period before the government orders them to boost dividend payouts, according to a Finance Ministry draft budget.

State companies are set to reach 35 percent of profit under International Financial Reporting Standards in 2016, Svetlana Nikitina, a Finance Ministry spokeswoman, said today by phone. The draft budget on the State Duma’s website shows estimated payments for 16 companies, including oil pipeline monopoly OAO Transneft, telecommunications operator OAO Rostelecom and airline OAO Aeroflot.

Russia is weighing dividend increases to help attract investors and balance the budget after President Vladimir Putin pledged to boost social spending. The government is freezing price growth next year for monopolies including Gazprom and Transneft to fight inflation, while Putin today told state companies to maintain investments to pull the economy out of its slowest growth since a 2009 recession.

“We are disappointed and hope the government will speed up the dividend reform,” Lev Snykov, a partner at Greenwich Capital in Moscow, which holds Russian stocks including Gazprom, said by phone today. “The investment attractiveness of state-owned energy companies will clearly suffer should the RAS-based dividend policy remain for longer.”

Gazprom dropped 1.6 percent to 143.35 rubles, while Transneft sank 1.5 percent and VTB fell 1.3 percent.

The government will set companies’ payouts on an individual basis during the transition period in 2014 and 2015, according to Nikitina.

Gazprom, the world’s biggest natural gas producer and Russia’s gas pipeline owner, and Transneft plan to pay out 25 percent of 2013 net income under Russian accounting standards. Gazprom said earlier this year it would switch to basing distributions on international-standard profit from 2014, after previously saying it was aiming for the 2013 financial year.

A move to international standards isn’t realistic before 2015 or 2016, Transneft President Nikolay Tokarev told reporters today in Astrakhan. VTB Chairman Andrey Kostin said yesterday that the bank isn’t against paying out 35 percent of net income. German Gref, the head of OAO Sberbank, said last week the lender, majority owned by the central bank, would need additional capital to meet the requirement or may slow lending, according to Prime news service.

Gazprom spokesman Sergei Kupriyanov wasn’t immediately available for comment.

Under the budget plan, the Finance Ministry estimates state revenue from Gazprom and VTB dividends will nearly double in 2016 from 2015, while Transneft’s payment will jump 13-fold to 48.8 billion rubles ($1.5 billion).

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