MOSCOW - Nornickel's largest shareholder, Interros, has proposed changing its dividend policy, Interfax news agency reported on Wednesday, in a move that would lower payouts to help fund planned investment.

The miner has just paid $2-billion to Russia for environmental damage after a fuel spill at its Arctic power plant last year that drew an angry response from Russian President Vladimir Putin.

Putin has also said Russia's big metals exporters should invest more for the good of the country.

Nornickel's dividend policy is set under an agreement between Interros, controlled by businessman Vladimir Potanin, and aluminium producer Rusal.

Interros has proposed changing its formulation - basing it on free cash flow (FCF) instead of the ratio of current net debt to core earnings, Interfax news agency reported.

The current approach expires on January 1, 2023, but Interros wants to change it before then, allowing Nornickel to minimise its final 2020 dividend payout.

The miner faces a new investment cycle aimed at increasing production and improving the company's environmental performance, Interros boss Sergey Batekhin told Interfax.

Nornickel's capital expenditure will rise in 2021 and peak in 2022 to 2025 at $3.5-billion to $4.0-billion a year.

Nornickel could start paying 50% to 60% of its FCF in dividends if Rusal agrees to change the agreement, Batekhin said.

Rusal, which relies on Nornickel's dividend payments in difficult years, said that it would prefer to discuss the strategy and dividend-related questions as part of dialogue between shareholders.

It also added that Nornickel faced a number of challenges over the last 12 months, and thus a review of the shareholder agreement cannot be done without one of Nornickel's management team performance.

Potanin is currently Nornickel's chief executive.

Batekhin said he'd initiated a discussion of his proposals ahead of Nornickel's board meeting set for March 29.

Its current dividend policy mean a payout of 60% of its core earnings, or EBITDA, if its net debt to EBITDA ratio is below 1.8. The payout declines on a sliding scale if the ratio is 1.8 or above, falling to 30% of EBITDA if the ratio tops 2.2.