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Norilsk Requests Waiver of Russian Export Duties

Published: 12 Dec 2013 22:23:51 PST

29-Jan-13


Vladimir Potanin, the newly appointed chief executive of the world's largest producer of nickel and palladium, Norilsk Nickel (GMKN.RS), has written to Russian President Vladimir Putin asking the government to waive export duties worth $500 million annually, Kommersant reported.

In the letter, Mr. Potanin said the company, which is also a major copper producer, would use the money saved to modernize its facilities and toward the fulfillment of social obligations, the newspaper reported.

A company spokeswoman wouldn't confirm that the letter had been sent, but said the question of decreasing export duties had been discussed due to weak metals markets.

Russia currently levies a 5% duty on nickel, 6.5% for platinum and 10% for copper. In 2011, Norilsk, which receives around 90% of its revenues from overseas sales, paid $779 million in export duties, according to its financial statements.

As part of the a recently-settled ownership restructuring, the company has promised to pay out $9 billion in dividends over the next three years. Last month, Mr. Potanin said Norilsk would likely pay dividends twice a year at 50% of earnings before interest, tax, depreciation and amortization, or Ebitda. Analysts have said that would be difficult, given the high share of Ebitda directed to the company's capital expenditure costs.

If the government agrees to waive the duty fees, it would be a positive -- as it would free up cash -- but would only be short-lived, analysts say.

"This looks rather technical as it comes in spite of the accession to the WTO, [World trade Organization] with Russia capping base metals duties and gradually decreasing them to zero by 2015-16," VTB Capital's Nikolay Sosnovskiy wrote in a note to clients.

An agreement to settle a long-running shareholder dispute at Norilsk was sealed in December when tycoon Roman Abramovich purchased a 5.87% stake for $1.49 billion, filling the role as peacemaker between Mr. Potanin, whose Interros Holding controls 30.3% of the company and Oleg Deripaska's United Co. Rusal PLC (0486.HK), which owns a 27.8% stake.
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