MOSCOW. April 21 (Interfax) - Russian state property agency Rosimushchestvo shares the Finance Ministry's position that the state companies should pay at least 50% of earnings as dividends, agency head Dmitry Pristanskov said.
At the same time, Rosimushchestvo will take an individualized approach that considers the impact dividend payments will have on investment program implementation.
"You are aware that this year's budget assumes that the state companies will pay at least 50% of IFRS profits as dividends. We adhere to this policy together with the Finance Ministry," Pristanskov said, adding: "achievement of strong financial indicators is only possible given efficient corporate governance."
"We see use of an individualized approach in calculating dividend payments of stock companies, taking into account an analysis of the impact a high dividend payment level has on the corresponding programs of each company individually, as one of the main tasks in 2017," he said.
The 50% level was in effect last year as well. "That said, decisions on the size of dividends were implemented taking into account the effect, of course, on the financial condition of the company, on the need for those companies to implement documents of a strategic nature, long-term programs of development, investment programs," Pristanskov said.
The debate over the share of earnings the big state companies should pay as dividends for 2016 has continued for months. It never really ended last year, even after the 50% minimum requirement was in put into effect, since so many companies managed to win exceptions for themselves. A meeting chaired by First Deputy Prime Minister Igor Shuvalov in the middle of December resulted in the approval of the principle that a minimum of 25% of net profit should be paid. Based on an audit of the specific company (its investment program, the size of debt, ability to service debt and so on), the final dividend percentage might be higher. Nonetheless, the Finance Ministry continues to insist that the 50% standard be extended. That is the level of dividend revenue assumed in the 2017 budget. Moreover, a letter from Rosimushchestvo in preparation for another meeting Shuvalov held in mid-March recommended that the state companies pay at least 50% of net profit (adjusted for exchange rate gains).
The authorities want the 50% standard to apply to a maximum number of state companies, but there will be no one-size-fits-all approach, Shuvalov said last week.
"We are working out the approaches now. The proposals now are that a maximum of 50% be taken, from those that can afford it. Where that is impossible, there must be weighty reasons and there must be an involved procedure for taking such decisions," he said. "For dividends we haven't arrived at an overall decision yet. We are orienting the companies toward paying the maximum: this is good for investors and for demonstrating some kind of investment appeal, so that they buy these shares. Overall, we believe that now is the time when dividends up to 50% may be paid. For some companies, it is the opposite, from 50% and lower," he said.
Finance Minister Anton Siluanov has said repeatedly in recent weeks that his ministry's position is unchanging. "I reiterate that in the current conditions, when the state is not raising the tax burden, we can demand a minimum of one half of distributable earnings," Siluanov said. By lobbying for a lower dividend payment, top executives at the state companies raise questions about their own effectiveness, he said.
In the case of Rosneft (MOEX: ROSN), the dispute over dividends resulted in two different draft directives for the board of directors at the oil giant, which the state controls via Rosneftegaz: Rosimushchestvo drafted a directive stipulating payment of 50% of IFRS net profit as dividends, while the Energy Ministry calls for payment of 35%.
Gazprom (MOEX: GAZP), another state-controlled energy giant that is a major source of dividend income for the budget, wants to hold its dividends for 2016 at the 2015 level: 7.89 rubles per share. The budget currently assumes Gazprom will pay 18.86 rubles per share (50% of projected IFRS net profit). Based on preliminary estimates from analysts, the dividend proposed by management is only about 20% of the IFRS net profit in 2016. The board of directors must make a final decision on the size of the dividend in May.
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