Transneft to give half of profit to shareholders for the first time ever

The company will earmark 82.5 billion rubles for 2017 dividends
On May 17, Arkady Dvorkovich (serving as Deputy Prime Minister at that time – Vedomosti’s note) signed a directive for Transneft to earmark 54.9 billion rubles for 2018 dividends, the company’s president Nikolay Tokarev told Interfax.
Last year, the company paid 27.6 billion rubles in interim dividends for the first half of 2017 (24% of its IFRS net profit). This means that the aggregate dividends payable to the shareholders for the 12-month period in 2017 will reach 82.5 billion rubles, which is 50% of Transneft Group’s normalized profit, the company’s spokesperson noted. Therefore, the state-owned company will comply, for the first time ever, with the Government’s recommendation to earmark 50% of the 12-month profit for dividends.
Transneft has never been so generous before: the company paid 25% of the consolidated profit in 2016 dividends, a mere 9% in 2015 dividends). All the ordinary shares of Transneft belong to the Government of Russia. The company’s preferred shares accounting for 21.9% of the authorized capital are trading on the Moscow Exchange.
Private shareholders (who are guaranteed to receive 10% of the net profit) often criticized the company because of the meager dividends. In particular, Ilya Sherbovich’s UCP Group, a long-standing shareholder of Transneft (holding 71% of all preferred shares) challenged the smaller dividends per share for private shareholders compared with the amount payable to the Government in court. UCP discontinued all legal disputes a few days before unloading its stake in March 2017, while Transneft amended its Articles of Association: now minority shareholders cannot be paid lower dividends than the Government.
Transneft’s new shareholders are RDIF (0.43%) and the Russia-China Investment Fund (RCI, 1.49%, established by RDIF and China Investment Corporation). 53.57% of the Company’s preferred shares are under discretionary management by the Gazprombank-Financial closed-end mutual fund whose principal investor is Transneft-Invest. At the same time, Transneft adopted a new dividend policy whereby it aims at paying 25, 20 or 15% of the normalized net profit earned in the reporting period, depending on its debt, investment program and other indicators.

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