Vladimir Potanin is determined to start talks on cutting dividends at MMC Norilsk Nickel, even though management upheaval at the miner’s other key shareholder United Co. Rusal makes the outcome uncertain.
“The company has big plans,” Potanin, Nornickel’s biggest shareholder and CEO, said in an interview in Moscow. “Given the need for investment, the dividend should be revised downward.”
Nornickel shares dropped 3.5% as of 10:19 a.m. in Moscow, paring this year’s gain to 5.8%.
Arguments over the dividend have been central to a years-long feud between Potanin and Oleg Deripaska’s Rusal, which uses the payouts to service its debt. While Potanin would like to invest part of the dividends in boosting Nornickel’s output of palladium and other metals, he must first renegotiate the payout formula with Rusal. Otherwise, it can only be changed when the current accord expires in 2023.
Potanin’s task has been complicated by the US Treasury deal at the end of January, which not only lifted sanctions on Rusal, but cut Deripaska’s influence over the aluminum giant. Now, there are questions over who is making strategic decisions at Rusal, leaving Potanin with nobody to discuss dividends with, he said.
“When for one or another reason the owners of an enterprise are taken away from running the business, this always affects the quality of management,” Potanin said. “For Rusal, like no other company, the loss of the owner’s influence is a managerial shock.”
All decisions in relation to the Nornickel investment are being made by Rusal’s board, the aluminum company’s press service said in an email.
Potanin’s 34.5 stake in Nornickel made him Russia’s richest man this year, with a $21.6-billion fortune, according to Bloomberg Billionaires Indexes. The miner’s shares rose more than 33% in the past year as palladium climbed to a record and nickel demand strengthened with the growth in batteries for electric cars.
While Nornickel has paid out about 394-billion ruble in dividends over the past three years, it’s difficult to find better uses for that cash than investments in the miner itself, said Potanin.
"Nornickel is the only platform in which I am able to invest millions of dollars,” he said, adding that none of his other assets have the same potential.
Nornickel’s plans to boost output of metals, including palladium, will require annual investments of $2.3-billion to $2.6-billion through 2022.
Potanin has used some of his payouts to buy more Nornickel shares in the market, but he said he doesn’t plan to bid for Rusal’s 28% holding. Under a shareholder agreement, it could only be acquired through a so-called shoot out option -- a duel between the two investors that would have seen the winner pay a premium for the other’s shares.
With Nornickel trading close to a record high, Potanin’s partners in the miner -- a group led by billionaire Roman Abramovich -- sold a 1.7% stake to the market this month.
That increased the free float of Nornickel shares, but retained Abramovich’s status as mediator between Rusal and Potanin under the shareholder accord, Potanin said. This group could sell a further 0.5% of Nornickel at a later stage, but a deal on its remaining 4 percent stake is “not possible now” due to a London court ruling last year, Potanin said.
Abramovich’s spokesman didn’t immediately respond to a request for comment.
Other Potanin Investments Interros has $1-billion of assets on top of Nornickel, according to Potanin, but those projects can’t match the miner’s returns. The tycoon also has about $1 billion invested in fixed-income securities. About $500-million is invested into private equity in different countries.