Ukraine cuts state company dividend rate to 50%

Ukraine’s Cabinet ruled on Apr. 24 to set the 2019
dividend distribution rate for state-controlled joint stock companies at 50% of
their 2018 profit. Exceptions were made for Oschadbank (OSCHAD), Ukrainian
Railway (RAILUA) and Ukrhydroenergo, an operator of hydroelectric stations,
which are required to pay 30% dividends. At the same session, the Cabinet
issued a resolution ordering entities with the status of state enterprises to
pay 90% of their 2018 profits to the state budget this year. Last year, the
Cabinet demanded 75% profit distribution from both state-controlled joint stock
companies and state enterprises.

This year, the Economy Ministry expects that the
government will receive UAH 2.1 bln in dividends from joint stock companies
(except Naftogaz) and UAH 15.4 bln from state enterprises. Based on the latest
business plan of Naftogaz it is going to pay UAH 7.0 bln in dividends to the
state, while its subsidiaries (mostly state enterprises) will pay UAH 15.28 bln
dividends in 2019.

Based on its 2019 budget law, the state is planning to
receive UAH 44.54 bln in total dividends. Last year, it received UAH 39.7 bln
in dividends, which was higher than plan (UAH 36.3 bln) and the key contributor
to that amount was Naftogaz (UAH 29.5 bln).

Alexander Paraschiy: It looks like this year, the state budget will underperform in terms
of dividends received by up to UAH 20 bln. However, such underperformance will
be compensated by receiving profit distribution from the National Bank, which
has been approved at UAH 64.9 bln, or UAH 17.3 bln more than planned by the
budget law. A reduced dividend payment rate from joint stock companies looks
wise, given that a higher rate still won’t enable achieving budgeted dividend
proceeds. Meanwhile, lower rates will enable saving some liquidity, which most
state companies need.