Page 101 - RusRPTJul19

estimated total return (ETR) of 45%. In April before the Druzhba crisis broke out, the CEO of the company Nikolai Tokarev told the press that Transneft could pay 25-40% of IFRS net profit in dividends. He also added that the company will adjust the net income base for one-off factors, to make the dividend policy more predictable. The dividend payment of up to 40% would make a compromise with the government request for a 50% payout that was previously argued by the company to put pressure on the investment programme. bne IntelliNews reported in detail on Transneft's upbeat outlook and guidance in January 2019.
Russia's second-largest oil producer independent Lukoil is considering launching liquefied natural gas (LNG) projects in Congo and Cameroon, as well as other overseas territories, the head of the company Vagit Alekperov said at the annual shareholder meeting as cited by Reuters on June 20. "Currently in Russia the only companies that can do LNG projects are those that launched the projects prior to 2013 -- meaning Novatek," Alekperov said referencing the independent gas major that is effectively developing Russia’s LNG strategy. "This is why we are looking at projects in Congo, where it will most likely be realised, as well as Cameroon and other parts where we have gas extraction assets," he added. Lukoil has extensive overseas operations that supported its performance in the first quarter of 2019, when the company reported stable earnings growth in 1Q19 despite revenue decline on lower oil prices. This week the shares of Lukoil made it to the global top 10 of 2019 Value Creators Rankings by the Boston Consulting Group (BCG), bringing investors returns of 27.1% for the period of 2014 to 2018. Analysts surveyed by Vedomosti daily attributed the growth in Lukoil's share value to improved dividend policy and the share buyout programme launched last year. The company is seen as generating strong cash flow at low leverage and capex, making a positive dividend outlook.
Fitch Ratings upgraded Russian petrochemical major Sibur's long-term issuer default rating (IDR) to investment-grade BBB- from BB+, the agency said on June 26. The outlook on the ratings is Stable. Sibur is the leader of the Russian petrochemical industry and one of the largest companies globally in this sector. Most recently Sibur voted to pay a record-high dividend of RUB33.8bn ($0.5bn) for 2018. Throughout the end of 2018 Sibur was in focus as the company was expected to announce a highly anticipated IPO, to raise $2bn-3bn based on a valuation of $20bn-$26bn. Fitch’s upgrade reflects the significant progress on the ZapSibNeftekhim project, including the completion of major production units ahead of schedule and on budget and the start of commissioning, while maintaining leverage below the forecasts throughout the intensive investment cycle. According to Fitch, expected growth in Sibur’s Ebitda following ZapSib’s launch will translate into higher margins and reduced volatility in operating cash flows through the expansion of the petrochemical business, which is less sensitive to the volatility of oil markets. The company outperformed the agency’s rating cases in 2017-2018 with funds from operations (FFO) adjusted net leverage maintained at 2.0x despite significant expansionary investments. The Stable outlook reflects Fitch’s view that the deleveraging forecast on the back of ZapSib's ramp up will provide sufficient headroom for new projects under consideration and create opportunities for a potential increase in dividend payments. Russia's largest petrochemical holding is controlled by Kremlin insiders Leonid Mikhelson (48.5%), Gennady Timchenko (17%), and Kirill Shamalov (3.9%). Chinese Sinopec and the Silk Road fund each acquired 10% in the company.
101 RUSSIA Country Report July 2019 www.intellinews.com