The Cabinet of Ministers approved a resolution on establishment of a joint-stock rail transport company at its meeting on Wednesday, June 25, 2014. The Interfax Ukraine news agency reported this, citing Oleksandr Kava, the coordinator of reform of the transport sector at the Coordination Center for Introduction of Economic Reforms.
"This fateful decision for the Ukrainian rail transport industry provides an opportunity to begin taking real action as part of the process of reform of Ukrzaliznytsia and begin separating the regulatory and business functions of the public rail transport system," said the expert.
According to a press release by Ukrzaliznytsia, an inventory of the assets of the enterprises and economic entities in the railway industry will be performed before the end of August and an independent valuation of the assets (including property rights and the state's shares that will be contributed to the authorized share capital of the Ukrzaliznytsia join-stock company) will be performed before the end of October.
Following completion of these procedures, a draft resolution on approval of the statutes of the Ukrainska Zaliznytsia public join-stock company (Ukrzaliznytsia) will be submitted to the Cabinet of Ministers by mid-November. This will be followed by state registration of the public joint-stock company, completion of the creation of the company's asset portfolio, creation of a management structure, and creation of 25 affiliates.
The joint-stock company is expected to begin operation in the first few months of 2015. The ban on privatization of railway assets will remain in force.
As reported earlier, the law on establishment of a public joint-stock rail transport company that Ukraine’s head of state signed on March 15, 2012, created the necessary legislative framework for reform of the railway industry.
According to the document, the company is expected to be created in the form of a public joint-stock company, in which 100% of the shares will be reserved for the state without the right of alienation.
The new join-stock company is expected to be created by merging the six existing railroads, as well as public rail transport enterprises, institutions, and organizations. In addition, the state’s stocks, shares, and equity in companies created with the participation of rail transport enterprises will be contributed to the authorized capital of the new join-stock company.
The join-stock company is expected to be created in accordance with the state program for reform of the rail transport industry through creation of vertically integrated entities based on their types of operations: freight transportation, domestic and international passenger transportation, suburban and regional passenger transportation, maintenance and operation of infrastructure, provision of locomotive traction services, repair of rolling stock, construction and repair infrastructure, scientific research and development work, operation of social facilities, etc.
Since the adoption of this law, the transformation of Ukrzaliznytsia into a joint-stock company had been delayed by the failure of the Cabinet of Ministers to adopt the corresponding resolution.
Mark Magaletsky, a senior banker with the European Bank for Reconstruction and Development (EBRD), said in October 2013 that the delay in creating the joint-stock rail transport company might affect the funding of new projects by the EBRD.
Ukrzaliznytsia took the first steps to reform its freight sector in late 2011. This involved creation of the Ukrainian Transport and Logistics Center for optimizing freight transportation within the country through greater centralized control of the transportation process. In addition, Ukrzaliznytsia’s fleet of gondola cars was transferred to two state enterprises – Ukrspetsvagon and the Darnitsky railcar repair plant. The process of repair of railcars was also changed.
