Page 108 - RusRPTOct20

dividends from SOEs will likely fall by more than 1/3 – but more important is the Ministry’s hard confirmation that all SOEs will pay 50% of net income from 2021.” Russia’s Ministry of Finance issued dividend forecast for 2020-23. The ministry reiterated the 50% payout for all SOEs. MinFin forecasts a 1/3 fall in dividends to be received next year from state-owned enterprises, but then a sharp jump the following year as the COVID-19 crisis abates, commodity prices normalize somewhat, and all SOEs move to the 50% payout target. Interfax reported. Minfin forecasts may be optimistic, but confirmation of 50% payout is +ive. While we think the government’s target for only a 1/3 fall on 2020e earnings is somewhat optimistic, we tend to agree that dividends will rebound nicely from 2021 across the oil & gas sector, and not just for the SOEs. However, the biggest takeaway is the explicit confirmation that the 50% payout target is a firm one. This news is most important for Gazprom shareholders, who suffered some doubt in late September when Deputy Energy Minister Sorokin suggested in a public forum that Gazprom’s dividends could be lowered to help finance the government’s regional gasification goals. With rising payouts and a recovery in the global gas market, we see GAZP’s dividend yield rising to well over 10% over a 2-3 year time horizon.
The Finance Ministry's draft budget plan includes a change of approach to the dividend policy for state-owned companies, ​whereby they would switch to calculating dividends as 50% of IFRS net income adjusted for non-cash and one-off items, RBC Daily reported, citing documents submitted to the Duma. The change will take effect starting with the dividends paid from 2021 earnings. The previous approach did not require these adjustments.
The announcement should be neutral for Gazprom and Transneft, as they already pay dividends from adjusted IFRS net income. Gazprom's payout is expected to rise to the required 50% in 2021.
“We see this as positive for Rosneft, which pays dividends from reported net income without adjustments. This change will remove the impact of FX movements and impairments from the dividend payout. However, due to the accounting approach used by Rosneft, the effect of FX movements on prepayments will not be adjusted away, although this effect will be more moderate, as the bulk of the prepayments received in 2013-14 and booked at a much stronger ruble exchange rate have already been reimbursed,” Sberbank CIB said in a note.
● Oil & gas
Tatneft​ representatives reiterated that the relatively small, Rb9.94/sh interim dividend recommended for 1H20 equaled 100% of RAS net income ​and, as such, was the largest possible payout for an interim (a company can pay over 100% of RAS net income, but only with the approval of the AGM, and thus only for the final dividend of the year). The existing dividend policy of larger 100% of FCF or 50% of IFRS net income was reiterated. Neither of these points is news, per se, but it is positive that this was a talking point, in our opinion.
Transneft​ BoD recommended FY19 DPS of RUB11,612​. The figure
corresponds with 7.8% DY as of September 29 closing price. The proposed
108 ​RUSSIA Country Report​ October 2020 ​ ​www.intellinews.com