Ukraine Railway Seeks Major Tariff Increase for Financial Recovery
Ukraine's State Railway Faces Financial Strain Amid Ongoing Conflict
By Pavel Polityuk
Urgency for Tariff Hike
KYIV, June 3 (Reuters) - Ukraine's state railway needs to increase its freight tariffs by at least 45% this year to help restore its finances and conclude a debt restructuring following a sharp escalation in Russian attacks on its infrastructure, the company's CEO said.
With the war with Russia now in its fifth year, the railway remains a vital part of Ukraine's logistics network, carrying both freight and passengers. However, increased spending on security and infrastructure maintenance is pressuring its cash flow at a time when it is trying to restructure its debt.
CEO's Perspective on Subsidies
Ukrzaliznytsia CEO Oleksandr Pertsovskyi told Reuters that a rise in freight tariffs is needed, arguing that the railway can no longer subsidise other sectors of the economy through its own resources.
"We understand the difficulties some sectors of the economy are facing. We understand that all of them have taken the hit from rising energy costs... but the railway cannot continue subsidising them," he said.
Financial Shortfall and Compromise
Pertsovskyi said tariffs need to increase by at least 45%, which would cover about half of the company's projected 26 billion-hryvnia ($587 million) cash shortfall.
"45% is not enough, because we have a significant gap, but we understand this is a compromise solution that allows us at least to hold out," Pertsovskyi said.
Debt Restructuring and Bondholder Negotiations
The tariff increase is important not only for immediate liquidity but also for talks with bondholders on debt restructuring and for the company's ability to secure new loans.
Eurobonds and Payment Delays
In 2022, Ukrzaliznytsia secured a deal to delay payments on its $895 million Eurobonds, including $594.9 million due in July 2024 and $300 million due in July 2026.
The company in January 2025 paid $38.27 million to cover coupon payments for the period since July 2024.
Ongoing Creditor Talks
Ukrzaliznytsia has so far failed to reach agreement with creditors on restructuring more than $1 billion of its bonds, but says it is prepared to come back with a new proposal by July.
"All (bondholders) are waiting for decisions, including on indexation," Pertsovskyi said, using an industry term to refer to a tariff increase proportional to the rise in key costs.
Opposition from Key Customers
Ukrzaliznytsia's plans to raise tariffs have been consistently opposed by its main customers - farmers and steelmakers - who say the increase would make their products uncompetitive on global markets.
Prime Minister Yulia Svyrydenko told parliament last week that negotiations are ongoing with business representatives regarding an increase in transport fares.
Impact of Russian Attacks on Railway Operations
Strikes on Locomotives and Infrastructure
STRIKES ON LOCOMOTIVES
Pertsovskyi said the financial difficulties faced by the railway were largely caused by Russia's attempts to paralyse its operations by attacking locomotives, depots, power substations and bridges.
"The jump (in attacks) is just crazy," he said. "This wave has an important feature - strikes on locomotives. We have more than 100 locomotives, diesel locomotives, electric locomotives, AC and DC, that have been attacked."
Changing Nature of Attacks
Pertsovskyi said the nature of the attacks had changed because Russia was using drones equipped with video cameras and online controls, allowing them to target rolling stock in real time.
Threats to Export Corridors
The railway is also recording strikes on energy infrastructure that supports train movements, including on routes to the Black Sea ports of Odesa, an important export corridor.
"(Russia's aim is) to sever our most critical export corridors, particularly those linking our metallurgical regions, such as Kryvyi Rih and Zaporizhzhia, and our industrial east to the ports of Odesa and to western border crossings," he noted.
Security Measures and Air Defence
He said the railway was participating in a government private air defence project, but declined to disclose details about deployment locations for security reasons.
(Reporting by Pavel Polityuk; Editing by Kirsten Donovan)
