Dividends in Question as Russian Petrochemical Plant Expands

  • Investment in new chemicals plant is planned at $7.8 billion
  • Dividend payout may rise in next four years from 30% of net

Nizhnekamskneftekhim PJSC, Russia’s largest publicly traded petrochemical producer, may not repeat a record dividend this year as it channels $7.8 billion into an ethylene complex to triple output, according to its majority shareholder.

“The dividends may be not be paid or cut to a minimum next year,” Albert Shigabutdinov, director general of Taif OJSC, the majority of the producer, said in an interview in Kazan, capital city of Russia’s republic of Tatarstan. There has been no decision yet, he said.

Nizhnekamskneftekhim’s preferred shares jumped 44 percent in Moscow from the beginning of the year after a record dividend on 2015 profit, pushing its market capitalization to almost $1.6 billion, a fifth of the new plant’s cost, as of Tuesday’s close. The stock fell as much as 20 percent Wednesday, and traded down 8 percent as of 4:43 p.m., the biggest decline since April 29.

The complex, at the company’s existing site, will be able to produce 1.2 million tons of ethylene a year, tripling output as global demand grows for plastics used in bags, toys and bottles, according to Shigabutdinov. Almost 50 percent of its output is sold outside Russia.

Nizhnekamskneftekhim plans to cover 15 percent of the cost of the new plant with its own funds and borrow the rest from Russian and foreign banks, Shigabutdinov said. The company may consider selling shares to finance the plant as a back-up option “in case there is not enough money and markets decline,” Shigabutdinov said. “The stock will be offered first of all to the current shareholders.”

Taif will discuss dividends with the government of Tatarstan, Shigabutdinov said. While Taif owns 52.35 percent of the petrochemical company’s ordinary stock, the administration has a so-called golden share, which gives it a deciding vote in some major corporate decisions. Regional oil producer Tatneft PJSC holds just less than 25 percent. Tatneft’s press service didn’t immediately answer calls.

By 2020, when the first two trains at the new plant are scheduled to start, Nizhnekamskneftekhim may raise the dividend payout from the current 30 percent of profit, Shigabutdinov said, without giving a target. The company’s press service didn’t immediately respond to a written request for comment.

Construction of a third train is set to start in the middle of 2018 and a fourth in mid-2019. The project will not reach full capacity before 2023, according to Shigabutdinov.

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