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. Last Updated: 07/27/2016

Rosneft Sets Out Plans, Faces Angry Questions

ReutersIgor Sechin at Saturday's meeting
Rosneft on Saturday set out plans to reduce its debt by 40 percent and expand refining capacity ninefold at its first annual shareholder meeting since its initial public offering last July.

The gathering was presided over by Igor Sechin, President Vladimir Putin's deputy chief of staff, who fielded a barrage of sometimes-angry shareholders' questions during his first public appearance as company chairman.

More than 900 shareholders packed into an auditorium at Moscow's ExpoCenter to hear from Sechin and CEO Sergei Bogdanchikov and vote on the dividend. In the share sale, the government appealed to citizens' patriotism and convinced 115,000 Russians to take part in a so-called "people's IPO."

The state-run company will sell bonds to reduce bank loans and sell noncore assets to trim $10 billion from its $25 billion of debt by 2010, CEO Sergei Bogdanchikov told the meeting.

Rosneft may also build new refineries abroad to meet its refining capacity target by 2015, he said.

"We don't need some of our assets, and we'll sell them," Bogdanchikov said.

The company will start presenting a eurobond issue to investors in the United States and Europe at the end of next week and complete the sale by the middle of next month, he said.

Rosneft became the country's top producer and refiner of crude this year after a state onslaught that led to the dismantling of Yukos, claiming more than $30 billion in back taxes.

Rosneft borrowed $22 billion to buy assets from bankrupt Yukos at liquidation auctions this year.

Bogdanchikov said in May that Rosneft plans to sell as much as $5 billion of bonds in the second half of the year, and about $4 billion of noncore assets bought in the Yukos auctions.

Rosneft's refining capacity increased fourfold after it bought five Yukos refineries. Rosneft will increase capacity to between 90 million and 95 million tons per year by 2015, Bogdanchikov said. Rosneft refined about 11 million tons last year.

"We're considering the addition of new oil refining capacity in China and other East Asian countries," Bogdanchikov said. "This will help fully balance refining with production."

Sechin told the meeting it was "strategically important to expand the company's presence on the most promising foreign markets."

Sechin has overseen Rosneft's growth from a second-tier oil company to the country's biggest producer and refiner after it acquired assets of bankrupt oil firm Yukos. Jailed billionaire Mikhail Khodorkovsky has accused Sechin of masterminding the fall of Yukos, a charge the Kremlin denies.

More than a dozen shareholders stood up to complain to Sechin and others that the 2006 dividend was too low in comparison with remuneration of managers and directors.

For Sechin "to be taking abuse from little old ladies is the supreme irony," said Kim Iskyan, co-head of research at UralSib. "It's ironic that one of the people responsible for the closure of Russia's political system is being taken to task because of market mechanisms."

Rosneft's shares in London have risen 41 cents since the initial public offering to $7.96, while the dividend recommended by the board was 1.33 rubles per share.

Some shareholders complained Saturday about a lack of information about the shares and said the board's answers were unsatisfactory.

"Let's forfeit our dividends, and you forfeit your bonuses," one elderly shareholder said, addressing Sechin and other directors. "Chairman, why do you keep calling on us to understand things that you yourself don't understand? Don't do that, we're not that stupid!''

Sechin responded by asking Bogdanchikov and other executives to reply to the concerns, and later provided shareholders with a phone number to call with questions.

"Any wishes, suggestions, recommendations and even criticism from shareholders help the company adjust its positions," Sechin said.

He assured the gathering that the company's "new values" included greater transparency and stronger corporate governance.