Page 59 - UKRRptMay21

net debt to EBITDA ratio should decrease to 2.4x as of end-2021, from 4.4x as of end-2020.
It does not look realistic that the company’s key business customers (entities related to Rinat Akhmetov and Kostyantyn Zhevago) will allow it to raise significantly (by about 10-13%) freight rates this year. Therefore, the company’s plans to increase freight revenue by 12% does not look realistic. The recovery of passenger transportation also might look too optimistic, taking into account that quarantine measures related to the pandemic are still in place. All this suggests Ukrainian Railways’ revenue plan looks overly optimistic. Also, it does not look realistic for the company to decrease maintenance costs, and especially fuel costs.
If the company is not able to reach its revenue and EBITDA outlook (which is likely), it will have to downgrade its CapEx plans to keep its leverage multipliers under control. Therefore, even though the company’s P&L plan looks too optimistic, we believe it is possible for Ukrainian Railways to decrease its net debt to EBITDA ratio back below 3.0x in late 2021.
Lemtrans, owner of Ukraine’s largest private rail car fleet, is investing $15mn to create a logistics hub at Mostyska, Ukraine’s Lviv region border town with Poland. By the end of this year, this ‘Dry Port’ will allow shippers to switch container between trains on Soviet gauge tracks and trains on EU gauge tracks. Referring to the growth of freight train traffic from China, Lemtrans General Director Vladimir Mezentsev told Interfax-Ukraine: “Such a project can give an impetus to the development of the entire industry of freight rail transportation in Ukraine.”
● Ships
Ukraine’s seaports handled 20.5% less cargo tonnage during the first quarter of this year than during the same January-March period last year, reported the Sea Ports Administration. The big factor in the drop to 33mn tons was a 37% decrease in grain export volumes, to 8.6mn tons. Ore exports were down by 12%, to 9mn tons. During the first quarter, ports handled 253,170 containers, almost a 5% y/y decrease. Despite these tonnage drops, Ukraine’s exports were up by 12% in the first quarter, to $13.75bn.
Ukraine plans to increase river cargo five-fold, to 50mn tons a year, aided in part by the new Inland Waterways Law, Nataliya Forsyuk, deputy infrastructure minister, told the Transportation Forum. Although Ukraine has 2,714 kilometers of navigable rivers, the country is using less than 20% of its potential. favoured during the Soviet era, river transport is back in fashion as the country seeks to comply with the EU’s Green Deal to cut greenhouse gases.
The state-owned Ukrainian Danube Shipping Company is pursuing a $200mn ship investment program that would allow it to increase its capacity to carry 4mn tons of cargo on the Dnipro, a 40% increase over the river’s 2019 cargo level. In a first step, the parent agency, the Infrastructure Ministry, has endorsed the Danube Shipping’s plan to build 16 tugs and 31 barges for use on the Dnipro. The Ministry also promised to transfer to the company its river ports and terminals. Danube Shipping is in negotiations with
59 UKRAINE Country Report May 2021 www.intellinews.com