Ukrainian Railways increases freight rates, promises more capex

The Infrastructure Ministry published on Aug. 17 its
order on the increase of railway transportation rates in two stages, Ukrainian
Railways (RAILUA) reported the same day. The increase will allow the company to
generate additional revenue of about UAH 2 bln in 2021 and UAH 10 bln in 2022,
the company’s acting CEO Kamyshin stated. He highlighted that this is the
biggest ever rates-driven revenue increase for the company and promised that
Ukrainian Railways will direct the generated funds for the renewal of the rail
infrastructure. In this way, the extra revenue will allow the company to
initiate a “Big construction” program, Kamyshin stated.

Recall, in early July, the ministry announced an increase
of freight rates for certain cargo types from September 2021 and January 2022,
estimating total effect on Ukrainian Railways’ revenue at UAH 1.78 bln this
year and UAH 10.09 bln in the next year.

Alexander Paraschiy: The
increase became inevitable after the State Regulatory Service supported the ministry’s initiative
last week. Therefore, the news is broadly neutral for RAILUA bonds. The new
rates will be applied from Aug. 17, according to Ukrainian Railways, which is
faster than the ministry initially planned (September). Therefore, the
company’s additional revenue this year should be slightly higher than the
ministry initially calculated.

The announced “Big construction” program at the
railway, which repeats a broader “Big construction” project promoted by the
team of president Zelensky as one of the president’s biggest achievements, is
also an expected event. As we assumed before, this project is a core reason for the recent reshuffle of Ukrainian
Railway’s top manager.