Page 83 - RUSRptApr17

‘hard’ 25% floor. We expect the issue to be resolved before the BoD meetings season kicks off in late April,” VTBC strategist Alexey Zabotkin said in a note.
There is a battle under way between Russia’s Ministry of Finance and the companies , which has already assumed a 50% payout of profits by the SOEs in the budget revenue estimates, and the managers of the state-owned companies that are resisting paying the full 50% of profits to their owners, the state.
The term of validity of the previous directive, stipulating a 50% payout from the highest base and issued in April 2016, expired on 31 December 2016. Since no new directive has been issued, starting from 1 January 2017 SOEs are again required to pay not less than 25% of net income (as set forth in the current regulations).
Last year even in terms of the special payout directive, only five SOEs paid 50% of the highest earnings base : Alrosa (50% payout of IFRS), Bashneft (50%), MOESK (50%), RusHydro (48%), and Rostelecom (118%), while Gazprom (24%), Rosneft (35%) and Transneft (9%) recommended dividends below the headline 50% guideline, having been provided with exemptions for company-specific reasons.
The base case scenarios for SOEs in 2017 (based on the 2016 financial results) imply a 50% IFRS net income payout for only two companies, Alrosa and Aeroflot.
FSK is next in line after the leaders in terms of the payout our colleagues expect (32%). Gazprom’s and Gazprom Neft’s base case payouts are 25%, which still imply upside to the FY15 DPSs.
Last year it seemed likely that the the 50% dividend payout scenario for SOEs would take place in 2017 as the 2017-19 federal budget, passed into law last November, was drawn up factoring in the 50% dividend payout requirement for SOEs. Moreover, the Minister of Finance Andrey Shuvalov was insisten on the 50% payout rule be applied to all SOEs without any exceptions in 2017 and beyond. However, the start of 2017 brought a fresh round of debate, when First Deputy Prime Minister Igor Shuvalov voiced his view on the SOE dividend issue, which was different from MinFin’s. According to Shuvalov, the main payout guideline for all the SOEs should be kept at a ‘hard’ 25% IFRS with no exceptions, while more generous dividend distributions could be considered on a case by case basis.
83 RUSSIA Country Report April 2017 www.intellinews.com