Page 17 - RusRPTJul21

2.6 Russian government tweaks 50% dividend payout rule for state companies
Russia's Prime Minister Mikhail Mishustin signed a new order on dividend payments for state companies, which brings clarifications to adjusted net income calculations for paying at least 50% of IFRS net profit, Izvestia reports.
This was expected, as in 2020 the Finance Ministry reiterated that it would continue to maintain strict dividend discipline for state-owned enterprises (SOEs), keeping the 50% of IFRS net profit rule and switching to adjusted net profit as the basis of the calculation.
As followed by bne IntelliNews, in 2019 the ministry succeeded in forcing the 50% payout ratio on almost all the country's largest corporations, such as Rosneft, Transneft, state-controlled banks Sberbank and VTB, and others.
The new changes to the rule touch upon correcting for primary paper gains and losses, as well as for the changes in the fair value of fixed assets and on foreign currency gains and losses.
Although this has not been confirmed, BCS Global Markets analysts believe that the new rules would likely affect Russia's largest oil producer Rosneft more than other Russian oil & gas companies.
"Rosneft currently pays 50% of book net income as reported under its IFRS accounts, but makes no adjustments for non-cash items such as FX gains and losses," BCS GM reminds, noting that this causes significant volatility in Rosneft’s reported net income each year, removing $4.4bn from net income in 2020, for example. BCS GM see the news as positive for Rosneft's shares and maintain a Buy rating on the name.
Sova Capital on June 17 note that Russian oil pipeline operator Transneft could have a slightly positive effect on dividends from new rules, as it will have to count in the contribution of associates to dividends.
Russia's gas giant Gazprom has already been adjusting for FX, impairments and profit from associates. However, while the companies of its utility arm Gazprom Energoholding are already paying out at least 50% of IFRS net income, it remains "somewhat unclear... what impact associates will have on Gazprom's total dividends going forward given the vague language in the new order," Sova analysts note.
Russian utility major InterRAO currently has to pay out no less than 25% of IFRS net income. "However, the government indirectly controls InterRAO via Rosneftegaz (28%), Federal Grid Company (9%) and treasury stock (30%)," Sova notes, which could give InterRAO’s dividend policy more flexibility compared to entities directly controlled by the state.
17 RUSSIA Country Report July 2021 www.intellinews.com