by Tim Webb and Tim Hill, Guardian
BP will pay $20bn (£13.5bn) into a special clean-up fund for the Gulf of Mexico oil disaster after company executives met Barack Obama at the White House today.
BP chairman Carl-Henric Svanberg followed the president’s statement by announcing the company will not pay a dividend this year.
The cancellation of dividends, including a $2.5bn payment due to be paid next week, is as a massive blow to BP shareholders. The company accounts for 12% of all dividends paid out by UK companies and is a cornerstone of most pension funds’ investments.
In a statement, BP said that canceling dividends was "right and prudent". Previously declared first-quarter dividends, scheduled to be paid on 21 June, have been shelved as part of the move."The board will consider resumption of dividend payments in 2011," BP said.
Svanberg said: "We regret the cancellation and suspension of the dividends, but we concluded it was in the best interests of the company and its shareholders."
It hopes to resume a pay-out to shareholders next year.
Following discussions with the president, the oil giant reached agreement to pay the $20bn sum into a trust to be overseen by US officials. The fund means the company has backed down over its plans to continue to pay billions of dollars in dividends to shareholders, but the president maintained it was not a cap.
In a televised statement following the discussions, President Obama said: "I am pleased to announce that BP has agreed to set aside $20bn for claims. This $20bn will provide substantial assurances that claims people and businesses have made will be honored. This is not a cap."
The fund will be run independently of BP and the government, and will be administered by Kenneth Feinberg, who previously oversaw the 9/11 victims compensation fund.
Obama said efforts to contain the leak should capture 90% of the leaking oil in the coming days and weeks.
"That is still not good enough. We will continue to press BP," he added.
Obama said: "We will continue to hold BP accountable, and I’m confident BP will be able to meet its obligations to the Gulf coast and to the American people.
"I want all Americans to know that I will fight each and every day until the Gulf coast bounces back from this tragedy. For the families in the Gulf, for small business owners, for fisherman and shrimpers – this is not a matters of dollars and cents.
"A lot of this folks don’t have a cushion. I emphasize that when Ken Feinberg talks to shareholders, and has meetings in the boardroom: keep in mind those individuals. They are desperate.
"That will be the standard by which I measure BP’s response. Today was a good start. The standard I will apply is whether or not those individuals, those vulnerable communities, are uppermost in the minds of those concerned. That’s who we’re doing the work for."
Obama said BP had also agreed to establish a $100m fund to compensate unemployed oil rig workers affected by a six-month moratorium on deepwater drilling imposed in the wake of the oil spill. The fund is in addition to $20bn payout.
Earlier this week, BP was still disputing the $20bn sum that 54 Democratic senators demanded the company pay into a ring-fenced fund over the weekend. That was before the official estimate of the size of the spill was revised upwards yet again – now to 60,000 barrels a day, from 20,000–40,000.
The company had been due to make a final decision next month to rubber stamp its estimated $2.5bn quarterly dividend to shareholders. But setting up such a large clean-up fund would scupper the payout.
The political pressure on BP has intensified over the past fortnight, as the scale of the disaster becomes clearer and calls for Obama to do more to deal with the crisis have become more vocal.
BP’s chief executive, Tony Hayward, told analysts in a conference call at the beginning of the month that the company would continue to meet its obligations to all its stakeholders. This was intended to reassure investors that BP could afford to pay its dividend and the cost of the clean-up.
But hours later, Obama warned the company against "nickel and diming the folks" of the Gulf of Mexico hit by the disaster, and criticized BP for still considering whether to make its next quarterly pay out.
Last week, BP’s tone on the dividend appeared to soften as even some investors worried that attempting to pay the dividend risked antagonizing the White House even more and would lay the company open to further attack.
(Official White House Photo by Pete Souza: President Barack Obama and Vice President Joe Biden meet with BP executives in the Roosevelt Room of the White House, June 16, 2010, to discuss the BP oil spill in the Gulf of Mexico. Pictured, from left, are BP CEO Tony Hayward, BP Chairman Carl-Henric Svanberg, BP General Counsel Rupert Bondy, BP Managing Director Robert Dudley, Senior Advisor Valerie Jarrett, Labor Secretary Hilda Solis, Attorney General Eric
Holder, and Homeland Security Secretary Janet Napolitano.)
(Republished with permission of The Guardian)