November 27, 2017, 01:01 / Business Exclusively by subscription

Japan invests in Transneft

RDIF and the Japan Bank for International Cooperation will buy shares in the company Galina Starinskaya Transneft's new dividend policy has attracted new shareholders / Maxim Stulov / Vedomosti

The Russian-Japanese Investment Fund plans to buy shares of Transneft in the near future for up to $150 million, the Ministry of Energy quotes the words of First Deputy Minister Alexei Teksler in a statement. According to him, the fund with investments of $1 billion is aimed at investing in joint projects, including in the energy sector.

The decision to create the fund was made in December 2016 by the Russian Direct Investment Fund (RDIF) and Japan Bank for International Cooperation (JBIC). The fund started operating in September. “We expect the first project in the pharmaceutical sector; we believe that it will be completed in the next month. We also have many projects in the field of aquaculture, transport infrastructure, etc.,” RDIF General Director Kirill Dmitriev said then (quoted by RIA Novosti). Dmitriev is on the board of directors of Transneft.

Transneft is aware of the impending transaction, a company representative said: “We are talking about purchasing preferred shares from the market. We are pleased that they believe in us and buy shares in the company.” On Friday, a RDIF representative declined to comment. JBIC could not be reached for comment.

Preferred shares of Transneft (21.9% of the authorized capital) are traded on the Moscow Exchange. The news that the Russian-Japanese Investment Fund will buy securities inspired investors: on Friday, preferred shares rose in price by 2.15%. Based on the quotes on Thursday, on the eve of the announcement of the purchase, $150 million could purchase 3.2% of Transneft preferred shares.

Transneft

Pipeline monopoly
Shareholders: Rosimushchestvo (100% of ordinary shares).
Capitalization – 288.4 billion rubles. (preferred shares only).
Revenue (IFRS, 1st half of 2017) – 438.3 billion rubles,
Net profit – 113.9 billion rubles.

For a long time, two-thirds of Transneft's preferred shares belonged to Ilya Shcherbovich's UCP group. In March 2017, he sold them for $3 billion to a group of investors. Then RDIF entered the company’s capital, it became the owner of 0.43% of Transneft shares, another 1.49% belongs to the Russian-Chinese Investment Fund (created by RDIF and China Investment Corporation). It was reported that the latter was ready to invest up to $300 million more. 53.57% of all preferred shares of Transneft are in the trust management of the Gazprombank-Financial fund, in which a subsidiary of Transneft owns a share. Free float – 32%.

The amount of $150 million allows the Russian-Japanese Fund to buy up to 3% of preferred shares of Transneft (0.67% of the authorized capital).

Interest in Transneft shares is growing amid rising dividends. In the spring, Transneft changed its dividend policy: it focuses on paying 25, 20 or 15% of normalized net profit at the end of the reporting period, depending on debt, investment program and other indicators. At the end of 2015, the company returned 9% of consolidated profit to shareholders, for 2016 – 25%, and for the first half of the year – 24%. At the same time, the Ministry of Finance expects that Transneft will fulfill the dividend standard of 50% established for all state-owned companies. Renaissance Capital analysts highly appreciate the increase in dividends from Transneft. The dividend yield will then double and amount to 8.2%, he points out. It is also possible to increase investor interest in Transneft securities by converting the company's preferred shares into ordinary shares, Dmitriev previously stated. There is no government decision on this proposal.