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Certain Statements by First Vice President of Transneft Maksim Grishanin at Teleconference with Investors and Analysts

Date of publication: 3 December 2019

Pictured (left to right): Vice President of Transneft Rashid Sharipov and First Vice President of Transneft Maksim Grishanin

First Vice President of Transneft Maksim Grishanin has answered topical questions of investors and analysts during a teleconference organised to discuss the Company's newly published IFRS statements for the 9 months of 2019.

Dividend Payment

Next year, Transneft plans to update its dividend policy to regularise the allocation of 50% of its normalised net profit to paying out dividends.

“Given that the state has almost decided on its position regarding the allocation of 50% of net profit to dividends, we will come up with an initiative to change the dividend policy next year,” Maksim Grishanin said.

“Of course, we believe that it would be fairer to pay out dividends from the free cash flow,” he added.

According to him, the issues of changing the dividend policy will be discussed with key executive bodies.

Buyback of Shares

The state did not support Transneft’s buyback initiative.

"Yes, indeed, we have presented a buyback offer. However, it was not supported by the principal shareholder — the state," Transneft’s First Vice President said while answering the analysts' questions.

“The opinion of the principal shareholder has not yet changed,” he added.

Constructive Negotiations

“Transneft is conducting constructive negotiations with all its shippers to settle the consequences of the Druzhba emergency”, Maksim Grishanin noted.

“Regarding the situation with oil contaminated with organochlorine compounds, as you also know, we technically solved the problem in June. Currently, we are undergoing a settlement process with our shippers, in particular, such an agreement has been signed with LUKOIL,” he said.

“Also, the settlement process with our shipper KazTransOil, which represents more than 30 Kazakhstani oil manufacturers, is almost completed, and we are having fairly constructive negotiations with all our shippers,” the First Vice President added.

Impact Assessment

Transneft will finish evaluating the consequences of the Druzhba oil pipeline incident by the middle of next year. The compensation payment process may last until the end of the first half of 2020.

"It’s clear that we’ll suffer losses. We are evaluating and organising them. The full assessment of the consequences will be completed somewhere in the middle of 2020," he said.

Maksim Grishanin noted that no owner of the refineries raised any claims related to the incident. "As for the refiners, even if they incurred losses, they were insignificant. At least so far none of the counterparties has claimed any damages that would be unambiguously linked to the incident," he explained.

System Reliability

Transneft will concentrate on maintaining the system reliability after the completion of large-scale construction projects.

“We are not considering any new businesses that are currently not part of the group’s perimeter. We believe that after the completion of large-scale construction projects, we need to concentrate on Transneft’s activities for maintaining the system in proper safe technical condition," Maksim Grishanin said during the telephone conference.

"The volume of our technical maintenance and repairs costs will remain at about RUB 250 billion per year in the coming years. We are not planning to build any new capacities yet. For the near future, our task is to concentrate on increasing the system’s flexibility and reliability," he added.

NCSP Strategy

Transneft’s Board of Directors plans to consider a strategy for the Novorossiysk Commercial Sea Port development in the near future.

"We have reviewed the strategy at the level of the Board of Directors Committee, and we will submit it to the Board of Directors in the near future," said Transneft’s First Vice President Maksim Grishanin.

"The port will concentrate mainly on its operations, as well as on the development of its main assets in Novorossiysk. And in the coming 5-8 years, our task is to increase non-bulk cargoes loading volumes by 25 million tonnes," he specified.

Adapted from the materials of Interfax, TASS, Prime
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