Ukraine railway monopoly plans 15% freight rate hike in January

Ukrainian state railway monopoly Ukrzaliznytsia (UZ, RAILUA) applied to the state industry regulator requesting to increase freight rates by 15% as of Jan. 1, 2016, the Interfax-Ukraine news agency reported on Oct. 29, citing the entity’s head Oleksandr Zavhorodniy. The plan calls for coal freight rates to increase 5%, he said. The monopoly is also considering another freight rate revision in 2H16, he said.

Freight transportation services are the main source of UZ’s profit. In 2014, it generated UAH 16.3 bln in operating income, which was partially eaten away by other segments to bring the consolidated result to UAH 10.9 bln.

Alexander Paraschiy: The revision of rates might allow Ukrzaliznytsia to boost its revenue by about UAH 7 bln in the next year, we estimate. Clearly, such an event, which is very likely to happen, will improve UZ’s liquidity, but it won’t be enough to improve its solvency. Its total debt, currently being about UAH 42 bln, will still exceed its EBITDA by more than three times, we estimate.