Financial experts complain to Shuvalov about Transneft’s dividend policy

Last week, the Association of financial market participants Nonprofit Partnership for the Development of Financial Market RTS (NP RTS Association) sent a letter to Russia’s Deputy Prime Minister Igor Shuvalov where they asked to stop “discriminating the rights” of the owners of PJSC Transneft’s preferred shares, according to a statement by Interfax. RBC reviewed a copy of this letter.
The authors criticize Transneft’s 2013 and 2015 dividend policy. The ratio of dividends on preferred and ordinary stock was below 60% for 2013 dividends and less than 40% for 2015 dividends, NP RTS Association notes.
Based on the company’s performance in 2013, the shareholders earned RUB 7.9 billion in dividends (70.16% of the company’s net RAS / Russian GAAP profit, including RUB 1.126 billion paid on prefs (RUB 724.21 per share against RUB 1,221.38 per ordinary share). The 2015 dividends will amount to RUB 823.31 RUB per preferred share, RUB 2,077 per ordinary share.
Roman Goryunov, the president of NP RTS Association, confirmed to RBC that the letter was sent. “The situation does raise deep concern over the infringement on minority shareholders’ rights to a fair reward, and casts a shadow on the entire Russian stock market,” he says adding that such a practice could have “negative effects” on the planned privatization of state assets. The letter was inspired by the financial market participants that are members of the nonprofit partnership; NP RTS Association itself does not own preferred shares of Transneft, its secretary Lilia Zakirova commented.
Shuvalov instructed the Ministry of Economic Development and the Ministry of Finance to prepare a response to this request with the involvement of the Central Bank of Russia, according to Interfax’s sources. The Ministry of Economic Development’s representative referred the issue to Shuvalov’s executive office, while the Deputy Prime Minister’s representative did not return RBC’s calls for comment. The Ministry of Finance, judging by a comment from its representative, has not yet received the instruction. The Ministry’s position on dividends has not changed: state-owned companies should pay at least 50% of their IFRS or RAS profits, whichever is the greater, she added.
Similar requests were previously submitted to the Government by the Association of Institutional Investors and Berwin Leighton Paisner (an international law firm acting on behalf of several Transneft’s preferred shareholder). Besides, Shuvalov, Alexey Ulyukayev (the Minister of Economic Development) and Dmitry Pristanskoy (Head of Rosimuschestvo) received complaints about the company’s dividend policy from representatives of several investment funds (UFG Asset Management, Leader Asset Management), as well as Deutsche Bank, Forbes informed.
“The submitted letters can arguably be viewed as having much similar in content,” Transneft spokesman Igor Demin commented for RBC. However, none of the letters was written by a person holding a stake in the company, he notes: “Therefore, the letters could be considered as a statement of expectations of some investors linking their investment in Transneft to the company’s ability to meet such expectations. However, Transneft shares are investment attractive and going up in price, Demin said adding that he saw no way the amount of Transneft’s dividends could influence the plans of bidders for the state-owned stakes in Bashneft or Rosneft.
Ilya Sherbovich’s UCP Fund, one of the largest minority shareholders of Transneft, filed a claim to the Arbitration court as early as in March 2016, seeking an extra payment of nearly RUB 100 million in 2013 dividends from the company. This claim will be considered on September 19. According to Transneft’s data as of January 20, 2016, UCP held 15.5% of the company’s authorized capital (71% of its preferred shares). The Government owns 100% of Transneft’s ordinary shares (78.1% of its authorized capital).
For details, see RBC:
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