Russian Railways propose Pension Funds to enter its capital.

By bne IntelliNews June 21, 2011
Head of railroad monopoly Russian Railways (RZD) Vladimir Yakunin proposed that Russian Pension Funds enters capital of the company. Yakunin argues that infrastructure company such as RZD is of great interest to pension funds and believes that acquiring part of RZD or participating in infrastructure projects could be one of the solutions of reforming pension system at large. To remind, Russian Pension Fund posted a deficit of RUB 1.3tn in 2010. As reported previously, should the initiative of PM Vladimir Putin of limiting the growth of natural monopolies to inflation be accepted, Russial Railways will require RUB 45bn-RUB 46bn worth of additional subsidies. This is the difference company would bear if the cargo transportation tariffs are increased by 5%-6% instead of 11.4% initially planned. As reported, in 2010 overall Russian Railways expected its profit to increase to RUB 70bn. If 2009 profit of RUB 14.4bn is taken as a base, this would make almost a 5-fold y/y growth. However, it was noted that in 2011 net profit is seen to drop to about RUB 2.7bn due to limitations on tariffs' growth (cargo transportation tariff's growth approved by the government for 2011 stands at 8%, while company believes that economically justified growth is 23%). Previously Russian Railways announced that it is going to have state funding cut by 24% to RUB 89bn in 2011. Company's total investment program for 2011 stands at RUB 349bn. State funding for the company in 2011-2013 is going to amount to RUB 157.5bn, including RUB 67bn in 2012 and RUB 0.5bn in 2013. Russian Railways is 100% owned by the government.

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