Ukrzaliznytsia rate hikes may be linked to inflation, deputy minister says

Ukraine’s Infrastructure Deputy Minister Yevhen Kravtsov said that freight rates of railway monopoly Ukrzaliznytsia (RAILUA) may be raised in June or July, Interfax-Ukraine reported on April 18. The growth may be linked to inflation rates in Ukraine, Kravtsov assumed, which is a straightforward benchmark.

Recall, the last time Ukrzaliznytsia enjoyed a rate hike was a 15% increase in late April 2016. Since then, Ukraine’s consumer prices have risen by about 12% and producer prices by about 35%. In its December presentation, Ukrzaliznytsia revealed its “hope” that the government would raise its freight rates by total 25% in the course of 2017, which would allow the company to more than double its CapEx program in 2017 to UAH 27.4 bln.

While the Infrastructure Ministry agreed to adjust rates by about 25% since February, other regulators blocked that decision and so far there is no new clear plan for rate adjustments.

Alexander Paraschiy: The rate hike seems to be being blocked by the key customers of Ukrzaliznytsia (iron ore, steel, coal and grain companies), which is what we expected in December. On top of commercial lobbying against rate growth, there is also political tension between Ukrzaliznytsia’s top management and the Infrastructure Ministry, which also may hinder any decision. All this confirms our neutral/skeptical view of the Eurobonds of Ukrzaliznytsia.