Nornickel`s co-owner proposes to reduce final dividend for 2020

Interros, Nornickel’s largest shareholder, invites Rusal aluminium producer and some other stakeholders, to agree on changing the dividend formula of MMC Norilsk Nickel, without waiting for the expiration of the agreement of the company’s shareholders in 2023, and to minimize dividends for 2020, the company said in a press release.

Nornickel’s dividend policy is set under an agreement between Interros, controlled by businessman Vladimir Potanin, and aluminium producer Rusal.

According to the dividend formula, NorNickel is to transfer to shareholders about $ 3.5 billion in final dividends for 2020, but Interros considers such a payment unacceptable from a social point of view. The need to cut dividends is due to an increase in costs for the modernization of facilities and the start of the investment cycle of the long-term development program of Norilsk Nickel until 2030.

“We are in favor of a more adequate proportion between dividends and investments in the development of the company,” Sergey Batekhin, CEO and Head of the Management Board of Interros, said in a comment to the Russian Interfax news agency. Under the current formula, Norilsk Nickel will need to borrow in order to pay dividends and support the investment program, Batekhin explained.

Interros proposes to change the policies of dividers from 2019, when the Potanin first announced a similar statement.

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.

The mining company just paid Russia $ 2 billion in environmental damage following a fuel spill at its Arctic power plant last year, prompting an angry reaction from Russian President Vladimir Putin.

Putin also said major Russian metal exporters should invest more for the good of the country, news agencies  previously reported.