Ukrainian Railways gets new acting CEO, rate increase approval

Cabinet of Ministers approved on Aug. 11 the
appointment of Oleksandr Kamyshin as the new acting CEO of Ukrainian Railways (RAILUA),
Interfax-Ukraine reported the same day. Since June, Kamyshin has been an
advisor to the Infrastructure Minister. In 2012-2019 he worked for Ukraine’s
largest business group, SCM of Rinat Akhmetov. Recall, he was offered the
position of acting CEO by Ukrainian Railways’ supervisory board last weekend.

In other news, Ukraine’s State Regulatory Service
approved Infrastructure Ministry’s initiative to increase in two stages the
rates for the railway transportation of certain cargos, according to
information from Ukrainian Railways’ supervisory board member Serhiy
Leshchenko. Recall, the initiative, made public in July,
assumes an increase of freight rates for 1st class goods (iron ore, coal,
cement, mineral fertilizers) of 8% from September and 20.4% from January, and
for 2nd class goods (grains) of 8% from September and 6.5% from January. This
should increase Ukrainian Railways’ revenue by UAH 1.78 bln in 2021 and by UAH
10.09 bln in 2022. According to Leshchenko, the rates increases will affect SCM
companies the most, with Metinvest (METINV) will have to spend UAH 3.2 bln more
and DTEK (DTEKUA) UAH 1 bln more for cargo transportation.

Alexander Paraschiy: The smooth
approval of the freight rate increase is a positive development as it will
allow Ukrainian Railways to get new rates and increased revenue since
September, and in line with the latest ministry’s plan. In this way, the
company will be able to accumulate more funds to finance its capex programs, as
well as will enjoy better leverage multiples. This potentially may lead to
further upgrades of the company’s credit ratings. All in all, we continue to
consider RAILUA bonds as the most attractive in Ukraine’s quasi-sovereign
universe.

The appointment of the new acting CEO is an expected
event, taking into account the determination of top Ukraine officials to change
the company’s top manager. Meanwhile, we will look forward to seeing how the
process of selecting a new full-pledged CEO of the company is implemented.