TNK-BP partners set to freeze dividend

By Lucy Farndon
Updated: 02:59 EST, 1 February 2011

 

BP's partners in Russian joint venture TNK-BP plan to freeze this quarter's dividend, as they step up their campaign to derail the British firm's tie-up with Kremlin-backed Rosneft.

Alfa-Access-Renova (AAR) - the quartet of Russian billionaires who own half of TNK-BP - have been dismayed by the oil major's £10bn share swap with Rosneft, announced earlier this month.

AAR has already lodged a High Court injunction aimed at scuppering the deal, claiming that it breaches a shareholder agreement stipulating that BP channel all business in Russia through the joint venture.

And the four oligarchs behind AAR resolved at a meeting yesterday to oppose the payment of a £1.1bn dividend for the past quarter, half of which would have been paid to BP.

Board members representing both sides will discuss the impasse at a meeting on February 18.

But the dividend requires unanimous support, meaning AAR's representatives can easily make good on their threat to block the payment.

AAR is expected to tell BP that its flirtation with Rosneft has left TNK-BP with little choice but to expand outside Russia, rather than risk fierce domestic competition with a rival backed by the ruling elite.

Rosneft is chaired by Igor Sechin, the deputy prime minister of Russia.

AAR will say that it now needs extra cash for international expansion, due to the strategic shift of focus necessitated by BP's partnership with Rosneft.

The billionaires have also launched an action for breach of fiduciary duty against David Peattie, BP's head of Russia, claiming that as a director of TNK-BP he should have kept the company better informed of negotiations with Rosneft.

BP (down 1.95p to 484.85p) said it had not breached the terms of its shareholder agreement with TNK-BP, adding that it would seek to resolve the matter in a 'business-like' way. But City analysts believe that the TNK-BP partnership has been irrevocably damaged by the Rosneft deal, which has revealed BP's lack of commitment to AAR's vision of building a Russian supermajor.

But while BP could miss out on a dividend from TNK-BP, its own shareholders are expecting to see their quarterly payouts resumed when the firm reports fourth-quarter figures today.

Chief executive Bob Dudley is expected to reinstate the dividend at around 7c per share, half the level seen before the Deepwater Horizon disaster last year.

Analysts expect the company to have made £3bn in the fourth-quarter, taking it to a loss of around £3bn for the year, after setting aside £25bn to cover its Gulf of Mexico costs.

Meanwhile, questions have been raised over BP's growing involvement in Russia after WikiLeaks documents revealed how previous ventures there almost brought it into contact with various 'rogue states'.

Leaked papers showed the TNK-BP subsidiary sought out business opportunities in countries usually shunned by British businesses because of international sanctions, such as Burma, Cuba and Sudan.

The TNK-BP board voted against the plans, but it is claimed that one of the firm's Russian directors then dished out the work to his own private firm.

The fallout that followed was so bad that Mr Dudley had to flee the country.

The news poses serious questions about BP's increasing involvement with the Russian government. Following the deal with state-owned Rosneft, Mr Dudley must work hand in hand with the Russian leaders he blamed for backing a hate campaign which forced him to go on the run two years ago.

He was ousted from his previous job as the head of TNK-BP after a boardroom coup in 2008 and moved from country to country for his own protection.

Last night, leaked papers seen by the Daily Telegraph show he believed the war was waged by Mr Sechin, Russia's deputy prime minister and chair of Rosneft.

End of the TNK-BP affair?
14 Jan 2011: BP unveils £10bn exploration tie-up with Rosneft
18 Jan 2011: Bob Dudley holds clear-the-air talks with TNK-BP
28 Jan 2011: TNK-BP files High Court suit to block the deal
31 Jan 2011: TNK-BP board members agree to stop dividend