Finance

Due to the systemic crisis in the freight car market, leasing companies have a chance to seriously influence the business of private rolling stock operators. Having become the largest holders of their accumulating debts and the largest owners of the fleet unclaimed for transportation, financial organizations can have their say in the processes of consolidating cars under a single management, which the railway monopoly has long dreamed of.

Leasing companies are looking with interest at innovative cars from leading manufacturers, but are in no hurry to invest money in them until the demand for them becomes widespread
Photo: Vladislav Lonshakov, Kommersant

Victor Anosov

Market participants and industry experts unanimously describe the situation in the Russian railway market as critical. “Due to the fall in transportation volumes, the demand for standard rolling stock is at a historically minimal level,” states the current state of the industry, Andrey Tsyganov, director of analytical research at the United Carriage Company (UWC). “Positive dynamics are observed only in the segment of innovative rolling stock, which, due to its improved technical and operational characteristics, provides the operator with a profitability twice as high as that of old-generation cars."

Little innovation

It should be noted that UWC, which produces innovative railcars with increased carrying capacity and reliability at the Tikhvin Freight Car Building Plant, combines both the leasing company RAIL1520, which provides operators with new products in installments, and its own operator of such railcars, the Vostok1520 company, which provides innovations for loading to cargo owners . Another large manufacturer of wagons with a new freight bogie, NPK Uralvagonzavod, operates in approximately the same way; the buyer of innovations is predominantly the subsidiary freight operator UVZ Logistics. Large cargo owners take such cars into test operation, but do so carefully, wanting to confirm in practice the innovative characteristics declared by the manufacturers.

But for other participants in the leasing market, the innovative carriage is not yet very attractive as a product. “The high cost of an innovative car offered by factories, even taking into account the proposed subsidies, and its low profitability, taking into account the discount on the tariff on an empty trip, have not yet led to mass demand,” notes VTB Leasing. “Operators are working to reduce the cost of their transportation by optimizing routes , reducing empty mileage, reducing other costs, so we believe that the innovative car will eventually find its niche as being more economically profitable.” However, this may not happen until the situation in the railway industry as a whole begins to improve, the company believes.

Nevertheless, market participants are aware of the emerging trend for new types of cars. “In subsequent years, it is advisable to update the fleet with innovative cars, that is, the annual production of 30 thousand cars should consist only of new generation cars,” says Dmitry Zotov, general director of the leasing company Transfin-M. “Perhaps car manufacturers should discontinue production of the cars with an old cart and thus reorient the buyer to innovative designs,” he believes.

The carriages are moving to the banks

According to leasing companies, in the current conditions, those operators who have a stable cargo base, a cheap car owned or leased at an acceptable price in the period from 2009 to 2011 can fulfill existing leasing contracts. A diversified business or a margin of safety in the form of equity capital helps operators bear the leasing burden, the VTB Leasing press service notes. “Thanks to a balanced credit risk policy and moderate risk appetite, VTB Leasing has formed a high-quality leasing portfolio mainly with this type of clients, with an acceptable debt per car,” the company says. “Of course, taking into account the current situation in the railway industry with individual clients carried out an economically justified restructuring and changed the structure of transactions on mutually beneficial terms." But to date, there have been no cases of forced withdrawal of wagons or customer default at VTB Leasing, the company assures.

Operators who purchased rolling stock at the peak of its value, having, as a rule, a small fleet and leasing it to larger players, are no longer able to service leasing obligations. “Given the high cost of cars, it is impossible to implement a restructuring that can satisfy current market requirements, so lessors are coming to withdraw such a fleet,” the VTB Leasing press service explains the situation. The company notes that, in accordance with current legislation, after the seizure of property, the owner of the car cannot re-leasing it. Therefore, leasing companies do not have such a wide range of options for dealing with cars: they can lease the fleet for operational lease to consolidator companies at a minimum rental rate, sell the fleet at a loss, and if the fleet is older than the established service life, cut the cars for scrap, trying to sell usable ones cast parts.

Balance Mind

The general director of the leasing company Transfin-M, Dmitry Zotov, agrees that there will never be the same rush of demand for freight cars, but is in no hurry to predict an imminent collapse in the industry. According to his forecasts, with the decommissioning of the old fleet, the number of cars on the network will normalize, and the production of new cars will be at the level of the retiring fleet. “From my point of view, the wagon market has ceased to be speculative, but not attractive for investment. At a certain point, wagons were bought in anticipation of excess profits and dynamic price growth. This period was necessary to quickly renew the worn-out fleet inherited from the times of the USSR. In the future, investments will be more reasonable, operators will buy a fleet only if they have a clear understanding of what cargo base it is intended for,” believes Dmitry Zotov.

Meanwhile, participants in the freight car market are seriously discussing among themselves the idea of the management of Russian Railways (RZD) to radically increase the efficiency of using the most problematic fleet of gondola cars by uniting about 300 thousand units of universal rolling stock of this type under one management. The idea itself is not new and is that with such a large fleet in one hand, colossal savings in empty mileage costs are achieved thanks to the so-called balance method of empty management.

Roughly speaking, a wagon released in the Far East can be immediately delivered for loading in the north-west of the country without the time required to move it across Russia, as happens when sending a private empty wagon. This focus is obtained by planning the need for freight rolling stock on a geographical basis, allowing the carrier to save on targeted shipments of each individual car and form trains without paying attention to its affiliation with a specific owner. In general, this makes it possible to effectively operate entire flows of railcar resources, which really improves the economics of transportation for both the operator and the carrier.

Officially, market participants and Russian Railways do not confirm information about a new round of reforms in railway transport, which involves the creation of a kind of “bank of universal cars” operating using impersonal technology. But according to Kommersant's information, in May several meetings of the largest owners of cars with high management of the monopoly were already held, where they also discussed a proposal to create such a common pool of gondola cars, which would be a solution to many long-standing industry problems. In this process, as sources familiar with the approximate content of the consultation topic say, a significant role will be played by the decision of leasing companies, which have begun to accumulate a relatively new fleet of carriages, but at the same time bringing zero income and requiring large costs for maintenance and storage.

Consolidation price

Market participants themselves do not argue that the balance sheet method of fleet management contains enormous resources of technological savings, which can be successfully monetized in the existing market. But each of the available proposals raises more questions in them than interest, which prevents them from making a decision to place their rolling stock under unified management. “They are talking about uniting about 300-350 thousand gondola cars under one roof, while in total there are about 600 thousand units on the market. The question is: what will happen to the remaining 300 thousand units of working cars and ready for transportation? The answer is clear “They simply won’t find a load for themselves and will turn into a pile of metal,” says the head of one of the large operators.

However, leasing companies and industry experts support any government measures to limit work on the network of freight cars produced in the last century. Up to the most radical ones - administrative bans on the operation of cars with extended service life, and not just economic incentives. With the current rate of return at 350-400 rubles. For a gondola car per day, only the operator from whom this car was purchased can maintain profitability, market participants note. If the car is leased, then the optimal operator rate should be no less than 700-800 rubles. per day, which the market has not remembered for almost two years.

By the way, the question of the rental rate remains key to the implementation of the idea of consolidating the fleet under impersonal technology. All previous attempts by Russian Railways to form a similar pool of cars ran into either opposition from antimonopoly authorities or the reluctance of operators to hand over their cars to management at a reduced price. Perhaps a new round of “secret” negotiations on the cost and conditions of attracting private rolling stock to the created “car bank”, and maybe even a public discussion of a possible consolidation project, will take place within the framework of the “Strategic Partnership 1520” railway forum opening today in Sochi. Good forecasts from weather forecasters (as opposed to the forecasts of industry analysts) and the resort atmosphere of the Russian Caucasus should help counterparties of railway cargo transportation find, on the one hand, a mutually beneficial solution, and on the other hand, save each other from inevitable bankruptcy.

Leasing fights for debts