Page 125 - RusRPTNov20

● Trains
Russian Railways (RZD)​ proposes indexation of tariffs for 2021. ​Russian Railways has changed its tariff proposals for 2021, according to materials sent to first Deputy Prime Minister Andrey Belousov – Komersant reports. According to Komersant’s source, the discussion is scheduled for next week. The new option provides an alternative RZD average tariff hike of 3.7% for 2021, i.e., an increase of empty run tariffs by 15.8% and a reduction of loaded run tariffs by 0.1%.
Russian Railways intends to maintain discounts on the transportation of a number of goods, including grain and oil and gas in the direction of the Far East. The discounts of innovative rail cars are proposed for cancelation. Instead, operators will be offered a 4.3% discount for selected routes.
BCS GM believe suggestion of empty run tariffs hike is not timely. In 2020, the industry experienced a decline in volumes due to COVID. Empty run tariff hike will increase the cost burden for operators. Simultaneously, it is unlikely that such a policy will reduce the empty runs on the chain, as the decline of volumes and higher empty run is driven by economic slowdown, rather than other reasons.
BCS GM believe the suggestion to increase empty run tariffs, if approved, may be limited to select types of rail cars and of cargoes. Note the shipment of selected types of cargo, such as oil products and grain, naturally have up to 100% empty run ratio and hiking tariffs hike will not be able to change the rate in any case.
BCS GM believe the final proposal on tariffs indexation will be different from the current version and hope RZD take into account the current situation and COVID crisis. If the additional empty run hike is indeed imposed, we believe railway operators would be willing to pass the hike onto the customer, similar to the practice of other RZD tariffs.
In case of the introduction of a 16% empty run hike for gondolas, without the possibility to pass the tariffs indexation onto the customer, we estimate up to 4% negative impact on GLTR’s 2021 EBITDA and 9% impact on its earnings. We consider such a scenario as the worst case and believe that either the final empty run hike will be less or the company will be able to pass a significant part of the empty run tariff hike onto its customers.
● Ships
Russia’s newest nuclear-powered icebreaker, the Arktika, will start
125 ​RUSSIA Country Report​ November 2020 www.intellinews.com