Bloomberg News

Transneft Chief Pledges `Sharp' Dividend Increase

June 18, 2007

OAO Transneft, Russia's oil-pipeline operator, plans to increase dividends ``sharply in a couple of years,'' Chief Executive Officer Semyon Vainshtok told reporters in Moscow today.

Transneft has recommended lowering its dividend for the past three years in a row as the cost of building a pipeline across eastern Siberia to Asia rises. The company will raise its dividend payments after completing ``the unprecedented investment projects'' currently under way, Vainshtok said.

``This is very positive for the stock,'' said Ron Smith, head of equity research at Alfa Bank in Moscow. ``The question isn't whether Transneft can build pipelines efficiently. The question is, will it pay dividends that benefit the holders of the preferred shares?''

Vainshtok also said the company will issue only common shares as part of a merger with Russia's state-owned oil products pipeline operator, Transnefteprodukt.

``There will be no privileged shares issued,'' he said. ``We will issue common shares that will cover the cost of Transnefteprodukt, and that's all.''

The Russian state owns all of Transneft's common shares, equal to 75 percent of the company's total share capital. Transneft's preferred shares climbed 2 percent to 41,976 rubles today, the highest since May 25.

To contact the reporter on this story: Greg Walters in Moscow at gwalters1@bloomberg.net; Torrey Clark in Moscow at tclark8@bloomberg.net.

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.


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