Russian Railways plans RUB 5.7bn investment program.

By bne IntelliNews June 5, 2012
State-controlled railways monopoly Russian Railways (RZD) is planning a RUB 5.7tn (USD 167bn) investment program for 2012-2020, out of which RUB 3.8tn the company plans to finance itself (borrowing about RUB 400bn) and RUB 1.9tn to request from the state, Vedomosti reports citing RZD's VP Vadim Mikhailov. State financing for the investment program could take form of infrastructure bonds, concession schemes, and investment of the pension funds. However, previously government's representatives were skeptical regarding financing the investment program hinting that RZD could raise sufficient funds by itself. RZD's sources claim that should the government not finance the RUB 1.9tn, the company will have to cut investment in few major infrastructure projects. RZD in the coming 3-5 years plans to borrow RUB 60bn-RUB 80bn (USD 1.8bn - USD 2.4bn), PRIME reported this week citing a corporate finance rep of the company. This would include tapping the Eurobond market at least once a year, with the rest to be borrowed in RUB. RZD placed USD 1bn worth of 10-year Eurobonds yielding 5.7% annually in the end of March 2012. At the same time demand for the securities exceeded the amount proposed threefold. It is also noted that prior to the placement yield guidance was lowered from 5.875% to 5.75%, making it the lowest yield on 10-year Eurobonds from CIS issuers. Last week RZD placed 7-year RUB-denominated Eurobonds at 8.3%, demand almost twofold exceeding the amount proposed. This year the company is going to borrow about RUB 100bn, out of which 70% will account for RUB and 30% for foreign currencies. In May six issues of 10 to 20 years domestic bonds worth RUB 90bn were registered. IFRS net profit of RZD declined by 30% y/y to RUB 67bn in H1/11. Profit decline was attributed to finishing the package of anti-crisis measures initiated in 2009 that pushed up operational expenses by 20% to RUB 644bn. In H1/11 revenues increased by 9% y/y to RUB 691bn, mostly due to cargo turnover growth of 8%. Last month Fitch Ratings affirmed the foreign currency long-term Issuers Default Rating (IDR) and priority unsecured rating of RZD at BBB, outlook Stable. RZD's ratings are on the same level as Russian sovereign ratings (BBB/Stable) due to 100% state ownership and strategic role of the company, while reflecting strong ties with the state including yearly tariffs, capital investment and subsidies being approved by the government. At the same time Fitch believes that own business and financial indicators of the company comply with the BBB rating, it being held back, however, by short-term nature of tariff-setting, market risk on commodity cargo (coal, oil and iron ore), low geographic diversification and dependency on state financing in terms of subsidies and capital injections. Agency expects single-digit revenues growth in mid-term perspective, EBITDA of about 20%-25% and negative cash flow due to substantial capital investment program of about RUB 1.3tn in 2012-2014.

Related Articles

Russias participation in Cyprus bail-out under question.

As Cyprus is trying to come up with new ways to raise EUR 5.8bn needed to secure the financing from ECB, EC, and IMF, Russia's participation in the package is not clear. According to the latest ... more

Fitch: Russian banks risks in Cyprus limited.

Fitch Ratings believes that resolution of the Cyprus crisis with a deposit levy or some other form of burden sharing involving creditors is unlikely to result in material losses for Russian ... more

Sources: Russia could triple oil exports to China.

Russia and China discuss contracts that would triple exports of Siberian oil through various transport corridors, Reuters reports citing unnamed sources in the industry. Rosneft is discussing ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.