Author`s name Dmitry Sudakov

Russian Railways to cost $129 billion in 5 years

JSC Russian Railways will leave Gazprom, Rosneft and all railway operators in the world behind in terms of cost. One should not rush with the privatization of the state-run company, Vladimir Yakunin, the head of Russian Railways believes. According to Yakunin, in five years, Russian Railways will cost $129 billion. Nowadays, the state-owned company, according to Yakunin, is 3.5 times cheaper - $36 billion.

For example, the capitalization of Gazprom exceeds $109 billion, Rosneft - more than $81 billion, Sberbank - $60.7 billion.

The potential sale of a strategic stake in the country's railway operator, which is one of the largest companies in the world, remains a subject of debate in the government. To privatize Russian Railways, the Transport Ministry offered an additional issue of shares. Recently, however, officials discuss the sale of shares in the amount of five percent to one of the state-owned banks.

According to Russia's Deputy Minister of Transport, Alexei Tsydenov, the 5-percent shareholding of JSC Russian Railways may be sold to Vnesheconombank (Foreign Economic Bank).

The Ministry for Transport agrees with the head of Russian Railways that the company is not ready for IPO. In 2013, it was supposed to sell 25% minus one share of Railways, but the resistance from the administration of the monopoly and state departments to such plans suggests that the distribution of packages in the near future is not going to take place. At least before 2015, which is designated as the date for potential IPO. In August, the head of Russian Railways said in an interview with Britain's Independent said that the package of 25% could be sold through IPO on the London Stock Exchange.

Russian Railways CEO Vladimir Yakunin said that the reduction of the share of state participation in the capital of JSC Russian Railways below 75% + 1 share will create systemic risks for the influence of the government on corporate decisions.

In addition, to privatize Russian Railways, one needs to observe a number of conditions, MPs insist. They include the definition of the model of financing and long-term tariff policy in the industry, optimization and subsidizing loss-making types of activities, including the commuter rail complex, the transition to the target model of the market, the development of the networking contract, and other goals that still remain unsolved.

"In addition, the profit from the sale of 25% of the shareholding should exceed the investment program of the company," Sergey Gavrilov, the chairman of the State Duma Committee on Property said.

Last week, the government approved the investment program of Russian Railways for 2013 and 2014-2015. Compared with 2012, the company's investments will be considerably reduced: from the current 492 billion rubles to 411.5 billion in 2013, to 360 billion in 2014 and 346 billion in 2015. Officials routinely stated that these options only allow to maintain the current condition of infrastructure.

The Ministry of Finance evaluated the capitalization of Russian Railways at 2.8 trillion rubles ($85 billion). Thus, the sale of a quarter of the company does not solve the problem of obtaining the necessary funds.

Vladimir Shabanov.