November 19, 2019 / 3:51 PM / 21 days ago

Nornickel's plan to cut dividends needs scrutiny: shareholder EN+

LONDON (Reuters) - Norilsk Nickel’s plan to reduce dividends to fund investments to boost output and cut emissions requires scrutiny as dependable payouts are critical for shareholders, major stakeholder EN+ told Reuters on Tuesday.

FILE PHOTO: Molten nickel is poured at Nadezhda Metallurgical Plant of the Norilsk Nickel company in the Arctic city of Norilsk January 23, 2015. REUTERS/Polina Devitt/File Photo

Norilsk Nickel, a major nickel and palladium producer, said on Monday that it would cut dividends in 2023-2025 as the Russian company’s annual capital expenditure peaks at $3.5-$4 billion in 2022-2025.

London-listed EN+ owns nearly 28% of Nornickel through its shareholding in aluminum giant Rusal.

“Like any major capex project it needs proper scrutiny, it needs to be rigorous and it needs to be transparent. However, we are also a shareholder...we see the importance of continued reliable dividends,” EN+ Chairman Greg Barker said in an interview with Reuters.

“We are in favor of investing in any initiative that will reduce the pollution footprint of Norilsk Nickel.”

Rusal, the world’s largest aluminum producer outside China, and En+ have long been supported by dividends from Nornickel during times of weak aluminum prices.

Barker said “we have adequate representation on Nornickel’s board via Rusal” and the company was “ready to engage and discuss sensibly” Nornickel’s proposals.

Nornickel’s environment project costing $3.5 billion is focused on the Arctic city of Norilsk, which has been the world’s top individual emitter of sulfur dioxide.

Nornickel Vice President Sergey Dubovitsky said at an investor briefing in London on Monday that dividends would remain in line with a shareholder agreement until it expires in 2022.

Norilsk currently pays out 60% of core earnings known as EBITDA if the company’s net debt to EBITDA ratio is below 1.8. The payout declines on a sliding scale if the ratio is 1.8 or above, falling to 30% of EBITDA if the ratio is above 2.2.

Reporting by Pratima Desai and Veronica Brown; editing by Susan Fenton

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