Ukrainian Railways plans to increase freight revenue 10% in 2021

Ukrainian Railways (RAILUA) is planning to generate
UAH 72 bln revenue from freight transportation in 2021, which is 10% more yoy,
the company’s press service reported on March 16. This year, the company
expects to deliver 314 mmt of cargo, which is 3% more yoy. In this way, the key
driver for the freight revenue increase will be the adjustment of freight
rates. This is planned to be achieved via the liberalization and unification of
cargo rates, the company stated. Currently, cargo rates are regulated and differentiated
depending on the type of cargo.

In other news related to Ukrainian Railways,
Interfax-Ukraine reported on March 16, referring to its sources, that the
company’s supervisory board might consider the dismissal of CEO Volodymyr
Zhmak. According to the source, some of the board members “do not like Zhmak’s
activity on the restructuring of the company.” The company’s press service
confirmed the circulation of such information in a comment to radiosvoboda.org
news site, adding that there are no objective reasons for the dismissal “based
on all the indicators” of the company’s activity.

Alexander Paraschiy: Any change
in Ukrainian Railways’ tariff policy that leads to an effective increase of
cargo rates usually meets fierce resistance from large business customers
(especially top customers, the companies related to Rinat Akhmetov like
Metinvest and DTEK). Most likely, dissatisfaction with Zhmak’s initiatives and
the respective pressure on him is rooted in the tariff initiatives. At least,
this means that the likelihood of the company’s changing its tariff policy is
not high.

Meanwhile, among the key tasks for Ukrainian
Railways for the near term is to agree on leverage covenants waivers with key
creditors (including Eurobond holders). Taking into account an opportunity for
the bondholders to get some premium in exchange for their consent, we keep our
neutral view on RAILUA bonds.