Petronas, whose RM30 billion dividend payout last year formed nearly half the government’s revenue, has reached an understanding with the Najib administration to fix the dividend payout ratio at 30 per cent of net profits, the national oil company said today.
The move, which is expected to take effect in 2013, could help Petronas boost its re-investment programme even as it embarks on a massive RM300 billion capital expenditure programme over the next five years.
It could also, however, impact the government’s revenue stream and, consequently, its budget deficit.
“The 30 per cent ratio is a planned payout ratio and we’ve reached an understanding with the government,” said Petronas executive vice president Datuk George Ratilal in a briefing today.
He added, however, that the total value of the dividends could be higher than RM30 billion depending on the performance.
Petronas paid out RM30 billion, or 74 per cent of its net profit of RM40.3 billion, in dividends to the government last year.
Profit after distribution of dividends in 2010 amounted to just RM10.3 billion, a drop of 52.2 per cent from the previous year.
Petronas said then that the dividend payouts could constrain the group’s growth plans as significant re-investment is necessary to generate future revenues.
“There is a limit to how much and how long we can continue to pay the dividends,” said Petronas CEO Datuk Shamsul Azhar Abbas in today’s briefing.
Ratilal said it was a case of finding a balance on an appropriate payout ratio.
“There is this financial year which end December 31, then one more year and then we reach the 30 per cent payout ratio thereafter,” he said.
Petronas has also recently benefited from the government’s move to raise the price of gas by RM3.00 per mmBtu every six months until it reached market levels, a development which Shamsul said could mean an estimated additional revenue of RM2 billion for the oil firm, which currently also foots a gas subsidy bill of about RM20 billion annually.
The government is aiming to pare down its fiscal deficit to 5.4 per cent of gross domestic product this year and to less than three per cent by 2015, and had cut back on sugar and fuel subsidies last month to help reduce expenditure.
Petronas plans to invest an average of RM60 billion over the next five years on exploration, replacement of ageing assets and for the recently announced Refinery and Petrochemicals Integrated Development (Rapid) project in Johor, which has a projected cost of about US$20 billion (RM60 billion).
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Now we know why UMNO is shaking in its boots. Petronas needs to invest more money because the last dregs of oil are exponentially more expensive to extract. Less money from the ground means more reliance on actual value-added by government, which in UMNO's case is worse than zero.
UMNO, how can a country our size can have a sovereign wealth fund of only US$25b compared to Singapore's US$500b? We are 500x bigger than Singapore and they have 20x as much money as we do? So they are 10,000x better than us per square foot? Please explain.
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