Govt agencies draft amendments to instruction on state co dividends: 50% of profits instead of 25% - source
MOSCOW. Oct 17 (Interfax) - Government agencies have returned to the idea of setting the share of profits that the state requires state-owned companies to pay out as dividends in a government instruction.
The dividend policies of state-owned companies are regulated by at government instruction from May 92, 2006 No. 774, according to which state-owned companies must pay out at least 25% of profits as dividends to shareholders. However, officials have in fact been fighting for the payment of at least half of profits for several years, battling against industry lobbyists who are gradually reducing the list of companies who have excluded themselves from the general rule for state-owned companies (the directive on the payment of dividends at 50% of profits was signed by Russian Prime Minister Dmitry Medvedev in 2017). In 2016 the Finance Ministry drafted amendments to instruction No. 774, including setting a standard of 50% of profits, but following long negotiations, they are only partially confirmed and the minimum boundary of 25% remaining in the document.
Replacing 25% with 50% (as of now, the section regarding the share of profits says "for the payment of dividends, the following provisions should be followed: allocating at least 25% of the company's net profit (excluding income received from the revaluation of financial investments) to pay dividends, unless otherwise established by government acts) is the only amendment proposed by the ministry.
The Finance Ministry, the source said, has agreed on the draft instruction without notes. This gives it more chance of being confirmed than in 2016 as Anton Siluanov is now First Deputy Prime Minister as well as Finance Minister and the leading figure in the government regarding dividends.
The Economic Development Ministry's press service confirmed that a draft instruction had been drawn up, saying that it is being agreed upon between agencies.
The majority of state-owned companies already pay out at least 50% of profits in dividends with Gazprom remaining the exception. In recent years the dispute over the size of its dividend payments ended with the same compromise between the monopoly and officials: sending a portion of profits to the budget in two ways - not only dividends but also via MET indexation. In the draft budget for 2019-2021, the Finance Ministry reinstated the payment of dividends at 50% of IFRS net profit for Gazprom (ensuring an approximately 3-fold rise in per share payments). The Economic Development Ministry based its forecasts on the Gazprom's dividends not changing in the coming years, which the company itself also insists on, citing the need to finance capital-intensive investment projects.
Gazprom has not yet made a decision on the size of dividends for 2018 (which will be assigned to the 2019 budget), Siluanov said in mid-September. "We are still going to look at 2019 [receiving dividends for 2018 in 2019] separately," he said.