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BP’s Russian billionaire partners in TNK-BP have voted against a proposal for the Russian oil venture to pay $1bn in interim dividends for 2012, adding pressure on the UK oil group to resolve a bitter dispute over the company.
The Alfa-Access-Renova consortium said it was torpedoing the dividend proposal tabled by BP earlier this month because of “uncertainty” in global oil markets and “strained” corporate governance at the equal joint venture.
BP and AAR have been heading for divorce after the UK oil group said in June it wanted to sell its 50 per cent stake in the company.
The two shareholders have been locked in legal conflict ever since BP’s bid last year to form a strategic partnership with Rosneft, the Russian state oil group. The tie-up was blocked by AAR, which argued it violated its shareholder agreement with BP.
The legal wrangling has caused independent directors to resign from the board, leaving the company without a quorum for most board decisions, while earlier in May, Mikhail Fridman, the leading shareholder in AAR, stepped down as chief executive.
As a result, the company has been unable to make any quarterly dividend payments for 2012 because it lacks a full board. The interim dividend would have required only the unanimous approval of the remaining board members.
AAR’s refusal to support the dividend payment could present a fresh setback for BP just as it prepares to present its second-quarter results on Tuesday. The UK oil group has benefited from $19bn in payouts from TNK-BP since its creation in 2003, while AAR frequently argues that a record dividend payout by TNK-BP last year provided 90 per cent of BP’s $4.1bn in dividends.
BP, however, played down the impact and denied that TNK-BP payouts directly funded its own shareholder dividends. “Dividends from TNK-BP are one of many sources of BP’s operating cash flow; they do not directly fund BP’s own dividends to its shareholders,” a BP spokesman said. Last year BP’s operating cash flow reached $22.2bn.
But the UK oil group is still searching for cash to deal with the Gulf of Mexico spill. It has reached a $7.8bn settlement with individuals and businesses affected by the spill, but it is yet to reach agreement with the Department of Justice and affected states. It could also face a $3.1bn charge after a Siberian court last week ordered it to pay this in damages over a minority shareholder claim over the Rosneft deal, although BP is appealing.
AAR said earlier this month it was prepared to buy half of BP’s 50 per cent stake in TNK-BP at a market price. It has also said it could exit the venture for a mixture of cash and up to 10 to 12 per cent in BP shares.
Analysts said AAR’s decision to block the dividend looked like an effort to push BP into accepting its offers. But AAR’s negotiating leverage appeared to be significantly diminished last week after Rosneft announced it was considering bidding for BP’s 50 per cent stake too. A source familiar with the process said negotiations for the sale of BP’s share in TNK-BP were well under way.