The government's decision to introduce a public service obligation for passenger transportation and to provide budgetary funding to Ukrzaliznytsia for this purpose-which is analogous to the European Public Service Obligation (PSO) model – enables negotiations on restructuring the company's debt, which missed an interest payment on its Eurobonds in January, according to Finance Minister Serhiy Marchenko.
"This gives us the opportunity to discuss the restructuring of the company's debt, as well as provide the EBRD with additional mechanisms to finance this company," the minister said at the Ukrainian panel during the annual meeting and business summit of the European Bank for Reconstruction and Development (EBRD), held in Riga on June 5 to 7.
Marchenko called the decision to grant a PSO to Ukrzaliznytsia during the war very painful for the government, but stressed that there is no time to wait for the war to end. "We decided that to ensure the safety of our railways, we need to do this," the finance minister said.
He thanked the EBRD and other development institutions that are helping to create conditions for preserving Ukrainian state-owned companies by providing them with sufficient liquidity to continue operating, particularly Ukrzaliznytsia and Ukrenergo.
"There is currently no potential for future investments, but we need to preserve this company for further development, restructure it, ensure its long-term prospects, and make it sustainable," Marchenko sai.
EBRD President Odile Renaud-Basso said that, overall, the bank's clients in Ukraine are repaying their debts well, so the bank can expand lending.
Renaud-Basso said it was very important to work on risk management rather than retreat. She noted that risk data, default rates and other indicators showed that the situation varied greatly across the country. According to her, risks were naturally much higher closer to the front line, while in western Ukraine they were significantly lower.
She said there were cases of high levels of non-performing loans, but that this was mainly related to state-owned enterprises that had to restructure their bonds, with such debt having default status.
The EBRD president said the financial parameters of key state-owned enterprises, such as Ukrenergo, Ukrzaliznytsia and others, had become more complex after four years of the need to repair certain infrastructure, declining demand or reduced revenues due to the macroeconomic situation and other factors.
She emphasized the need not only to increase the bank's capital, a decision made three years ago and being implemented according to plan, but also to use additional instruments to make projects bankable, including guarantees, insurance and donor support.
Renaud-Basso added that financial parameters remained an important factor, but that the bank was receiving very strong support from bilateral donors. She said that sometimes sovereign guarantees had to be replaced, as the government had very strict requirements for maintaining macroeconomic stability, while the EU was helping by providing guarantees that the government could not provide.
