Ukrzaliznytsia Expects To Raise Freight Rates By 25%, Passenger Rates By 35% In 2017

The Ukrzaliznytsia public railway company plans to increase its capital investments 2.4-fold to UAH 27.4 billion in 2017 from the UAH 11.2 billion that is expected in 2016. This is stated in a presentation that Ukrzaliznytsia made during a conference call with investors on November 22, the Interfax Ukraine news agency reports.

According to the document, Ukrzaliznytsia plans to spend 46% of this amount of investment on purchase of fixed assets, 33% on capital construction (mainly improvement of the electrification of its tracks), 19% on modernization and modification of fixed assets, and 2% on other needs.

Ukrzaliznytsia plans to finance 66% of these capital investments with its own funds, 33% with new borrowings, and 1% with investors' funds.

Ukrzaliznytsia’s board Remigiusz Paszkiewicz said during the conference call that implementation of the capital investment plan required the government to approve the company’s plan to raise freight rates.

In particular, the capital investment plan provides for raising freight rates by 25% and passenger rates by 35% in 2017, which, according to Paszkiewicz, takes into account not only the cost increases related to the weakening of the hryvnia and rising inflation, but also the increasing demand for rail transport.

Ukrzaliznytsia may revise the capital investment plan if the Cabinet of Ministers does not approve the plan to raise rates. Among other things, it may divide the plan into two parts and implement the second part in 2018. However, according to Paszkiewicz, such an outcome is undesirable.

"As you know, there is a shortage of rolling stock for transportation of grain in Ukraine. According to a research that we conducted in collaboration with the World Bank, grain production is increasing every year and will continue to increase in the coming years. We would like to modernize part of the rolling stock and buy new ones. However, we cannot do that without raising rates," he said.

Paszkiewicz also said that Ukrzaliznytsia increased grain transportation by 10% in the first 10 months of this year, compared with the corresponding period of 2015. 

As reported, the most recent increase of freight rates in Ukraine (by 15%) took effect on 30 April 2016.