Russia Said to Backtrack on Higher State-Company Payouts

Updated on
  • Minimum 25% threshold seen after failed 2016 push for more
  • Gazprom, Transneft resisted state push to reap higher payouts

Russia is preparing to abandon years of efforts to wrest higher dividends from state-owned companies, effectively conceding defeat after facing intense pushback against government plans from some of the nation’s corporate giants.

The government is planning to reduce the minimum payout to 25 percent of net income under international accounting standards, closer to where it was before an increase to 50 percent last year, according to two officials familiar with the matter. They asked not to be identified because the discussions aren’t public and there is no final decision. Authorities will continue to push for higher rates from some companies, one of the people said.

After scraping for cash to survive the biggest oil downturn in a generation, the government is changing tack now that public finances stabilize following a deal late last year to trim global crude supply. Even when under pressure in 2016 to bridge the widest budget deficit in half a decade, authorities allowed for exemptions to many of Russia’s largest corporations from paying 50 percent of their profit in dividends. 

The rules applied to all state companies, including Gazprom PJSC, Aeroflot PJSC, Russian Railways JSC and Rosneftegaz JSC, which holds a majority stake in Rosneft PJSC. According to the terms of the budget, state companies were supposed to provide 483 billion rubles ($8 billion) in dividends this year, an estimate that assumes a payout of half their net income.

Stocks Drop

Rosneft shares dropped as much as 3.3 percent, the lowest in a month, while Gazprom slid 3 percent, the lowest on an intraday basis since Nov. 29. Flagship carrier Aeroflot PJSC also fell 3 percent, while oil-pipeline operator Transneft PJSC declined 1.4 percent.

“If you hold a controlling stake and can’t influence a decision about dividend payments, that means either something is wrong with the corporate-governance procedures of the given company or there is absolutely no will or desire on the part of the main shareholder to do or change anything,” said Alexander Losev, head of Sputnik Asset Management, a Moscow investment fund.

Confusion has reined about the policy since instructions issued for last year including the 50-percent figure -- expired starting this month. A document on dividend rules for 2017, which was submitted to the government, was returned for reworking, Deputy Finance Minister Alexey Moiseev said last week.

Finance Minister Anton Siluanov last week said that the budget was still based on the assumption that companies would pay dividends equal to 50 percent of last year’s profit in 2017.

The Finance Ministry wants to reduce the budget shortfall by one percentage point each year to balance the books by 2020. It brought the deficit below 4 percent last year by tapping one of its wealth funds and selling some state assets.

Plans to double dividend payouts have met with opposition before. Deputy Prime Minister Arkady Dvorkovich has suggested the government should decide on dividends for each state-run company separately after studying their investment programs and current market conditions.

— With assistance by Vladimir Kuznetsov

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