Changes in the dividend policy is proposed by a Norilsk Nickel shareholder

Interros, Nornickel’s largest shareholder, proposes to reduce dividends for 2020 and revise the company’s dividend policy before the expiration of the shareholder agreement in 2023, Interros said in a statement.

Interros Holding, controlled by businessman Vladimir Potanin, aluminium producer Rusal and some other stakeholders have a dividend agreement under which Nornickel pays them twice a year. The deal expires on Jan. 1, 2023.

The Board of Directors of Norilsk Nickel will hold a meeting on March 29, at which it is planned to consider guidelines for dividend payments in connection with the investment strategy until 2030.

“Since 2019, Interros has been advocating a more adequate proportion between dividends and investments in the company’s development,” Interros said in a statement.

Potanin who has already proposed to the largest shareholders of Norilsk Nickel to abandon dividends during the year and, as a result, limit the final payments to $ 1 billion. Similar statements were made in 2019.

Under the current formula, Norilsk Nickel will need to borrow in order to pay dividends and support the investment program, which is likely to harm the company’s operations. For this reason, Interros proposes already now to agree on a change in approach – to pay from the real money that the company earns minus the costs of current activities and development, and not from the accounting EBITDA indicator, which does not take into account capital investments. “After all, this is how most companies in the mining industry calculate dividends, including Rusal itself, prioritizing the modernization of enterprises, and not momentary profit,” Interros informs.

Rusal PLC and London-listed EN + owns nearly 28% of Nornickel calculate their dividends from free cash flow, not EBITDA, which they insist on at Norilsk Nickel.

Potanin is not alone in calling for a cut in dividends. Appeals are heard also from the Kremlin.
“The task of the government is to create such conditions under which the available resources and those resources that may appear in connection with the situation in the world market would be more efficient, to direct these funds not to pay dividends and not to distribute them somewhere there – legally, I understand, … … and direct them to the development of their own businesses or new businesses within the Russian Federation, ” said Russian President Vladimir Putin, quoted on the President’s website.

Nornickel updated its environmental investment plans and output growth strategy earlier in December. They will require more than $27 billion within the next 10 years, including $5.5 billion for environment projects.

It plans to upgrade 60% of its energy infrastructure by 2030 and target a significant reduction in sulphur dioxide emissions in the Norilsk area by 2025.