Ukrainian Railways (Ukrzaliznytsia) has approved a UAH 108 bln development strategy for the its rolling stock fleet. As part of the five-year strategy, 96,000 railcars will be modernised, of which 9,000 freight wagons during next year.
According to Alexander Paraschiy, Head of Research at Concorde Capital, a local consultancy company, Ukrzaliznytsia always had ambitious plans of upgrading its railcars and locomotives, none of which have been fulfilled, primarily due to a lack of financing. “This time, with the April appointment of a new and hopefully more efficient management, there is a chance that UZ will be able to meet the plan. The key risk in that plan is that the company does not earn as much as it is going to spend – that means its financial leverage will only increase in time. For instance, the company recently outlined an ambitious CapEx program for 2017 for UAH 27.4 bln, a third of which will be fullfilled by attracting new debt. Such a CapEx program exceeds Ukrzaliznytsia LTM EBITDA (2H15-1H16) of UAH 18.4 bln. All this is in line with our neutral/cautious view on Ukrzaliznytsia’s Eurobonds”, he added.