New Ukrzaliznytsia head plans freight rate hike within month
Ukraine’s Cabinet of Ministers ruled on Aug. 9 to accept the resignation request
of Ukrzaliznytsia (RAILUA, UZ) CEO Wojciech Balczun and appoint Yevhen Kravstov, the
deputy infrastructure minister, as temporary acting CEO. Following his appointment,
Kravstov promised to agree to “some” hike in UZ freight rates within a month,
Interfax-Ukraine reported. He also said that as of 2018, the company will offer a clear
and transparent system of revising freight rates.
CEO, Balczun had insisted on the introduction of a new system of freight rate adjustments
starting this year, which would have been linked to the producer price index. Based on
its preliminary business plan, UZ was expecting that freight rates would increase 22.5%
since June, which would enable it to generate additional revenue of UAH 6.7 bln this
Ukraine’s Infrastructure Ministry has the power to approve freight transit rates
for Ukrzaliznytsia. The last time the ministry adjusted rates was in May 2016. Freight
transit is the only profit-generating segment for Ukrzaliznytsia.
Alexander Paraschiy: It looks
like the conflict between Balczun and the Infrastructure Minister was the key reason why
the ministry didn't raise freight rates for Ukrzaliznytsia this year. Now that someone
close to the minister is running the company, the chances for a rate hike have improved
significantly, which is a positive development for UZ.
What is negative in the current situation is that the company has no CEO with
full authority and won’t have a clear methodology for revising freight rates in the long
term. The latter means that, as usual, the prospects of Ukraine’s rail monopoly will
continue to depend on the will of the infrastructure minister. We retain our cautiously
neutral position on RAILUA bonds.
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