Cabinet deregulates railcar rent pricing for Ukrzaliznytsia

Обзоры по компаниям и отраслям 27.12.2017 Ukraine’s Justice Ministry has approved the cancellation of a state regulation on the rental price for the railcars of Ukrainian Railway (RAILUA, Ukrzaliznytsia), Ukraine’s state-controlled railway operator, Infrastructure Minister Volodymyr Omelyan announced on his Facebook page on Dec. 26. Ukrzaliznytsia has the authoritiy to set prices for railcar rent on its own as of Dec. 22, Omelyan clarified. Alexander Paraschiy: Ukrzaliznytsia suffered for a long time from inefficient pricing of its railcar rent, with regulated prices being far below the market. In fall 2017 for example, the daily regulated rental price for its gondola cars was UAH 108/day and for grain hoppers it was UAH 254/day, according to Ukrzaliznytsia, while free market prices were UAH 560/day and UAH 600/day, respectively. Such a price difference created a shadow market for state railcar rentals, which will likely vanish once railcar rent is liberalized. Earlier, Ukrzaliznytsia estimated the positive effect from railcar liberalization of at least UAH 1.0 bln p.a. Ukrzaliznytsia claims the liberalization should lead to reduced market prices for railcar rent by about 10%, which will benefit railway customers. So far, it is hard to believe in such a scenario, but newertheless we see the negative effect from the liberalization won't be significant for Ukrzaliznytsia clients. While the news is positive for Ukrzaliznytsia, we maintain our neutral view on RAILUA bonds.