Ukraine railway’s shipments fall 3x in Donbas, estimates heavy war losses

Обзоры по компаниям и отраслям 05.09.2014 The Ukrainian railway monopoly Ukrzaliznytsia (UZ, RAILUA) estimates the total cost of recovery of its facilities damaged by war in Donbas is UAH 900 mln, according to its Sept. 4 press release. About 190 UZ facilities have been damaged as of the reporting date, and some haven’t even been inspected to calculate losses. The company already calculated that the repair of inspected railroads and related power lines will cost UAH 668 mln. The entity’s subsidiary servicing the war-afflicted regions, Donetska Railways, reported the same day its cargo shipments slid 3.0x yoy in September to 4.1 mmt, while coal shipments plunged 4.3x yoy to 1.6 mmt in September. Alexander Paraschiy: The recovery funds needed already exceed the semi-annual EBITDA of Donetska Railway. The increased capital needs for recovery is a lesser problem than a possible underperformance in terms of revenue due to decreased freight traffic from the Donbas war. For Ukrzaliznytsia as a whole, the underperformance may reach UAH 800 mln for just for August alone. If the situation does not improve fast in Donbas, UZ will exceed the 3.0x Net Debt / EBITDA covenant stipulated by its Eurobond already in 2014. The coal shipment statistics of Donetska Railways (which operates in the regions where 75% of Ukraine’s coal is mined) also illustrate the risks for Ukraine’s energy sector. Coal shipments fell much faster in Donbas than its mining activity (down 2.9x yoy in August), suggesting that Ukraine’s electricity generating sector (which is 40% coal-fired) may face real troubles with fuel in the very near term. To address that challenge, Ukraine has had to transition from a net exporter of coal to importer: 1 mmt in coal imports has been secured already, according to a recent government report.