Zarubezhneft asking gov't to allow it to not pay 2021 dividends - source

MOSCOW. April 14 (Interfax) - Zarubezhneft has asked the Russian government to release the company from paying dividends for 2021 thus preserving capital for the company's investment program, a source familiar with the situation told Interfax.

The Zarubezhneft investment program for 2022 is planned at about 26 billion rubles, the source said. It will focus on projects in Russia and South-East Asia. Furthermore, the company plans to invest an additional 9 billion rubles to expand its presence in the Middle East.

At the same time, Zarubezhneft fears difficulties in the implementation of the investment program due to the current geopolitical situation, which could led to restrictions on the sale of hydrocarbons, high inflation, rising interest rates and sanctions pressure, the source said.

Zarubezhneft subsidiaries in Bosnia and Herzegovina (Brod Refinery and the MPZ Modrica Oil Production Plant) have already faced the impact of European sanctions, which do not allow for debt refinancing. This led to an unplanned outflow of 15 billion rubles from the parent company, which is the guarantor of loans of the Bosnian subsidiaries.

Zarubezhneft's dividend policy is standard for state-owned companies - payment of at least 50% of net profit to IFRS. Statements to IFRS have yet to be disclosed, but the Interfax source specified that dividends for 2021 could amount to about 8.9 billion rubles. Zarubezhneft's sole shareholder is the state represented by the Federal Property Management Agency (Rosimushestvo).

The company fears that in case of dividends payment there will be a high risk of a liquidity shortage to finance the investment program, which in conditions of limited access to capital markets may lead to failure to fulfill contractual obligations, with subsequent withdrawal from projects, the source said.

Last week, Finance Minister Anton Siluanov said that there must be an individual approach to solving the issue of dividend payments by state-owned companies, unlike for state banks, for which this is not recommended. "In fact, not all companies are ready to not pay dividends for the previous year and not all of them are in such a critical situation [as to waive planned payouts to shareholders]. Therefore, when it comes to this, we will approach the issue on an individual basis," Siluanov said.