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27.08.2008
Credit-Rating: New program on reforms in utilities sector to be efficient only in a far future
Credit-Rating thinks that in case the program for reforms in Ukraine`s housing and utilities sector to 2012, which draft has been presented in July 2008, is approved, the effects from its implementation may be expected in far future only. This program does not create conditions for enhancements in the industry`s financial and economic state and renovations of its assets.
In the view of Oleg Lutsenko, Credit-Rating municipal sector`s senior analyst `the development of the program on reforms in the housing and utilities sector is associated with the volume of loans raised by the utilities companies for renovations and development of the sector, which increases the consolidated debt of the municipalities. This project envisages changes in both sector`s institutional framework and approaches for financing projects aimed at renovation of housing and utilities infrastructure`.
According to the program, one of the major leverages for funding the renovations of the sector`s assets is to be decrease in cost of loans raised for investment projects aimed at development of housing and utilities sector (over 40% of the budgetary funds for the program is to be aimed at lowering the cost of loans). The rest of the funds will be invested in implementation of the pilot projects aimed at renovations in the housing and utilities sector. Moreover, pursuant to the program`s draft, the conditions for obtaining cheap loans are absence of salary arrears in utilities companies and the sufficient volume of operating assets for ongoing operations. However, the absence of procedure for calculation of a sufficient volume of operating assets may obscure approaches for granting budgetary support to the companies.
The enhancements in the financial and economic state of the companies is to be driven by in-time revision of tariffs for utilities services, which is to be promoted by establishment of the National Regulatory Commission operating in monopoly markets. The program draft envisages the establishment of such authority, but it is to take place only upon development of amendments to the Constitution of Ukraine in 2009 and approval of a number of legislative acts, which makes the program`s implementation dependant upon the Parliament`s work schedule.
For more information, please contact:
Information and Communication Department
Sergey Rozumyak +38 044 490 25 50
SRozumyak@credit-rating.com.ua
