Romanian state-owned companies may be obliged to transfer some 90% of their net profits from last year to their shareholders.

The Romanian Government thus wants to make sure that it gets more money from its cash cows to cover for the higher expenses included in this year’s state budget. However, the minority shareholders will also benefit from the higher dividends, as some of the state’s most profitable companies are listed on the Bucharest Stock Exchange (BVB). However, the higher dividend payout ratios will leave less money at the disposal of these companies for new investments, which may affect their future results.

The Government led by Sorin Grindeanu wants the state representatives in the General Shareholders' Meeting or the Board of Directors of national companies or the companies where the state has a majority stake to push for allocating a quota of 90% of the 2016 net profits for dividends, according to local Profit.ro.

This means that profitable companies such as gas producer Romgaz, gas transporter Transgaz, electricity producers Hidroelectrica and Nuclearelectrica, electricity transporter Transelectrica, and electricity distributor Electrica, will pay higher dividends this year. Five of these companies are listed on the Bucharest Stock Exchange while Hidroelectrica should be listed this year.

State-controlled companies are obliged by law to distribute at least 50% of their net profits as dividends. However, there have been years in the past when the Government asked them to increase their payout ratios to get more money for the state budget. Thus, profitable state companies distributed 90% of their net profits in 2010 and 85% in 2011, when Romania was struggling to overcome the effects of the economic crisis.

editor@romania-insider.com