OMV Locks in Costlier Hybrid Debt as Borouge Dividend Cut Threatens Payout Formula

Austrian energy major issues 4.375% perpetual bond to refinance debt and support dividends, while BGI IPO delay threatens future payouts; Q1 profits fall 22%.

OMV shares are trading just a whisker from their 52-week high, but the Austrian energy major is paying a steep price to shore up its balance sheet. On the same day the stock inched to €63.80 — a mere 0.93% below its peak of €64.40 — the group issued a €750 million perpetual hybrid bond with a fixed coupon of 4.375%, nearly double the 2.50% it paid on the 2020 tranche now being retired.

The new notes, priced at 98.921% of par, come with a first call window in December 2032 and are set to begin trading in Luxembourg and Vienna around 10 June 2026. OMV is using the proceeds to refinance the older hybrid, announced for redemption in May, while also bolstering liquidity and covering general corporate purposes — including the €3.4 billion in organic investments planned for this year and a dividend payout of €4.40 per share, comprising €3.15 regular and €1.25 special, approved at the annual general meeting.

Although the coupon jump reflects a radically different interest rate environment, hybrid capital remains attractive because of its favourable accounting treatment. Moody’s and Fitch each classify 50% of the issue as equity, while OMV books the full amount as equity under IFRS — keeping it off the liabilities line and preserving borrowing capacity.

That balance-sheet headroom comes at a critical moment for shareholder returns. The planned initial public offering of the Borouge Group International joint venture has been pushed back to 2027, more than halving the anticipated BGI dividend to just $250 million this year, down from an earlier forecast of $500 million. Under OMV’s new payout formula, effective from fiscal 2026, investors receive 50% of BGI dividends plus 20–30% of the operating cashflow generated outside the joint venture. Analysts estimate the shortfall could shave €0.60–€0.70 off the per-share dividend, with the first payment under the revised formula due in 2027. OMV and its partner ADNOC cited the need to strengthen BGI’s balance sheet in the current market environment.

Operationally, the first quarter delivered a mixed picture. The adjusted CCS operating result came in at €1.025 billion, while net profit slumped 22% to €323 million. The energy division bore the brunt of the weakness, with adjusted operating earnings falling 21% to €723 million on lower exploration and production contributions. Chemicals provided a counterweight: adjusted operating profit there rose to €245 million, lifted by the reclassification of Borealis, improved polyolefin margins and cheaper light-feedstock costs. OMV’s balance sheet remains solid, with €3.5 billion in cash and €3.1 billion in undrawn credit lines, keeping the gearing ratio at 17% — well below the 30% ceiling. Full-year production guidance has been trimmed to 280,000–290,000 barrels of oil equivalent per day.

Outgoing chief executive Alfred Stern used his final public appearance at the late-May annual meeting in Vienna to sound a warning on European gas storage. Austria’s caverns stood at just 45% capacity, compared with over 53% a year earlier. While short-term supply is secure, Stern said, filling storage for the months ahead poses a genuine challenge. He also stressed that OMV has been completely independent of Russian gas since the end of 2024 for the first time in over six decades. BP executive Emma Delaney is set to take the helm in September.

The share price has advanced 31.9% year-to-date and 47.2% over the trailing twelve months, yet the relative strength index of 62.8 suggests there is still room to run before overheating. Investors will watch the half-year results due in July for evidence that the chemicals upturn can offset continued pressure from energy and the Borouge dividend gap — and whether the new hybrid’s thicker coupon proves a price worth paying for financial flexibility.