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Ukraine Business News, Tuesday, March 19

 

 

 

 

  • Inflation down, Prime Stays High
  • Central Bank Moves to Allow Foreigners buy Hryvnia Bonds
  • JPMorgan Buys $350 Million of Ukraine Eurobonds in Private Trade
  • ProZorro Saves Nearly $3 Billion in 3 Years
  • Train to Plane to Get Bigger
  • Kyiv’s Big Bridge Will Boost Mega Development on Rybalsky
  • Spain’s Acciona Invests in Odesa Solar
  • Singapore’s Wilmar Invests in Yuzhne Port
  • Coming Down the Tracks: Private Locomotives, Private Rail Station Management
  • Russian Gas Flowing Through Ukraine Up 15%
  • Ukrainian Gas Consumption Down 9%
  • Heads Roll at State Oil and Gas Companies
  • Kyiv Dominates IT Growth
  • China to Finance a Russia Bypass: the Finland-Estonia Tunnel
  • UZ Railroad Starts Selling its Scrap Mountain
  • Faster Trains for Mariupol
  • New Investment for Sea of Azov Ports
  • Record Grain Harvest Bursts Silos
  • From Farms to Ports, Investment Grows in Grain Logistics
  • Arms Production: UAVs, APCs and Missiles
  • US Company Builds 2nd Zakarpattia Factory
  • Work to Create Ukraine-Slovakia Freight Corridor

 Inflation will end this year at 6.3%, one third below last year’s rate of 9.8%, predicted Yakiv Smoliy, governor of the National Bank of Ukraine. Next year, inflation will be 5%, he told reporters Thursday.

 Despite cooling inflation, Ukraine’s prime interest rate stays at 18%, a level first set six months ago, the National Bank of Ukraine reported Thursday. To combat inflation, the central bank started raising the prime rate 17 months ago, when it went from 12.5% to 13.5%. Smoliy said Thursday: “The timing of the transition to lowering the discount rate will depend on how robust the inflationary risks will be and inflation expectations improve.” Timothy Ash writes: “Solid move by the NBU to hold its policy rate at 18%, despite inflation heading lower. Prudent move given uncertainty around who wins the presidential elections – really a three horse race, with little real clarity on who will win.”

One day after a weeklong IMF review mission flew back to Washington, Smoliy predicted Thursday that Ukraine will receive a second low interest loan tranche in May. “[We] continue to cooperate with the IMF and expect to receive tranches in May and in November,” he told reporters. In December, the IMF board approved a 14-month, $3.9 billion stand-by program for Ukraine. Release of more money is contingent on Ukraine’s government making progress on anti-corruption. After noting the IMF team asked about the Constitutional Court’s recent abolition of liability for illegal enrichment, Smoliy said: “We continue to work as usual, continue to cooperate with the IMF.” The May tranche is expected to be be $1.3 billion, slightly below the December tranche of $1.4 billion.

In a key step toward allowing non resident foreign investors to buy Ukrainian government bonds, the central bank signed an agreement Wednesday with Clearstream Securities Depository. Soon, the National Bank of Ukraine is to establish a “link” with Clearstream, simplifying access of foreign investors to government domestic bonds. “Correspondent relations with the international depository will allow Ukraine to accelerate its integration into the world capital market,” said Oleg Churiy, the central bank’s deputy governor.

The National Bank of Ukraine was awarded the ‘Central Banking Award for Transparency’ Wednesday night at a ceremony in London. Selected by Central Banking magazine, previous central bank transparency award winners were: Ireland in 2017, Israel in 2016, Czech Republic in 2015, and Sweden in 2014. The US embassy in Kyiv tweeted Thursday: “We welcome the success of Ukraine in cleaning up the banking sector, and with the independent leadership the National Bank plays an important role in this transformation.”

Ukrzaliznytsia redeemed the first part of its Eurobonds for $150 million and paid a coupon yield on them. Money to repay the bonds were raised domestically, notably from Oschadbank and Ukrinfraproekt. On Feb. 13, the Cabinet of Ministers authorized the state railroad to issue up to $500 million in new Eurobonds to pay off old debt. Yevhen Kravtsov, the railroad chairman, said Ukrzaliznytsia “is always on time and fully calculated on its obligations.”

JPMorgan Chase bought $350 million worth of bonds from Ukraine’s government Tuesday, paying 98.88 cents on the dollar, reports The Wall Street Journal. The bank has been reselling them to investors at about 100.50 cents on the dollar. The Journal calculates that if JPMorgan sells all of the bonds at that price it would make a $5.7 million profit from this private sale. “In general we have a supportive environment for emerging markets, and JPMorgan is taking advantage of that,” Jan Dehn, research head at Ashmore Group, tells the Journal. ”Good for them. That’s what the market is there for.”

From the government side, the Finance Ministry announced Wednesday the re-placement of Eurobonds with a maturity period up to Nov. 2028 for $350 million, with a coupon rate of 9.75% per annum. The placement price was not indicated in the posting. With this placement, total nominal issue volume increased to $1.6 billion

In its three years of existence, the ProZorro electronic procurement system has handled 3 million tenders, saving the nation $2.8 billion, reports Maxim Nefyodov first deputy minister of economy. Open to foreign and national bidders, ProZorro posts tender details and electronically handles the bidding process.

In one step toward rebuilding Soviet-era hydro capacity, a $50 million contract was signed in Kharkiv Thursday to rebuild two of the 60-year-old power units Kremenchuk Hydroelectric Power Plant. With much of the money coming from the EBRD and European Investment Bank, the hydro turbines will be built by Turboatom and the hydro generators will be built by Electrotyazhmash. The third dam in the Dnipro cascade, the 624 MW Kremenchuk plant was inaugurated in 1959 at Svitlovodsk, or Bright Waterway. Prime Minister Groysman who presided over the signing said: “This contract provides for work for 25,000 Ukrainian workers, engineers, designers.”

China’s Great Wall Drilling Company is looking for contracts to design, drill and overhaul oil and gas wells in Ukraine, reports the Ministry of Energy and Coal Industry. On Wednesday, several officials of the company, a unit of China National Petroleum Corporation, met in Kyiv with Ministry officials “to establish mutually beneficial cooperation to involve engineering and technical services in the oil and gas sector in Ukraine.”

Estonia’s Bolt, formerly Taxify, expands its smartphone taxi hailing service to Lviv this weekend. After launching in Kyiv last June, the service expanded in December to Kharkiv. Now in 30 countries, Bolt competes in Ukraine with Uber and Uklon.

Kyiv’s single car, self propelled electric train to the plane has proved so popular that the state railroad plans to replace it with a conventional diesel locomotive pulling passenger cars, Yevhen Kravtsov, chairman of Ukrzaliznytsya, tells Segodnya news site. Marketed as the Boryspil Express, the 80 UAH ($3) ride between the airport and Kyiv Central Station is often so full that some passengers have to stand during the 35-minute trip. 

Kyiv’s Podolsko-Voskresensky bridge, a city fixture since work began in 2003, is to receive $8 million to speed up construction of the seven kilometer road and rail bridge over the Dnipro. Designed to carry 60,000 cars a day between Podil and the Left Bank, the ‘bridge’ is actually an ensemble of seven bridges, four interchanges and two viaducts. If spending holds up, the bridge could be open to road traffic by the end of next year. Allocating another $8 million to the northern extension of the Green metro line, Prime Minister Groysman told Mayor Klitschko: “Kiev should be the pearl of Europe.”

One beneficiary of the big bridge will be Sergei Tigipko’s TAS group, which plans to build on Rybalsky Peninsula ‘Lipki Island City Resort’ – a complex of 36 buildings with 6,200 apartments housing 15,400 people. The development will include 43,500 square meters of leasable office space and 33,300 square meters of leasable retail space. This week, TAS’ partner, City One Development, is presenting this mega project to potential investors at MIPIM, the annual real estate conference in Cannes.

Also at MIPIM, Ukrainian Trade Guild, the real estate consulting company, is promoting $400 million worth of real estate projects in Dnipro, Kyiv, Lviv, and Vinnytsia. The stand features: Alfa Mall, Alfa Residence, Alfa District (Dnipro), LCD Europe, IT cluster Hypercube (Vinnytsia), and urban hotels Urooms (Lviv).

Spain’s Acciona Energia Global will acquire majority control of a 26 MW solar project in Odesa started by Vasily Khmelnitsky’s UDP Renewables. Last summer, Acciona announced it was joining UDP to invest €55 million to boost capacity to 58 MW in the complex. UDP has posted on its website plans to further boost capacity this year to 175 MW. Called Gudzovka-Solar-1 and Gudzovka-Solar-2, the two solar stations are located in Artsyzky, Bessarabia, 100 km southwest of Odesa city.

Holland’s AEG Power Solutions has signed a licensing agreement with Odesa’s S-Engineering LLC to manufacture solar inverters using AEG technology. A key component of solar plants, inverters convert DC power coming from a solar panel into alternating current, or AC, which can be fed into a commercial electrical grid. The first inverters to be produced in Ukraine, the AEG inverters will be eligible for slightly higher green tariffs, reserved for Ukrainian-made renewable energy products.

Singapore’s Delta Wilmar CIS LLC plans a major expansion of its facilities at Yuzhne: a new shipping berth, a soybean processing plant, and storage and handling facilities for shipping bulk agricultural cargo. In coordination, the Sea Ports Authority plans to dredge the approach channel to the new pier. The new plant will be capable of crushing 2,000 tons of soybeans a day. The terminal will store 40,000 tons at a time.

A unit of Wilmar International, one of Asia’s largest agribusiness groups, Delta Wilmar is expanding its agro products handling capacity at Yuzhne, Ukraine’s biggest port, to 1.2 million tons a year. Rajvis Veckagans, chairman of the Ports Authority, said: “This project with Delta Wilmar CIS will create 200 new jobs in the port, and increase the processing capacity of agricultural products by 600,000 tons per year.”

Nibulon, the grain producing and exporting giant, expects to open in June its newest river port, in Ternivka, Zaporizhia region, on the Ploska Osokorivka river, a Dnipro tributary. Nibulon wants to build a Black Sea terminal in Oleksandrivka, but the company waits for permits from Kherson region authorities. Docking at a string of private ports on the Dnipro, Nibulon barges made 660 trips last year, moving 2.8 million tons of grain and oilseeds, a 24% jump over 2017.

Ukrainian authorities want to restore the Dnipro to its Soviet-era role as Ukraine’s Mississippi. Meeting with Kyiv region farmers on Tuesday, Infrastructure Minister Volodymyr Omelyan noted that river cargo volumes have tripled since 2013, to 10 million tons. “And this is only the beginning,” he promised. “It is cheaper, more convenient, and, in the end, it is more logical.”

The low design of Russia’s Kerch Strait bridge cut by one third the list of ships that historically served Mariupol, asserts Vadym Chernysh, the minister responsible for displaced people from the occupied territories. “Russia restricted the height of vessels: from now on, vessels like the Panamax cannot pass through the channel,” he said, adding that metal exports from Mariupol are down by 140,000 tons a month. In addition, he said, the bridge pylons have changed currents, causing silting problems. Russia’s ports on the Azov have half the depths of Ukraine’s ports and are used largely for fishing.

A pilot program of private freight trains will start in Ukraine this year, Minister Omelyan promises. Private fleets of freight cars are increasing, but private locomotives have been banned. After the Rada rejected a private train bill in December, the government submitted a new one on Jan. 31. Without going into details, Omelyan told the Kyiv region farmers: “This year, in the experimental mode, we are introducing private traction on the railroad.” Earlier, he told UNIAN the pilot program could involve a major international rail operator working on routes that are not profitable for Ukrzaliznytsia. State railroad freight cars will increasingly be leased through ProZorro, the electronic auction platform. Omelyan told the farmers: “The price may fluctuate depending on supply and demand. Electronic auctions are anti-corruption protection.”

To test private companies running train stations, Ukrzaliznytsia plans to transfer Khmelnitsky and Mykolaiv stations to private management this year. Handling 1.6 million passengers last year, Khmelnitsky is Ukraine’s ninth busiest station. Mykolaiv was not in the top 10. The state railroad is working with the EBRD and the World Bank to benefit from models that work well elsewhere. Experimenting with these two relatively small stations is a warmup to the real prize: private management of Kyiv’s Central Station. The busiest of Ukraine’s 1,300 rail stations, Kyiv’s Central Station handled 23.4 million passengers last year.

Ukraine is closing the nation’s air space to Boeing 737-8 MAX and 737-9 MAX. The measure puts Ukraine in line with the EU, which suspended use of the aircraft after two fatal crashes. No Ukrainian airline uses the new, fuel saving passenger jets. Ukraine International Airlines plans to receive three this year, including one within two weeks.

The volume of Russian gas flowing across Ukraine to Europe was up by 15% in the first two months of this year, compared to the same period last year. Ukrtransgaz, the state gas transmission company, said that 13.8 billion cubic meters of gas passed through Ukraine’s pipeline system to the EU and Moldova. Officials for Naftogaz, the parent company, predict that volumes could drop to zero next year.

Ukrainians cut their gas consumption by 9% during the first two months of this year, compared to the same period in 2018, reports Ukrtransgaz. The state pipeline operator did not say why consumption dropped to 7.9 billion cubic meters. Household gas prices were hiked in November, a move that spurred conservation. Last year, Ukraine raised its gas consumption slightly, by 1.3% year over year, to 32.3 billion cubic meters of gas. Since 2015, 525,000 Ukrainian families have received “Warm Loans” – government credits to winterize their homes and to buy energy efficient hot water boilers.

Mark Rollins, the British energy executive who has served as chairman of the Ukrnafta supervisory board since November 2015, will have his powers ‘terminated’ in a shareholders meeting on April 30, reports Ukrinform. The state news agency did not say why the former Shell executive would leave his post overseeing Ukraine’s largest oil and gas producer.

In a wider shakeup of Ukraine’s state-owned energy companies, the government has not renewed the contract of Andriy Kobolyev, CEO of Naftogaz. Kolobyev’s contract expires in 10 days. This Friday, Oleg Prokhorenko steps down as CEO of UkrGazVydobuvannya, the state gas producer. Prime Minister Groysman criticized Kobolyev for receiving an excessively high salary and Prokhorenko for not raising gas production fast enough.

Fifteen Ukrainian IT companies are on a worldwide list of top 100 tech companies rated for consistent performance over the last decade. Inclusion on the list is based on rankings given in past years by the New York-based International Association of Outsourcing Professionals. Ten companies have their headquarters in Ukraine: AMC Bridge, Ciklum, ELEKS, Infopulse, Intellias, Miratech, N-iX, Program-Ace, Sigma Software, and Softengi. Five others do much or most of their work in Ukraine: EPAM, Luxoft, Softjourn, Svitla, and TEAM International Services. The first list included only four Ukrainian companies.

Land lines are fading out fast, especially in villages where mobile access is increasingly available and affordable, reports the State Statistics Service. For rural households, the number of land lines dropped by one quarter last year, to 564,000. In cities, households with land lines dropped by 18%, to 3.8 million. Overall, about 7 million homes and offices in Ukraine have land lines.

The government has approved a $11 million project to create an International Pilot Training Center to train pilots under EU standards to fly for Ukrainian and European airlines. Training would be divided between Kyiv’s Hostomel Antonov airport and the National Aviation University’s flight academy at Kropyvnytskyi airport, Kirovohrad. Money would be spent to upgrade the Kropyvnytskyi landing strip and to buy two flight simulators and 24 single engine, two-seater planes: 12 Italian-made Tecnams, eight Ukrainian-made Skyeton K-10s, and four American-made Cessna 172s.

 Kyiv accounted for 46% of all IT vacancies in Ukraine last year, Volodymyr Kurylo, CEO of CleverStaff, tells Interfax-Ukraine. Following in the top five cities were: Lviv – 15%; Kharkiv – 13%; Odesa – 6%; and Dnipro – 6%. Demand for QA engineers grew by 67%, for front end developers doubled, and for Android developers tripled. “Based on the changes in the number of vacancies in the CleverStaff database, we can predict that within two years in Ukraine there will be a demand for 7,600 front end developers, 7,200 testers, and 4,600 Java developers,” said Kurylo, whose company develops software for applicant tracking and recruitment automation.

From Kyiv to Helsinki by train, bypassing Russia? Peter Vesterbacka, the Finnish entrepreneur behind the Angry Birds video game franchise, has signed a memorandum of understanding with a Chinese company, Touchstone Capital Partners, to arrange €15 billion to build a 100 km road and rail tunnel between Helsinki and Tallinn. Although the two cities face each other across the Gulf of Finland, the rail connection requires an 800 km detour through Russia. In addition to building the world’s longest undersea tunnel, the Chinese investors would build four stations and provide high speed trains. Completion would be by 2025, also the target year for completing Rail Baltica, a high speed European gauge railway connecting Tallinn and Warsaw. This year, Ukrzaliznytsia expects to extend its new Four Capital train to Tallinn. Launched last fall, this overnight train runs twice a week on a south-north route: Kiev – Minsk – Vilnius – Riga.

 Ukraine is more than doubling exports this year of a niche grain: rye. From last July to this January, Ukraine exported 85,000 tons of rye, 123% more than the total exports for the last marketing year, reports UkrAgroConsult. Rye is used for bread, beer, some whiskeys and horse feed.

Rusting landscapes familiar to train riders may gradually improve as Ukrzaliznytsia starts to turn its scrap steel into cash. On Monday, Metinvest agreed to pay $7 million for 26,800 tons of railroad scrap sold at auction on the ProZorro auction platform. This year, the state railroad plans to earn $75 million from scrap metal sales. With about 450,000 tons of metal for sale, it will take at least two years to work through Ukrzaliznytsia’s scrap mountain.

To cut the isolation of the Sea of Azov, Ukrzaliznytsia launches on March 30 a Kyiv-Mariupol ‘Night Express.’ Running every other day, the ‘express’ will cut two hours off the route, reducing it to 14 hours and 44 minutes.

Starting March 31, trains will travel daily from Mariupol to Kharkiv, Ukraine’s second largest city and home to a major international airport. These overnight trains will take 12 hours and 40 minutes.

Mariupol plans to inaugurate a $6 million modern grain terminal by August, in time for the new harvest, Igor Barsky, port director, tells the Center for Transportation Technologies. To drum up business, a major national conference, Grain Logistics and Terminals of Ukraine, will be held in Mariupol on June 12.

With half a billion dollars worth of wind projects planned for Ukraine’s Sea of Azov coast, Berdyansk is becoming a major port of entry for the massive wind turbines. DTEK and China Machinery Engineering Corporation plan to send 63 turbines through Berdyansk this year. Already, in January, 26 wind turbines were unloaded at Berdyansk Starting last May, Russian border patrol boats have intermittently harassed commercial ships heading for Berdyansk and Mariupol.

Asket Shipping has increased grain storage capacity at Berdyansk port to 100,000 tons, a 42% increase over last year. The company built a new warehouse and expanded an existing one, Victoria Abreyeva, Berdyansk director for Asket, tells the Center for Transportation Technologies.

Bids are accepted until March 26 on a ProZorro tender for major repairs at the main berth of Berdyansk port. Later this year, the Seaports Administration plans to put up for tender work on the second berth. The first job is to cost $140,000.

Russia and Ukraine have quietly set 2019 quotas for the Sea of Azov fish catch. After representatives of the two fishery agencies could not reach agreement in face to face meetings last fall, diplomats set the quotas for the catch – anchovies, sprat, gobies, herring, mullet and taran. When 95% of the total limit is reached, both sides are to stop fishing. Three decades ago, the Azov was the Soviet Union’s nation’s productive fishing area. Last year, Ukraine caught 21,300 tons of fish in the Azov. Ninety Ukrainian businesses used 811 fishing boats, employing 3,670 fishermen.

To help the Azov Sea ports, the Infrastructure Ministry plans to exempt Mariupol and Berdyansk from contributing to the state budget, leaving that burden to Ukraine’s 11 Black Sea ports. Minister Volodymyr Omelyan said: “We will not leave our two Azov ports in trouble. All the resources of the state will be sent to help. Together with the European Commission and our American partners, we are developing a project of financial assistance to improve the infrastructure of both ports and cities as soon as possible.”

The EU is to announce in coming days details of €50 million in road, rail and port aid to Ukraine’s Azov. At a recent meeting with EU officials in Brussels, Hennadiy Zubko, Ukraine’s regional development minister, talked about “the infrastructure gap between the Sea of Azov region and the rest of the country.”

AzovAkvaInvest Park, a 16-hectare industrial park in Mariupol, has been registered by the Economic Development and Trade Ministry. The goal of the park is to create 665 jobs in light industry. Ismail Hacioglu, a Turkish entrepreneur, has signed a memorandum with the City Council to build an assembly plant for elevators, escalators and home lifts.

With Swedish and USAID aid, much of Mariupol’s Chess Club has been converted into an IT-Hub. In addition to providing space for IT startups, the IT-Hub provides classrooms for Beetroot Academy. Since opening in Mariupol 18 months ago, Beetroot Academy, a Swedish-funded NGO, has trained 100 local students in skills needed to work for international IT outsourcing companies.

 Ukraine lost up to 15% of its record 70 million ton grain harvest due to improper storage and handling in transport, estimates Pro-Consulting. Investment is needed in silos and elevators. Competition is needed among the grain handling facilities at the nation’s 13 seaports, reports UNIAN, citing the Kyiv-based market analysis firm.

Construction starts this summer on a $12 million grain storage and processing complex in the Bila Tserkva industrial park. Designed to ship gain by truck or train, the complex is to have the capacity to accept 3,000 tons of grain a day. In the summer of 2020, Volytsia-Agro LLC plans to open the complex which will have an elevator, grain dryers and silos for wet and dry grain. Vasyl Khmelnytsky, owner of the farming company and the industrial park, made the announcement on Facebook.

Epicenter K Group is expanding its modern silo storage capacity to 1 million tons at eight locations, Svitlana Nykytiuk, tells Interfax-Ukraine. In July, the farming group plans to launch the first $30 million phase – 500,000 tons in four locations. While building rail tracks to two silos, the company also is spending $6 million to buy 100 grain trucks.

Kernel, the agro giant, opened its new grain export terminal in Chornomorsk last month, adding one million tons of throughput capacity. By the end of this year, the company is to open a second phase, increasing its Chornomorsk throughput by an additional three million tons. Last month, Kernel, Ukraine’s largest vertically-integrated agribusiness, bought railcar company RTK-Ukraine. Dragon Capital writes: “With almost 3,000 grain hoppers, at a estimated valuation of $64 million, [Kernel] almost met its grain transportation needs, complementing the existing fleet of 500 wagons.”

As demand grows to move grain, Sergey Tigipko is talking with foreign investors about expanding his grain wagon fleet as much as seven times, to 10,000 wagons. Tigipko, owner of TAS-Logistic, tells Novoye Vremya that his company now has 1,200 grain carriers.

Ukrzaliznytsia has posted on its website a list of 301 ‘low-performing’ grain stations that are candidates for closure. During the last harvest season these stations averaged less than 2.3 grain cars a day, Andrei Ryazantsev, director of finance at the state railroad, tells the Center for Transportation Technologies. Last summer, Ukrzaliznytsia announced that 130 grain stations received less than one car a day. One grain hopper typically carries 70 tons of grain.

Ukraine is the world’s largest exporter of millet, a grain used for food and fodder, according to Mordor Intelligence. The smallest of Ukraine’s grain exports, millet goes largely to Germany and South Africa. Ukraine exported 76,000 tons in 2016. By comparison, Ukraine expects to export 49 million tons of grain in the marketing year that ends this June.

Ukraine, South Korea and the US are working with Science Technology, a Saudi company, to design and build an unmanned combat aerial vehicle capable of carrying tons of weapons. Details of the long range ‘unmanned bomber’ were revealed at IDEX 2019, a recent defense show in Abu Dhabi, reports Defense Blog news site. Citing interest by Middle East and North Africa militaries, the Washington-based blog reports: “The UCAV fleet in the region is forecast to increase from dozens of aircraft in 2018 up to 700 combat drones in 2028.”

Ukrspetsexport, the military import-export agency, is building an armored vehicle assembly plant in Myanmar, reports Defense Blog. Equipment and production machines have arrived in Yangon for a plant that is to start operating next year, reports Defense Blog. The plant will assemble 8-wheeled BTR-4U armored personnel carriers, designed by Kharkiv’s Morozov Design Bureau. From the same Kharkiv company, the Myanmar plant will build 2S1U self-propelled Gvozdika howitzers. After Myanmar’s Buddhist majority government forced much of its Muslim minority to flee to Bangladesh, the US and the EU expanded existing bans on sales of arms and equipment that can be used for internal repression.

US-based Curtiss-Wright Corporation has signed an agreement with Kropyvnytskyi-based RadICS LLC to market their nuclear power safety systems to US power plant operators. Under the agreement signed recently in Dallas, the Idaho Falls unit of Curtiss-Wright will be the US stocking facility for all RadICS system components for the Kirovohrad region company.

US-owned Jabil Circuit Ukraine, Ltd. is building a second electronics assembly plant in Zakarpattia, 300 meters south of the main rail freight yard for trains to Slovakia. The new, 20,000 square meter plant will be five km south of Uzhgorod and adjacent to Jabil’s existing plant, a workplace for 2,300 people. The new plant is to employ 1,300 people assembling mobile phones, media players and computer equipment for export to the EU.

Slovakian and Ukrainian officials want to speed east-west freight and passenger rail traffic by developing logistics terminals in Košice and Mukachevo and a joint customs and border control point in Chop, reports Railwaypro news site. At a bilateral meeting, Infrastructure Minister Volodmyr Omelyan cited Ukraine’s new double track tunnel through the Carpathians mountains, saying: “After the opening of the Beskidy rail tunnel, the transit though the territory of Ukraine and Slovakia can increase by several times.” Dana Meager, from Slovakia’s Finance Ministry, said: “The development of a logistics complex in Košice can turn Ukraine and Slovakia into a gate between Asia and Europe and into a one big logistics hub.”

ActiveChat, a Kyiv-based chatbot software company, hit the top of sales charts last month at AppSumo, the Texas-based deals website for digitally distributed online services. ActiveChat sold 10,800 subscriptions during the last two weeks of January, making it the period’s bestselling Software as a Service, or SaaS. The previous record for a Ukrainian company was DepositPhotos, which sold 8,000 subscriptions on AppSumo. Believing in the future of voice-activated chatbots, Sergei Kostyukov, the company’s managing partner, is talking with potential American investors with a goal of increasing ActiveChat’s market cap 10-fold in the next three years.

 

 The original English version is from our partner UBN – Ukraine Business News. For more information and news archive, go to: www.ubn.news.

 

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Ukraine Business News, Tuesday, March 12

 

 

 

 

  • Oil, Gas Auctions to Unleash $250 million Investments
  • Dutch Buy Lviv Animal Feed Maker
  • Inflation Slows
  • Boryspil’s Terminal F Reopens March 31
  • Next for Ryanair: Kharkiv
  • New Office Space to Double in Kyiv This Year
  • Dragon Buys Another Shopping Center
  • US Ambassador Calls Out Government on Corruption
  • Foreigners Skip Auctions of Oil, Gas Blocks
  • Ukraine Has World’s 4th Cheapest Internet
  • UkrGazvyDobuvannia nearly doubled its ‘fracking’ operations
  • Ukrainians Spend $1 billion on Smartphones
  • Mariupol Mega Plant Will Export Steel Instead of Pig Iron
  • River Cargo Grows
  • Regional Airports Revive
  • France’s Alstom Eyes 500 Locomotive Deal with Ukraine
  • SCM Invests $1.3 billion in Ukraine Cos
  • EU to Spend €50 Million on Azov Roads and Rails

 The three oil and gas blocks sold at electronic auction should trigger almost $250 million in exploration and production investment, says Stepan Kubiv, Economic Development Minister. Sold Wednesday by online auctions on ProZorro, the blocks went for a total of $5 million, about triple the opening price. Kubiv said: “Simple and competitive access to special permits for subsoil use is a boost to increase our own production.” Concorde Capital’s Alexander Paraschiy writes: “This was the first transparent tender for the sale of oil and gas licenses in Ukraine. If such tenders become a regular occurrence, they will benefit the nation’s investment climate and energy independence.”

Holland’s Royal De Heus, one of the world’s top 10 animal feed suppliers, is buying majority control of D-Mix, a Lviv region manufacturer of food for chickens and pigs. With a capacity to make 80,000 tons of soy and sunflower-based feed, D-Mix is about to start building a multi-million dollar pre-mix plant at their Zolochiv site. Betting on beef and dairy herds expanding in the 2020s, Koen de Heus, CEO of the family owned multinational, says: “We believe that our extensive experience in international livestock farming and the animal feed sector will also be of value in further professionalizing livestock farming in Ukraine.”

The government will spend $130 million this year to turn around the gradual decline of the national livestock herd, Olga Trofimtseva, Minister of Agrarian Policy and Food, told the International Dairy Congress in Kyiv. Of this amount, about half will be for rebuilding milking barns and fences and purchases of modern equipment. For households, the subsidy for keeping a milk cow is raised to $33, paid twice a year.

Kormotech, a Lviv region producer of cat and dog food, is building a wet food plant in Lithuania and is expanding its dry food production in Ukraine by 50%, to 46,000 tons. To reach a target of exporting 50% of production by 2023, the company is entering new markets — in South America, Hungary, Lebanon, Libya and the Czech Republic. The company sells its pet food under the brands Optimeal, Club 4 Paws, Meow!, and Woof!

Inflation slowed in February to 8.8% year over year, reports the State Statistics Service. This was down from 9.8% for 2018. The National Bank of Ukraine predicts inflation will end this year at 6.3%. The IMF and World Bank predict 7.3%.

Work is to start this spring on doubling to four lanes the 200 km Lviv-Rivne section of the M-06, cutting drive times in half, to 90 minutes. This is a key section of the main truck route west from Kyiv and Zhytomyr to the Polish border. Construction will include building bypasses around towns on the way, reports the Center for Transportation Technologies, citing Ukravtodor, the state highways agency.

Hungary plans to build next year a new highway bridge over the Tisa River near Chop, the Zakarpattia border town. In addition, both countries are working to cut travel times on the new Mukachevo-Budapest train to six hours, from seven. Work also is underway to put to use Hungarian loans for Zakarpattia road rebuilding, first offered two years ago, reports Ukraine’s embassy in Budapest, citing a meeting Friday between Hungarian diplomats and Ukraine Infrastructure ministry officials.

Taking trucks off roads, Ukrzaliznytsia expands its increasingly popular container freight service, launching a new train running the north-south length of the nation, from Belarus to Romania. On Wednesday, the first train rolled — from Udritsk on the Belarus border to the Chernivtsi rail crossing with Romania, a 1.5-day trip. Started in earnest two years ago, Ukrzaliznytsia’s container service has expanded to 10 domestic trains and eight international transit trains. Yevhen Kravtsov, chairman of the state railroad, said: “This guarantees shippers the reliability, safety and speed of delivery of products on the principle of door to door.”

Boryspil’s Terminal F reopens March 31, relieving congestion at Terminal D, which handled 1 million passengers a month last year. Airlines moving to Terminal F are: Aigle Azur, Laudamotion, Ryanair, and SkyUp. Terminal F will also handle some flights by: Air Serbia, Bravo Airways, Bukovyna, FANair, Iraqi Airways, Wind Rose and YanAir. “Charter and low-cost carriers operating point-to-point direct flights will operate in Terminal F,” Yevhen Dykhne, first deputy director of Boryspil, writes on Liga.net. Airlines handling transfer passengers and codeshares will stay in Terminal D.

By refurbishing and reopening regional airports, Ukraine could triple its air passenger market to over 60 million people a year, Infrastructure Minister Volodymyr Omelyan tells Channel 5 TV. “We will be able to reach it quickly enough if we invest in airports,” the minister said. He noted that Ukraine’s air traffic increased last year by 25%, hitting 20.5 million passengers.

Ryanair is to start flights from Kharkiv this fall, making Kharkiv Ukraine’s second city to be served by Europe’s largest airline. The main destinations under negotiation are cities in Poland, Germany and the Baltics, Vladislav Ilyin, the airport’s marketing director tells ‘On Vacation’ (U Vidpustku) website. He says: “We plan that this year Ryanair will fly from Kharkiv.” Serving Ukraine’s second largest city, Kharkiv airport registered a 19% jump in traffic last year, to almost 1 million. Airport officials also are negotiating with Wizz Air about adding more German routes, beyond the sole Kharkiv-Dortmund flight.

New flights and new frequencies were approved by Ukraine’s Aviation Service Commission. Jonika airline won the right to fly Kyiv-Gothenburg, Sweden and Kherson-Erbil, Iraq. UIA won the right to increase the frequencies of its flight from Kyiv Boryspil to Toronto to five times a week and to Paris to 18 times a week. SkyUp won the right to increase the frequencies of its flights from Boryspil to Alicante, Spain to four times a week and to Tbilisi to daily. In June, UIA plans to start flights from Kherson to Burgas, Bulgaria.

Betting on foreign travel growth, Azur Air Ukraine is doubling its long-haul fleet by leasing two more Boeing 767-300s, reports Karen Antonov, charter airline’s company’s general director. The additional planes will allow Azur to offer business class on its flights to Barcelona, Egypt, Tunisia and Turkey.

New office space is to double this year in Kyiv – to 117,000 square meters, according to a new study by CBRE Ukraine. In 2020, new space is to increase by another 20%, fully returning to pre-2014 levels. Of new construction, 58% is in the central business district, an area with good metro access. As vacancies dropped last year from 17% to 10%, monthly prime office rents rose by 9% y-o-y to $25/square meter. Last year, about $130 million of known investments were made in Kyiv offices, the highest level since 2008.

Driving demand, IT companies accounted for 38% of office take up and co-working hubs accounted for 24%. The biggest expansion was by Regus, which rented three new office spaces for a total of 8,300 square meters. Of this take up, upgrading accounted for 51% and company expansions for 34%. CBRE writes: “Demand for high quality, well-located offices came from IT, high tech and telecommunications and business services companies willing to open most competitive offices in the fight for the best talent in the market.”

Dragon Capital has bought Aladdin Kyiv, its fourth shopping center in less than three years Ukraine. Located at a left bank highway interchange, near Poznyaki metro station on the Green metro line, Aladdin is 500 meters from Pyramida, a slightly larger mall that Dragon bought in 2016. Between those two purchases, Dragon bought Sky Park in Vinnytsia and Victoria Gardens in Lviv. Vladimir Tymochko, Dragon’s managing director for equity, says the purchase of Aladdin, with 10,571 square meters of leasable area, brings the total area of Dragon’s shopping center portfolio in Ukraine to 160,000 square meters. The Aladdin purchase price was not disclosed. In 2016, Interfax-Ukraine estimated the purchase price of Pyramida was $25 million.

Almost 40% of Ukrainians would like to open their own business, but two thirds believe the state hinders small and medium businesses, according to a late February poll of 2,500 people conduced by the Sociological Group Rating, a nonprofit entity. But only 27% see the government’s role as promoting economic freedoms. A majority, 64% see the state’s role as ensuring income equality and social justice, a jump from 48% last June.

An overwhelming majority – 77% – support cutting bank interest rates, currently the highest in Europe. Of respondents, 63% trust small entrepreneurs and 60% trust medium-sized entrepreneurs. Confidence in big business owners fell to 20%, and in ‘oligarchs’ to 6%.

It is now easier for foreigners to get work permits, the government says. Under regulations adopted Wednesday, foreigners are allowed to submit documents to the Foreign Ministry’s Consular Services Department, without leaving Ukraine. The change was announced at the latest deregulation meeting of the Cabinet. At the meeting Prime Minister Groysman said the government has abolished or changed 1,200 regulatory documents, including the removal Wednesday of 149 obsolete acts from the mid-1990s. The government abolished the obligation for companies to keep complaint books.

Ukraine’s goal this year is to climb 10 notches in the World Bank’s Ease of Doing Business ranking. Last year, Ukraine rose five points to rank 71st out of 190 countries. Charged with this deregulation mission, the current Cabinet is to remain in place until next November, when results of the Oct. 27 parliamentary election are known.

Of 10 oil and gas blocks up for electronic auction Wednesday, there were no bidders on seven and only Ukrainian bidders for three. In the three successful auctions, prices were bid up — from 43% to five times the asking prices. Nikolay Zlochevsky’s Burisma group agreed to pay $925,000 for a lot in Poltava. A unit of Rinat Akhmetov’s DTEK agreed to pay $3.1 million for a Kharkiv block, almost five times the lowest bid. State-owned UkrGazVydobuvannya agreed to pay $1.1 million for another Kharkiv block, three times the starting price. Foreign investors had complained about the lack of insufficient seismic data. They also expressed concerns that Ukraine’s next president could change the rules of the game.

In a survey of 230 countries, Ukraine has the fourth cheapest mobile internet in the world. With an average prices of US 51 cents per gigabyte, Ukraine was only bested by India, Kyrgyzstan and Kazakhstan in the Worldwide Mobile, Data Pricing list compiled by Cable, a Britain-based broadband advisory service. At the other end of the scale are: Zimbabwe $75 per gigabyte; Greece –$33; Chad — $23; Switzerland — $20; Turkmenistan — $20; Greenland — $17; Mozambique — $16; Portugal — $14; and Norway — $13. Cheap internet boosts Ukraine’s IT industry.

Naftogaz’ gas production company, UkrGazvyDobuvannia, nearly doubled its ‘fracking’ operations this winter. The state company reports that it plans to conduct over 100 hydraulic fracturing operations this year, extracting an extra 500 million cubic meters of gas.

Ukrainians spent nearly twice as much last year to buy mobile phones as to buy laptops and TVs combined. Ukrainians spent $1.1 billion to buy 6.9 million mobile phones, 78% of them smartphones. The average smartphone cost $200. The average push button phone cost $23. Point of Sales Tracking GfK Ukraine reports, Ukrainian spent $320 million to buy 610,000 laptops and $333 million to buy 810,000 televisions.

 Billed as “the largest industrial construction project in history of independent Ukraine,” a new $150 million steel casting plant in Mariupol is to pump out $1 billion worth of new steel slab exports a year. Metinvest says the new plant will increase Mariupol’s Iron & Steel Works steel smelting capacity by almost 40%. It will allow the plant to replace exports of low value pig iron with higher value steel slab. Inaugurated Friday after 2.5 years of construction, the new plant has created 347 new jobs.

Capable of casting 2.5 million tons of steel slab a year, the plant largely uses Austrian equipment from Primetals Technologies. Raiffeisen Bank International provided a €43 million loan, covered by Austria’s export credit bank, Oesterreichische Kontrollbank AG. Gas cleaning and dust removal equipment comply with EU environmental requirements. Yuriy Ryzhenkov, Metinvest CEO, said: “This large-scale project will ensure a clean production and new jobs, additional foreign currency revenues amounting to approximately $1 billion for the country, and guaranteed prospects to the industry, the region and the city.”

Nibulon has launched its 10th and final tug boat from its Mykolaiv ship yard. Completing a five-year construction project, the tug fleet is to haul grain barges down the Dnipro to Nibulon’s Black Sea terminals in Kherson and Mykolaiv. The latest tug uses key imported foreign components: Mitsubishi — main engines; Volvo-Penta — diesel generators; Rolls-Royce — screw-steering columns; and Viessmann — hot-water boiler.

With an early end to the ice season and completion of repairs on two locks — Kakhovsky and Zaporizhia – commercial shipping on the Dnipro is to resume this week. Last year, 10 million tons of cargo were moved on the Dnipro, up 22% from 2017.

Using the Dnipro River to move construction materials, Kyiv’s river port plans to build a 10,000 square meter, multi-modal logistics center, capable of handling containers for trucks or trucks, reports the Center for Transportation Technologies. Sand, gravel, metal, and cement are target cargos. Over the last five years, the Kyivport company has invested $1.5 million in building warehouses and a customs complex and buying an icebreaking tugboat and a floating crane. Two barges and a hydraulic lift were bought from Belarus. The port aims to attract cargo from Belarus, 1-2 days upriver from Kyiv.

Wizz Air is basing a fourth Airbus A320 jet at Kyiv Sikorsky this month, responding to near doubling of its Ukraine passenger traffic. In January-February, the airline carried 300,000 passengers on its 44 Ukraine routes, up 94% from the same period last year. Last weekend, the discount airline opened four new Ukraine routes: from Lviv to Copenhagen, and from Kyiv Sikorsky to Riga, Bremen, and Billund, Denmark. The company now employs 140 people in Ukraine and says its investments here total $400 million.

Mykolaiv airport aims to 200,000 passengers a year in the early 2020s, surpassing a level not seen 1990. Closed for a decade, the airport reopened 10 weeks ago with SkyUp flights to Sharm el Sheikh, Egypt. On May 1, SkyUp starts flying to Antalya, Turkey. On a visit to the airport Monday, President Poroshenko was told flights are planned to Kyiv and to Istanbul.

Cherkasy airport, closed since 2002, is negotiating with SkyUp Airlines to host international charter flights later this year. Odesa’s Rostdorstroy is under contract to complete repaving the airport’s 2.5 km landing strip by the end of this year.

 France’s Alstom is prepared to supply 500 train locomotives to Ukraine, Henri Poupart-Lafarge, the company CEO tells the Center for Transportation Strategies. Alstom is proposing to Ukrzalinystia a package that would include French technology, French financing and a degree of Ukrainian production. Asked about the degree of localization, he responded: “We need to balance our desire to localize production in Ukraine, which will benefit the Ukrainian economy, with the demand of the French side for localization in France.”

Prime Minister Groysman told the Alstom CEO about a locomotive deal: “The issue of localization is very important to us. We are interested not only in maintenance but also in full scale production.” The French CEO responded: “You have every opportunity to become a production base of European scale. We are, of course, aware of the amount of work that we have ahead, but we came to strive for a strong and lasting partnership.” According to the Center for Transportation Technologies, Alstom has interview 50 potential parts supplier and five potential locomotive manufacturers.

Ukrzaliznytsia plans to spend $1.85 billion through 2025 to buy 310 new locomotives, Alexander Bogdanov, deputy director of the state railroad’s locomotive department, said at a recent railway conference in Kyiv. The average Ukrzaliznytsia locomotive has used up 84% of its expected working life. By the end of this month, all 30 GE locomotives imported from the US since last fall are to be released for service on the tracks.

China’s Xian Electric Engineering Co. has signed a €19.4 million contract to rebuild a Ukrenergo substation serving the Boryspil, Brovary and Baryshivka regions of Kyiv’s region’s left bank. Ukraine’s state electricity distribution company says that 11 companies from eight countries participated in a tender under rules set by the European Investment Bank, the primary source of project finance. The Chinese bid cut the expected price by 25%. Xian is to complete upgrading the 330 kV Brovarska substation by the end of 2021.

The SCM group, owner of Metinvest, invested $1.3 billion in its Ukraine companies in 2018, Natalia Yemchenko, SCM spokeswoman, writes on Facebook. SCM is owned by Rinat Akhmetov.

The EU plans to spend €50 million to improve road and rail access to Mariupol and Ukraine’s Sea of Azov, President Poroshenko told the Odesa Regional Development Council on Saturday. By electrifying rail lines, he said, EU aid could extend Intercity rail service from Zaporizhia to Mariupol. “We will bring Mariupol closer through Intercity. For me, this is a fundamental thing and a challenge: we must reduce the distances.”

An IMF team arrives in Kyiv for a week long review visit. In December, Ukraine received a first $1.4 billion tranche of a 14-month $3.9 billion program. Progress toward implementing anti-corruption conditions is needed for release of a second tranche, expected to be $1.3 billion in May.

Ukraine has received a second loan, for €529 million, under a World Bank guarantee, reports the Finance Ministry. Funds were provided in two tranches – €240 million with a maturity of four years, and €289 million with a maturity of 10 years. The loan was arranged and provided by Deutsche Bank. Since December, a World Bank guarantee of $750 million has allowed Ukraine to attract about $1 billion from international markets.

Ukrainians and Georgians can visit each other’s countries using only their national ID cards, or internal passports, under an agreement that went into effect on Friday. Ukraine and Turkey have a similar passport-free, 90-day visit agreement. Last year, 177,000 Ukrainians visited Georgia. Four airlines fly from Kyiv to Tbilisi: Georgian Airways, SkyUp, UIA and Yanair. In May, SkyUp starts flights to Batumi. This summer, Yanair will fly to Batumi from Kyiv Sikorsky, Lviv and Odesa.

Kharkiv, Ukraine’s second largest city, gets more international flights this spring. On Saturday, SkyUp started flights to Sharjah, UAE. On March 25, Ernest Airlines starts flight to Rome and Milan-Malpensa. On May 3, Buta Airways launches flights to Baku.

Lviv airport’s passenger traffic increased by 50% y-o-y in January and February, maintaining the strong 48% growth of last year. Of the 108,400 passengers in February, 89% flew international. On Sunday, Wizz Air started flights to Copenhagen. Confirmed new flights this season are: Motor Sich to Uzhgorod on March 15, airBaltic to Riga on April 1 and SkyUp to Odesa on June 2. This year, Lviv is expected to win a flight to Doha on Qatar Airways.

 

The original English version is from our partner UBN – Ukraine Business News. For more information and news archive, go to: www.ubn.news.

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Ukraine Business News, Tuesday, March 05

 

 

 

 

  • Big Real Estate Projects Announced for Kyiv
  • SkyUp to Move from Sikorsky to Boryspil
  • Geology Agency Doubles Oil + Gas Blocks For Auction
  • Almost 1 Gigawatt of Wind Projects Underway
  • Ukraine Exports Half a Billion Dollars Worth of Chicken Meat
  • Ukraine to Top Russia This Year as Largest Black Sea Grain Exporter
  • 90-Window is Open for Bids on Oil and Gas Blocks
  • Worries Mount that ‘Green Auction’ Bill is Stuck in Rada
  • Warehouse Rents to Keep Rising Until New Projects in 2020
  • Cargo Hub at Uzhgorod Airport Would Straddle Slovak-Ukraine Border
  • Kyiv Hotel Room Rates up 6%
  • Chickens to Ghana, Eggs to Singapore – 85 New Ag. Markets
  • Grain Exports to Grow by 23% This Year
  • China Courts Motor Sich, Again
  • Kyiv Office Rents to Rise Until New Buildings Open in 2020-2021
  • “Dead Malls” to Appear in Kyiv?
  • Cashless Payments With Cards up 55%
  • Foreign Tourists: More by Plane, Fewer by Train

 

Israeli-Ukrainian City Capital Group plans to invest more than $50 million over the next four years to convert old industrial spaces in Kyiv into offices. “The office real estate market is coming to life,” Maria Kazantseva, a CCG board member, tells Interfax-Ukraine. “All experts predict an increase in the demand in this segment. IT companies are declaring a shortage of quality space.” Founded a decade ago by Israeli businessman Ofer Kerzner, CCG manages Platforma Art Factory, on the left bank, near Lisova metro station.

Degraded industrial land around the shipyard on Kyiv’s Rybalski peninsula will be transformed into a residential complex, a shopping center and offices, Sergey Tigipko, the new owner, tells Novoe Vremya magazine. “We are planning to start a large-scale construction project in the near future,” Tigipko says. “Most likely, it will be a residential area – with schools, kindergartens, commercial real estate. As for the 9-hectare site near the railway station, we are planning to build a large shopping and office center.” Adjacent to the Obolon commuter rail station, the peninsula also offers views of the Dnipro River. Tigipko promised to keep open the shipyard, a fabricator of assault boats for Ukraine’s Navy.

Kernel, one of the nation’s largest farming groups, saw its net profit jump 83% to $164 million in the last half of 2018, compared to the same period in 2017. In Kernel’s fiscal year, ending next June, the company plans to process 3.1 million tons of sunflower seeds and and export 6 million tons of grain. Concorde Capital’s Andriy Perederey writes that the results “were higher than our estimates due to due to stronger sunflower oil segment EBITDA and better results in silo storage and farming.”

SkyUp Airlines, preparing for a major expansion this spring, will move its base on March 31 from Kyiv Sikorsky to Kyiv Boryspil. The Ukrainian discount airline will join Ryanair at Boryspil’s newly reopened Terminal F. Evgeny Khaynatsky, the airline CEO, said Kyiv Sikorsky “works with our heavy aircraft at the limit of its capabilities.” SkyUp’s all-Boeing 737 fleet is double over the next five years to 12. Between April 24 and June 15, SkyUp plans to launch 17 new destinations, for scheduled and charter service.

Boryspil has two runways – one 3,500 meters long, and the other 4,000 meters. Sikorsky has one 2,310 meter long runway. Surrounded by apartment buildings in the Zhuliany neighborhood, the airport has no for expansion. Last fall, flydubai moved from Sikorsky to Boryspil. Wizz has talked with Boryspil officials about moving from Sikorsky.

Motor Sich, Ukraine’s all-Antonov airline, expands its flight network this spring. On March 15, it starts flights between Kyiv and Uzhgorod. On March 31, it increases to daily its flight frequencies between its Zaporizhia base and Minsk. On June 6, it starts flights between Zaporozhia and Burgas, Bulgaria’s Black Sea resort city. Ukraine’s fifth largest minority, 200,000 Bulgarians live in southern Ukraine, largely in Odesa and Zaporizhia. Bulgaria Air flies from Odesa to Sofia.

Concrete paving of Odesa’s 2,800-meter new runway restarts in two weeks, weather permitting, reports the contractor, Highway-South. Work should be completed by this fall. Replacement of the Soviet-era concrete block landing strip is a key condition for Ryanair, Wizz Air and other discount airlines to fly to Odesa.

 To attract foreign investment into oil and gas exploration and production, the State Geology Service is doubling the number of blocks prepared for electronic auction by June. “More than 30 oil and gas sites” are to be auctioned, Oleg Kirilyuk, head of the service, told the Cabinet of Ministers on Wednesday. The current schedule for auctions is: March 6 — 10 fields; April 29 –7 fields. The Geology Service says these 17 sites have ‘projected resources’ of 92 billion cubic meters of gas and 16 million tons of oil.

The oil and gas auctions are designed to “attract the maximum quantity of not only Ukrainian companies but also foreign companies to the market,” said Ostap Semerak, Minister of Ecology and Natural Resources, the Ministry that controls the Geology Service. Ukrinform reports Semerak told the Cabinet of Ministers on Wednesday: “I am convinced that the Service will show a good result, because the new conditions are very liberal and comfortable. I want this to be a new impetus for the Ukrainian economy.

President Poroshenko pushed a button starting a GE wind turbine Wednesday, but did not publicly talk about the fate of the green energy auction bill in the Rada. “The new energy industry is one of the most important, primary issues for moving our state forward,” the President said. Hailing the Primorsk project by DTEK Renewables to build 52 towers with 3.8 MW turbines on Zaporizhia’s Azov coast, the President said: “It is through such projects that we turn Ukraine into a regional leader.” Back in Kyiv, 700 km to the north, analysts noted that the President did not use the press event to throw his weight in the Rada behind passage of the auctions bill, a step designed to unlock more wind and solar investment.

German commercial banks will loan €90 million for construction of the second phase of the Primorsk Wind Power Plant, Philipp Leckebusch, DTEK Renewables CEO, said at the inauguration. “This project is financed by two loans of German commercial banks for a total of EUR180 million,” he said. “This will be one of the largest commercial loans in Ukraine in recent years.” Expected to cost €300 million in total, the plant is to have the capacity to generate 200 MW.

Almost 900 MW in wind power projects are under construction in Ukraine today, says Andriy Konechenkov, chairman of the Ukrainian Wind Energy Association. Of these about 300 MW will be commissioned this year, he predicts. The projects are largely in southern Ukraine, along the coasts of the Black and Azov seas, where winds are the strongest. Last year, 68 MW of wind power capacity was commissioned.

If Ukraine does not move from Europe’s highest green tariffs to an auction system, consumers will pay $1.5 billion a year for renewable energy by 2021, warns Olha Buslavets, director of energy markets for the Ministry of Energy and Coal Industry. This sum is equal to what consumers paid last year for electricity generated by nuclear power plants, source of 56% Ukraine’s power, she said in a press statement on Wednesday.

DTEK Naftogaz, one of the nation’s largest private gas producers, plans to nearly double natural gas production to 3 billion cubic meters by 2024, Igor Shchurov, the company’s general director, said Wednesday at the Ukrainian Energy Forum in Kyiv. Praising regulatory changes and cuts in royalties, Shchurov said the company plans to double investment, to $110 million, and to increase drilling depths, possibly to below 7 km. Responsible for about one third of Ukraine’s privately produced gas, DTEK Naftogaz produced 1.65 billion cubic meters last year, the same amount as in 2017.

Ukraine exported half a billion dollars worth of chicken meat last year – four times the combined total of beef, pork and sausage exports. According to the Food Export Council, meat exports were: chicken — $507 million, 326,000 tons; beef – $125 million, 42,000 tons; pork — $3.7 million, 1,700 tons; and sausages – 439 tons , $1.3 million.

Ukraine is expected to displace Russia this year as the largest Black Sea grain exporter. Russia is to export 42 million tons this year, 20% below last year’s record 52.4 million tons. By contrast, Ukraine is to export 49 million tons in the year that ends in June. Kommersant reports from Moscow that Russian Agriculture Ministry officials are calling exporters asking them to slow sales. Concerned about meeting domestic demand, Rosselkhoznadzor, the state food safety agency, is in go slow mode. stretching quality checks at ports from one day to five days or more. Yulia Melano, a food safety agency representative, is quoted saying longer checks respond to quality complaints from Indonesia, Vietnam and African countries.

Ukraine’s central bank has completed a pilot project on a blockchain-based ‘e-hrynia.’ “We are not talking about cryptocurrency, we are talking about digital currency of the central bank,” says Alexander Yablunivsky, director of payment systems at the National Bank of Ukraine. Ruling out the e-hryvnia becoming a crypto currency, a central bank must have more control over its issued currency than crypto currency’s immutable ledgers offer.

This summer, a 2,000 square meter shopping and entertainment center will open 50 meters from the southern exit of Kyiv’s Central Rail Station, reports Informator news site. With about 100,000 people passing through the Southern Station a day, the exit area already has a KFC, a Papa John Pizza and a Puzzata Hata. According to Colliers International, the new center will offer stores and two restaurants with summer verandas on the roof. Ukrzaliznytsia is drawing up plans to privatize management of the commercial spaces inside the Central Station, which opened in 1932.

 A 90-day clock has started running for energy companies to bid on nine oil and gas blocks put up for tender under 50-year production sharing agreements. By May 25, bids should be made to Ukraine’s Interagency Commission accompanied by a non-refundable bid fee of $11,100. Tenders require minimum commitments to invest $16-35 million during a five-year exploration period. The production sharing agreements also stipulate percentages of produced oil and gas to be handed over to the state.

Concern is mounting that ‘green energy’ auction bill is stuck in the Rada, threatening new investments in Ukraine’s booming renewable energy sector.

 The law should be “be adopted before the elections — because otherwise we will lose at least six months,” Torsten Wöllert, energy director for the European Commission’s Ukraine Support Group, told the Ukrainian Energy Forum in Kyiv on Tuesday. As approved Dec. 20 on first reading, the bill provides for moving next Jan. 1 to competitive auctions for most solar and wind projects. Noting that Ukraine can benefit from the experiences of other European countries, Wöllert said: “I very much hope that Ukraine will have a very advanced law.”

The EBRD, the largest lender to Ukraine, will resume lending for solar and wind projects only after the Rada passes the ‘green energy’ auction bill, Olga Yeromina, EBRD Ukraine’s senior banker for electricity, said Tuesday at a Rada energy conference. As reported by ExPro Consulting, she said: “As soon as the law introducing the new renewable energy support system through the mechanism of auctions is adopted, we will be ready to actively start the preparation of new framework financing for the continued support of projects in the field of renewable energy.” She said the EBRD hopes the bill will be approved by the Rada and signed by President Poroshenko in coming weeks.

Deputies under the control of “energy oligarchs” are sabotaging the auction bill by submitting extraneous amendments and blocking Rada consideration, Yuriy Chyzhmar, a Radical Party deputy tells UNIAN. The news agency reports: “A number of People’s Deputies are blocking the approval and approval of amendments, so the fate of the bill being submitted to the session hall remains unknown.”

Auctions are designed to lower Ukraine’s ‘green tariffs’, among the world’s highest. Last year renewable power sources provided 2% of the nation’s electricity, but accounted for 8% of the nation’s power bill, according to Olga Buslavets, director of energy markets for the Energy and Coal Industry Ministry. Reviewing solar and wind projects under way, she predicted at a Kyiv round table that the nation’s installed renewable energy capacity will increase by 50% this year, to three gigawatts. In Ukraine’s electricity pie, nuclear supplies 53%, coal, gas and oil power plant supply 37%, and largely scale hydro dams – 7%.

Worldwide investments in renewable energy hit $332 billion last year, the fifth year in a row the figure was over $300 billion, reports Bloomberg. Solar energy investment dropped by 24%, to $131 billion. Technological improvements cut the average cost of installing 1MW of solar capacity by 12%. Investment in wind energy increased by 3% to $129 billion. Investment in biomass and waste-to-energy increased by 18% to $6.3 billion.

Bloomberg calculates that Ukraine attracted $2.4 billion in renewable projects last year. China remained the world leader investing $100 billion. But this was one third below 2017 due to a cut in the number of new solar projects. The US came in second, with $64 billion, 12% more than in 2017. In the EU, investment jumped by 27%, to $74.5 billion, largely due to five massive offshore wind projects and a big expansion of solar in Spain.

With office space tight and tourism rising, the Rada rejected a bill that would restrict the use of apartment buildings to private residences. While office vacancies have fallen to 5%, Kyiv has an estimated 70,000 unsold apartments. Similarly, the arrival this spring of discount airlines from Europe – Ernest, Ryanair and Wizz Air – demand for hostels and two-star lodgings are expected to increase sharply.

Warehouse vacancies fell to 2.8%, pushing rents up last year by 20-25% in dollar terms, Property Times reports in a lengthy analysis of the warehouse sector, largely in Kyiv. Rents are to increase more this year as only two projects, with a total of 31,000 square meters, are to be commissioned this year. In face of the space shortage, many companies are responding with ‘build to suit’ premises that do not go on the open market. Over the next three years, developers have announced projects totaling 190,000 square meters. But, Property Times reports, several developers are waiting to learn the outcome of the presidential elections before starting construction.

Uzhgorod will regain flights to Kyiv on March 15, Valerii Lunchenko, a Rada member from Zakarpattia, tells Mukachevo.net. Almost three year ago, Ukraine’s westernmost airport lost air service, leaving Kyiv-bound residents with a stark choice: 10 hours by car, or 12-14 hours by train. The 627 km flight will be the nation’s longest domestic flight, probably taking one hour.

Foreign investors propose expanding Uzhgorod airport into a Slovak-Ukrainian enterprise, with a free trade area and bonded warehouses for cargo on both sides of the international border, Eduard Maliar, infrastructure director of the Zakarpattia regional administration, writes on Facebook. To handle cargo planes from Asia, the runway would be extended 1,500 meters into Slovakia. After studying the airport, he writes, investors propose building “terminals both in Ukraine and Slovak territory that will serve both passenger and freight transport, including transportation of goods from China and South Korea to Europe.”

To better connect Slovakia and Zakarpattia, test passenger trains are to start in April on the standard gauge track between Košice, Slovakia’s second largest city, and Mukachevo, Zakapattia’s rail hub. With Slovakia’s ZSSK trains plying the 175 km route in four hours, service is start in June, in time for the summer tourism season. The new route “will make this region more attractive for tourists,” Arpád Érsek, Slovakia’s Transport and Regional Development Minister, said after meeting with his Ukrainian counterpart, Volodymyr Omelyan.

Reflecting pent up demand for this east-west connection, two Czech private rail companies, Leo Express and RegioJet, recently started bus service between Mukachevo and Košice, the eastern rail terminus for both rail companies. Separately, in December, Hungarian Railways and Ukrzaliznytsia launched daily direct Mukachevo-Budapest trains. They use standard gauge tracks first laid in Zakarpattia during the Austro-Hungarian empire.

The average daily price for a hotel room in Kyiv hit 89 euros last year, 6.3% increase over 2017, according to a report by STR Global, an American company that tracks hotel supply and demand. Kyiv’s occupancy rate inched up 3%, to 52.5% — well below the EU average of 72.4%.

 A $500 million windfall in duty payments on illegally imported cars will help fund an election month bonus for the nation’s 10 million pensioners.

 On Friday night, a 90-day window closed for 50% duty discounts on cars illegally imported from the EU. Instead of a forecast $37 million in duties, owners of 218,000 cars paid the hryvnia equivalent of half a billion dollars. The State Fiscal Service says the top paying areas were Kyiv and the four westernmost regions: Volyn, Lviv, Zakarpattia and Chernivtsi. Owners of cars in violation now have until May 23 to pay the full duty. After that, they face a $6,000 fine. The Finance Ministry suggests remaining violators drive their cars back to the EU, or sell them here for parts.

Chickens to Ghana, eggs to Singapore, milk to Macedonia, and sheep to the Emirates – these are some of the 85 new markets developed last year for Ukraine’s food exports. “Last year, our country expanded the geography of our products exports and the number of enterprises that received the right to export food of animal origin increased as well,” said Volodymyr Lapa, Head of Ukraine’s Food Safety and Consumer Protection agency. “This allowed to level the economic impact of the loss of the market of the Russian Federation and contributed to raising the level of Ukraine as reliable trading partner.” Last year, Ukraine’s food exports to the EU grew by 8.7% y-o-y to $6.3 billion.

Ukraine’s grain exports should be up 23% this marketing year over 2017-2018 levels, Elena Kovaleva, deputy minister of Agrarian Policy and Food, said Monday in Geneva at the annual meeting of the Rapid Response Forum of the Agricultural Marketing Information System. Encompassing producing and consuming countries of corn, rice, soybeans and wheat, the forum promotes policy coordination for a food crises. “Ukraine remains a stable, reliable partner and exporter of agricultural products,” Kovaleva said. Raising her ministry’s forecast by 4%, she said: “In this marketing year, we expect that grain exports from Ukraine will reach 49 million tons.”

Ukrainian wheat exporters could see an opening this year in Indonesia, the northern neighbor of Australia, reports UkrAgroConsult. During the last half of 2018, Australia, Indonesia’s traditional source, saw its wheat exports drop by 41% y-o-y. Due to a drought, Australia’s wheat harvest may be down 20% in the marketing year ending in June. The latest forecast is 17 million tons, the lowest in a decade.

Corteva Agriscience, the agricultural division of DowDuPont Inc., has achieved a 21% market share of Ukraine’s corn seed market and 16% of its sunflower seed market, says Serhiy Kharin, head of Corteva’s Eastern Europe division. He cited a survey of Ukrainian farmers conducted last year for the Kleffman Group, a Germany-based agricultural market research company. Over the last five years, Corteva has invested heavily in its Ukraine production complex , attaining full capacity in 2017: 500,000 corn seeds per year, and 250,000 sunflower seeds per year.

In a step toward food processing, Mover Mill LLC has opened a $4 million mill capable of producing 350 tons of flour, semolina or bran a day. The mill is located in the village of Kryvi Kolina, Cherkasy region, 250 km south of Kyiv. Despite the government’s push to add value to agricultural exports through processing, exports of Ukrainian flour were down 54% July-November, compared to the same period in 2017. According to UkrAgroConsult, Ukraine exported 94,300 tons of flour during that period, the lowest in five years.

“Individual entrepreneurs,” a low-tax status enjoyed by about 130,000 Ukrainian IT workers is threatened by a draft law prepared by the Social Policy ministry, according to a report by OpenDataBot. Since 2015, the number of IT ‘individual entrepreneurs’ increased by 45%. They generally pay a 5% income tax rate, a rate credited with cutting Ukraine’s IT brain drain to the EU. This year’s elections may decide the future of this low tax rate.

High speed internet should be provided across Ukraine, wherever there is electricity, President Poroshenko said in Lviv. Campaigning for a second, five-year term, he said: “The internet over the next five years should be everywhere where there is electricity. Broadband in every village…How will we train IT specialists if there is no internet in rural areas?” In Lviv, IT companies are growing so fast they recruit software engineers from Belarus and Moldova.

“Chinese investors” plan to work with Ukraine’s government in a $100 million plan to develop Motor Sich air engine factory and its design affiliate, Ivchenko-Progress, both in Zaporizhia, Delo.ua reports, citing Yuriy Brovchenko, deputy minister of Economic Development and Trade. Last September, citing national security concerns, the State Security Service, or SBU, blocked a $100 million bid by Beijing’s Skyrizon Aviation to take a controlling state in Motor Sich. In a move opposed by the US and Japan, China wants to learn how to make Motor Sich turbo fan engines for its own military helicopter, cargo and trainer aircraft. Anatoly Malysh, head of the Motor Sich Supervisory Board, later told Interfax-Ukraine that he does not know of any state investment plans.

Dragon Capital writes: “Confirmation of a budget to finance the company and a firm statement by a government official about joint investment with the Chinese could mean that legal pressure on Motor Sich from [Ukrainian] state authorities may ease soon.”

 Kyiv office rents will rise for the next two years, until a “huge amount new [office] projects” open in 2020-2021, Ihor Zabolotsky, a commercial real estate analyst for Colliers International (Ukraine), said at Kyiv’s recent Open Mind conference. Making up for the post 2014 slump, developers plans to commission 406,000 square meters in 2020-2021 — about two thirds more than the pre-2013 annual rate of 140,000 square meters. With office vacancies hitting 5%, IT companies are driving almost half of the new space demand.

DTEK Academy has become a major tenant of Kyiv’s UNIT.City, occupying two floors, or 12,000 square meters, of the six story main building. DTEK moved six kilometers from their old office in the Eurasia Business Center on Zhilyanska Street to work with start ups and to focus training on innovation and digitalization. Max Yakover, CEO of UNIT.City, says the Academy plans a four fold increase of students nationwide, from 30,000 this year to 120,000 in the 2020s.

Real estate purchase transactions increased last year by 8% y-o-y, to 277,230, reports real estate portal domik.ua Drawing on statistics from public and private notaries, the news site reported that the two regions were: Kyiv – 35,000; and Dnipropetrovsk – 28,500.

Kyiv risks seeing “Dead Malls” this year, NAI Ukraine, the consulting company, writes in a new report on the city’s shopping mall scene. After 101,500 square meters in retail space opened last year, an additional 400,000 square meters are to open this year. NAI writes: “Such a large number of offers on the market may lead to the appearance of “Dead Malls” – empty, uninteresting for buyers and tenants of the mall. The concept that is common in America may appear in Kyiv due to the fact that such a large number of offers is not needed by the consumer.”

In a Kyiv poll, NAI found that more than half of respondents like to visit a mall every weekend. About 30% go to malls on weekdays. The average cost per visit is: food court — $5.20; restaurant – $22; jeans – $26; and shoes – $48. Mall goers are 54% women and 46% men.

Britain’s Marks & Spencer reopened in Kharkiv two weeks ago, returning to a market it abandoned during the 2014-2015 crisis. With the 500 square meter store in Kharkiv’s French Boulevard shopping center, the chain now has nine stores in Ukraine – five in Kyiv and one each in Dnipro, Kharkiv, Lviv and Odesa, and Lviv.

Cashless purchases using bank cards jumped by 55% last year, hitting $48 billion. The number of transactions rose by one third, to 3.1 billion, reports the National Bank of Ukraine. The portion of all non-cash transactions made with cards hit 45%. As Ukraine increasingly goes cashless, the number of point of sale terminals rose by 20% last year, hitting 279,000.

As contactless also becomes popular, the number of contactless cards jumped last year by 44%, to 4 million. Today almost 80% of point of sale terminals allow contactless transactions. Starting April 12, Mastercard increases the limit of contactless payments on cards without a PIN code to UAH 500, or $18.50, up from the current level of UAH100. Mastercard accounts for 70% of purchases by card in Ukraine.

Ukraine’s average monthly wage, as measured in dollars, has doubled in three years, to $380, Prime Minister Groysman said. The minimum wage, received by a minority of workers, has tripled, from $50 in 2016 to $150 today. He said: “The current size is not big, but we are moving forward.”

Less than one year after Beskidy railway tunnel opened, the tunnel through the Carpathians is carrying 60% of Ukraine’s exports to the EU, President Poroshenko said on a visit to Lviv. Opened in May, the double track, Lviv-Zakarpattia tunnel can carry 100 trains a day. Hailing “the Lviv locomotive,” he said that Lviv’s exports to the EU jumped by 22% last year. Last year, 79% of Lviv’s exports went to the EU, almost double the national average of 43%

Ukrainian loggers last year cut 22 million cubic meters, or about 1% of the national forest, reports Volodymyr Bondar, deputy head of Forest Resources Agency. Forest growth is about 1.5% a year, or 33 million cubic meters. The Agency controls 73% of Ukraine’s 10.4 million hectares, or 15.9% of the nation. Due to an Electronic Wood Accounting System, Bondar says that illegal logging has been reduced to 17,700 cubic meters.

Wood exports dropped 40% y-o-y to only 527,000 cubic meters, a tiny portion of the national cut. The EU is pressuring Ukraine to export more wood to feed its wood products industries. Ukraine restricts exports of raw logs in an attempt to rebuild the furniture and milling industries at home.

ProZorro, the electronic procurement system, has saved almost $2.8 billion since its introduction four years ago, reports the Economic Development and Trade Ministry. About 215,000 companies, 80% of them small businesses, have used the platform, the ministry reports Facebook. Mandatory for most government procurements since 2016, the system posts information on tenders and conducts competitive bidding sales. Foreign companies are eligible to participate.

Ukraine wants to sell to Egypt an upgrade of its anti-aircraft missile defense systems. Pavlo Bukin, head of UkrOboronProm, agreed at a defense show in Abu Dhabi, to provide “proposals for the modernization of anti-aircraft missile systems and other air defense systems used by the Egyptian Armed Forces.” Bukin met at IDEX 2019 with Hassan Ahmed Abdel-Mageed, director of Egypt’s Ministry of Military Production.

Tourists visiting Ukraine by plane – rather than train – jumped last year, according to the Border Service. As a result of this higher spending influx, tax money generated by tourism rose by 21% last year to $155 million, reports the Economic Development and Trade Ministry. EU growth champions were: Spain + 68%; Great Britain + 47%; Lithuania + 23%; Italy + 15%; Germany + 13%; and France + 9%. From the rest of the world, growth countries were: India + by 57%; China + 39%; Japan +38%; Israel + 22%; and the US +19%. Entries by citizens of border countries declined.

 

The original English version is from our partner UBN – Ukraine Business News. For more information and news archive, go to: www.ubn.news.

 

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Ukraine Business News, Tuesday, February 26

 

 

 

 

  • DTEK Advances To Goal of €1 billion Solar, Wind Investments in 2019
  • Glencore Position Itself for Dnipropetrovsk Iron Investment
  • US Backs Poland as Regional Hub for US LNG Gas Exports
  • More Worries about Kolomoiskyi and PrivatBank
  • Florida Investors Bet on Ukraine Sugar Revival
  • Corn Harvest Jumps 50% in 2018
  • India’s Cooks Save Ukraine’s Sunflower Oil Industry
  • ZAZ to Make South Korean Tractors?
  • Mariupol Gets New Mass Transit Fleet
  • Zaporizhia Opens $10 million Air Terminal in Summer
  • IT Industry Hiring 4,000 Software Engineers
  • Kernel Buys Nation’s Largest Private Grain Car Fleet
  • Southern Ukraine Farmers Start Planting
  • Ukrposhta International Parcel Business up 45%
  • Wizz Air Doubled Ukraine Passengers in 2018
  • Dragon Buys Another Warehouse As Vacancies Hit ‘Zero’
  • Kyiv Region To Gain a Cargo Airport: Bila Tserkva
  • Online Ads up 40%
  • airBaltic Doubles Kyiv-Riga Seats in Bid for Moscow Traffic
  • DTEK Opens Europe’s Second Largest Solar Plant in Nikopol
  • Ukraine’s First Solar Panel Plant Opens in Vinnytsia
  • EU’s Donald Tusk in Ukraine Through Wednesday
  • UZ to Spend $1 billion in 2019
  • Goods Deficit Grows, Services Surplus Grows
  • Ukrainians Using Facebook up 30% in 2018

DTEK Renewables is starting work on a €200, 240MW solar polar plant near Nikopol, only a few kilometers from a site where the company inaugurated a 200 MW solar station last month. Construction this summer is to create 1,000 jobs.

The new solar station is part of a plan by Rinat Akhmetov’s DTEK to invest €1 billion in renewables in Ukraine by the end of this year. Already Ukraine’s largest wind power producer, DTEK is building an additional 300 MW of wind power generating capacity at two sites on the coast of the Sea of Azov. To get Ukraine’s high feed in tariffs, renewable projects have to be commissioned by Dec. 31.

Philipp Leckebusch, DTEK Renewables new CEO, signed a contract with Siemens to build the new solar plant on the site of a former manganese mine, in Pokrov, Dnipropetrovsk. Leckebusch flew to China, to sign a contract with Risen Energy Co. for supply of 874,000 solar modules, or panels. Hailing the deal, Zhao Zelin, Risen’s vice president for sales, said: “Risen Energy plans to continuously drive the transformation of the Ukrainian energy market.” Leckebusch, a German, said the new plant, called Pokrovskaya, will produce enough power for 200,000 households.

Canada’s Black Iron Inc has signed a memorandum of understanding with Glencore, the Anglo-Swiss mining giant, to finance and develop Shymanivske iron ore deposite in Dnipropetrovsk. One of the world’s largest iron deposits, Shymanivske has an estimated 833 million tons of reserves, with ore grading at 32% iron. The nonbinding memorandum contemplates Glencore funding all or part of construction in return for iron. A first phase envisages $436 million investment to produce 4 million tons of iron a year. Black Iron’s CEO Matt Simpson says: “I am pleased to welcome Glencore as an external investor for the construction of the Shimanivske project, as well as their agreement to work with us to provide additional funding.”

After Wednesday’s announcement, the Canadian junior’s shares jumped on the Toronto Stock Exchange by over 35%, prompting Mining.com news site to headline: “Black Iron’s shares skyrocket after inking MOU with Glencore on Ukraine iron ore project.” In Kyiv, Concorde Capital’s Dmytro Khoroshun writes: “If the Shymanivske project is realized, even after many years of uncertainties, it would be positive for Ukraine’s investment image, especially if one of the equity partners is Glencore. Nevertheless, we are cautious because one of the main reasons for the long uncertainty with Shymanivske was the situation on the iron ore market, and the iron ore price volatility is unlikely to go away.”

Washington sees Poland as a future hub for re-export of American liquefied natural gas to Ukraine and Eastern Europe, Georgette Mosbacher, US Ambassador to Poland, told a conference in Warsaw on LNG and the countries of the EU’s Eastern Partnership. She said next year the US will export 120 billion cubic meters a year, about 30% of world LNG. Poland is expanding its three-year-old LNG terminal at Świnoujście, on the German-Polish border. In four years, Poland plans to stop importing gas from Russia. Referring to Poland’s plan to “become a regional gas hub,” Mosbacher said: “I support this fantastic initiative of Poland and Ukraine.”

Ukraine’s food exports to the United Arab Emirates hit almost $200 million last year, Olha Trofimtseva, Acting Agrarian Policy and Food Minister, said in Dubai at the Gulfood exhibition. The number of Ukrainian companies participating in the fair more than doubled this year, to 69, she tells Ukrinform. Ukraine largely exports sunflower oil, milk, honey, and eggs to the UAE. With a population of 9.5 million people and a per capita income of $42,000, the Emirates import almost all their food. After signing an agricultural cooperation deal, Trofimtseva said: “Ukraine intends to become a strategic partner of the UAE to ensure food security of this country.”

Next month, Ukraine will mount a pavilion for the first time at Asia’s leading food exhibition, FOODEX Japan, in Tokyo. The pavilion will display products of 13 manufacturers, reports Ukraine’s Agrarian Policy ministry.

In the last five years, the volume trade handled by Mariupol port dropped by almost two thirds, to 5.3 million tons. The number of countries receiving cargo from the Sea of Azov port dropped by more than half, to 24, reports the Center for Transportation Strategies. Metals accounted for 90% of last year’s exports, going to 21 nations. On the import side, the biggest shipper was the United States, sending coal, followed by Turkey. Because Russia built the Kerch Strait bridge too low, Port Director Oleksandr Oleinik says, Mariupol lost an annual contract to ship 1 million tons of pig iron to the US and to ship up to 500,000 tons to Southeast Asia.

EuroMoney Magazine speculates in a lengthy article about PrivatBank and Ukraine’s presidential elections that Ihor Kolomoiskyi’s post-election strategy might not be to retake control of the bank, but to have the government stop suing him to recover bank assets. “They couldn’t give Privat back to him,” author Lucy Fitzgeorge-Parker quotes ‘a senior banker’ saying. “There would be an international outcry. It would be tantamount to branding Ukraine as a rogue state.”

PrivatBank had to be nationalized in Dec. 2016, because it was insolvent, Kateryna Rozhkova, first deputy chairman of the National Bank of Ukraine, tells Novoe Vremya. “It was impossible to shut down, because then we would have crippled the entire financial system of the country,” she said. Since the government takeover, the central bank has won 22 lawsuits, stipulating the return of $43 million in mortgaged property. After the government intervention, a forensic audit by concluded that “PrivatBank was subjected to a large scale and coordinated fraud over at least a 10-year period ending December 2016, which resulted in the Bank suffering a loss of at least USD 5.5 billion.” The report stated that 95% of corporate lending had been to bank shareholders.

Betting that world sugar prices will rise, Florida-based Kopernik Global Investors LLC has bought 12,947 shares of Warsaw-listed Astarta Holding, raising its stake over 5%. Between February 2017 and August 2018, the price dropped in half. Since then, sugar prices recovered slightly, to 13 US cents a pound. Dragon Capital writes: “Kopernik’s latest share accumulation may reflect bottom-fishing demand in anticipation of a bounce in the sugar market. Astarta’s shares slid by 59% in USD terms in 2018, hitting the lowest level since 2015 on a drop in global and domestic sugar prices.”

Ukraine’s sugar beet plantings are to drop 20% this season, to 220,000 hectares, S&P Global Platts reports from London, citing “a source close to the National Association of Sugar Producers.” Sugar experts forecasts a similar drop in plantings in the EU and Russia. Platts notes that Germany’s Suedzucker, the world’s largest corporate sugar producer, said last month it is considering closing factories. In September, Tereos, France’s largest sugar producer, said it was planning to cut plantings to cut sugar beet production by 5%.

Ukraine’s corn harvest last year was up 50% y-o-y, to a record 35 million tons, reports the U.S. Department of Agriculture’s Foreign Agricultural Service. The Service reports that 5% of the corn may have been left to rot in the fields because silos were full. On Wednesday, the State Statistics Service reported that the nation’s capacity for simultaneous storage of grain, beans and oil seeds grew last year by 7.3%, to 78.3 million tons. Of this amount, farms owned 58%.

Sunflower cooking oil exports could rise this year by 16% to 6.2 million tons, the USDA predicts. This follows a 15% rise in seed production last year, to 14 million tons. India emerges as the savior of Ukraine’s industry, Fiscal Service statistics show. Last year, India bought 45% of Ukraine’s total exports. Exports to the next 11 countries dropped.

MHP, Ukraine’s largest agricultural producer, is obtaining a €120 million loan from ING Bank NV. According to Interfax-Ukraine, the loan is guaranteed by Zernoproduct MHP, the company’s grain unit with assets valued at €192 million. Based in Myronivka, 100 km south of Kyiv, Myronivsky Hliboprodukt is the nation’s largest chicken producer.

Capital investments in farming hit $2 billion during the first three quarters of last year, Elena Kovaleva, deputy minister of Agrarian Policy and Food, tells reporters. A major portion went into two declining areas of animal husbandry – cattle breeding and pig production. About $500 million was invested in dairy processing and baby food production. Kovaleva called this investment volume “amazing.”

Zaporizhia Automobile Plant, or ZAZ, has started assembling a test batch of South Korea’s LS Mtron tractors. LS, South Korea’s largest tractor maker, has factories in Brazil and China. “The creation of a joint venture with the manufacturer is not being discussed yet,” Dmytro Skliarenko, spokesman for UkrAVTO, the ZAZ parent company, cautioned Interfax-Ukraine. ZAZ has signed a distribution agreement with LS and has presented LS tractors at agro fairs here. Priced between $38,000-70,000, the LS models under study would go head to head with MTZ Belarus tractors, imports popular among Ukraine’s small and medium farmers.

Despite Russia’s harassment of merchant ships in the Azov, Asket-Shipping increased its grain silo storage capacity in Berdyansk last year by 42%, to 100,000 tons, reports the Center for Transportation Strategies. Victoria Abreyeva, director of the Berdyansk branch, says of the export-oriented investments: “All our warehouses are equipped with truck weighing complexes and laboratory equipment.” Asket has export warehouses in the ports of Kherson, Mariupol, and Mykolayiv.

While the EU studies new road and rail aid to Ukraine’s Azov, two international financial institutions are loaning €25 million to Mariupol, the region’s largest city, for new buses, trams and trolleybuses. Located 30 km west of the front lines, Mariupol’s population has grown to 450,000, swollen by people leaving the separatist controlled section of Donetsk region. On Wednesday, the World Bank’s International Finance Corporation signed a €12.5 million low interest loan for Mariupol to buy 64 large buses and to rebuild the Soviet-era bus depot. Similarly, last summer, the EBRD approved a €13 million loan to Mariupol to buy new trams and trolleybuses. Largely powered by overhead electric lines, city’s modern mass transit fleet also is designed to cut carbon monoxide. Largely because of Metinvest’s Iron & Steel Works on the city’s eastern edge, Mariupol has the worst air pollution of Ukraine’s 39 largest cities, according to a study last year by Kyiv’s Central Geophysical Observatory.

Zaporizhia, the closest airport to Ukraine’s isolated Azov coast, opens a $10 million steel and glass passenger terminal this summer. Last year, the airport handled 400,000 passengers, a post-Independence record. Flights were up 10% and passengers were up 15% to make Zaporizhia the sixth busiest in Ukraine. With two flights to Kyiv, on UIA and on Motor Sich, three quarters of traffic was international. Last year LOT Polish started flying to Warsaw. This year, SkyUp starts flying to Turkish and Egyptian resorts. This year, $35 million is being spent to upgrade the 223 km Mariupol-Zaporizhia road, cutting the drive time from the Azov to the airport to three hours. Road work is also trimming the Berdyansk-Zaporizhia airport drive time to three hours.

Wizz Air, the airline with the most flights to Lviv, is expanding its flights by 17% this spring, to 30 per week. After launching flights to Copenhagen on March 1, Wizz Air will fly from Lviv to 10 EU cities. Ryanair and UIA are tied as the airport’s second busiest airlines, five international destinations.

A survey of Ukraine’s top 50 IT companies indicates that job growth was 11.6% during the second half of last year, to 58,448 ‘specialists,’ largely software engineers. The industry started this year with 4,091 vacancies, according to the company poll, conducted twice a year for DOU.ua. Looking ahead, 40% of 45 companies plan to hire 100 or more professionals by June. Only two companies say they do not plan to increase their payroll.

Confirming commercial real estate reports that IT companies account for nearly half of new office rentals in Kyiv, 43 of the top 50 IT companies have offices in the capital. Lviv has 21 major IT companies and Kharkiv has 20. Fourteen companies have more than 1,000 specialists. Two – EPAM and SoftServe – have more than 6,000.

Kernel, Ukraine’s largest grain shipper, is buying the nation’s largest private grain hopper fleet. Kernel is paying $49 million for RTK-Ukraine, which has almost 3,000 grain cars, about 15% of all grain cars in the nation. Last year, Kernel-Trade used 35,070 cars to move 2.2 million tons of grain to Black Sea ports, calculates the Center for Transportation Technologies.

Kernel intended to buy only 500 new cars this year. Tuesday’s bold move comes after grain car rentals charged by Ukrzaliznytsia increased 5-fold in recent months, to $38 a day. Reflecting tightening demand, the state railroad’s pilot program to auction grain car rentals on ProZorro is producing daily rates of $64. Kernel’s hopper fleet purchase comes as the company plans to commission this year its second TransGrainTerminal at Chernomorsk port, with an annual capacity of 4 million tons of grain. This year, Kernel aims to increase grain exports by 60%, to 6.2 million tons, a company record.

Taking advantage of unseasonably warm weather, farmers in southern Ukraine have started spring sowing – one month earlier than last year, ProAgro reports. In Kherson, farmers are sowing spring barley. Separately, the Agrarian Policy Ministry reports that the supply of spring seeds, 684,000 tons, meets “100% of the demand.” This year, farmers are expected to fill 27.7 million hectares, virtually the same area as last year.

As growing exports strain Ukraine’s rail system, SCM’s Metinvest is leasing two GE C30-7A locomotives once operated by Conrail, the US freight giant. Rebuilt by a Czech company, CZ Loko, the locomotives are leased from Operail, Estonia’s state-owned rail freight company, reports Trains.com. Since Ukrainian law does not allow private locomotives on public tracks, the locomotives will be used internally by the Ukrainian mining and metals giant. The results of this year’s elections will determine whether the Rada allows Ukrzaliznytsia to go ahead with a pilot project for private freight trains.

Nine new oil and gas exploration and production blocks are now posted online by the State Geology Service for a third round of electronic auctions, the Service reports. Five are in Ivano-Frankivsk region and four straddle Kharkiv and Dnipropetrovsk regions. This year, 10 auctions of oil and gas sites are to be held on the ProZorro.Sale electronic platform. The first 10 blocks are to be auctioned March 6, three months after site details were announced. A second auction, of nine blocks, will be held at the end of April.

Back to the 1970s…in the 2020s. By 2023, Ukraine should once again be self-sufficient in gas production, a status Soviet Ukraine enjoyed 50 years ago. Praising this year’s oil and gas auctions and production sharing agreements, Prime Minister Groysman told the Freedom of Speech TV show: “We are beginning to untangle a very complicated and closed system – access to Ukrainian subsoil.”

Ukrposhta handled 34 million international parcels last year, up 45% y-o-y, the Center for Transportation Technologies writes, analyzing the state postal company’s statistics. With e-commerce driving the parcel business, the top sources of shipments were: China, the Netherlands, Israel, and the US. Last year, Ukrposhta started partnerships with Hongkong Post and Alibaba’s delivery platform, Cainiao Smart Logistics Network Ltd. This year, Ukrposhta plans to increase parcel deliveries by 27%.

Wizz Air doubled passengers on its Ukraine routes last year to 1.5 million passengers, making it the largest low cost operator in Ukraine. With flights starting in May from Kyiv Sikorsky to Athens and Thessaloniki, Wizz Air reports that it will offer 45 routes to 13 EU countries from three Ukrainian cities – Lviv, Kharkiv and Kyiv.

Dragon Capital has bought a cold storage warehouse complex on western Kyiv’s Ring Road, raising the investment company’s warehouse holdings to 300,000 square meters. With the purchase of the Arktika warehouse, “logistics space will constitute 48% of our total commercial property portfolio,” says Volodymyr Tymochko, Dragon’s managing director for private equity. “Ongoing growth in demand for warehouses, fueled by the expansion of offline and online retailers, is making this particular real estate segment attractive for investment.” Last week at Dragon’s annual investor conference, Tomas Fiala, Dragon’s CEO, said: “In logistics and retail — not only in Kyiv, but across the country — vacancies are close to zero, which we last saw in 2007–2008.”

After opening five stores on Kyiv’s right bank last year, Rozetka.ua, Ukraine’s largest online store, now finds it cannot find warehouse space. “Ukraine is growing fast enough – this is good – but the problem is that the infrastructure is not keeping up with such growth,” Vladislav Chechetkin, co-owner of Rozetka, tells Interfax-Ukraine. “The vacancy of the warehouses is zero. Therefore, if you want a warehouse on the right bank, this means that you have to find (land), get approval, permission to build … is a significant time lag.” Two years ago, Rozetka bought a warehouse on Kyiv’s left bank. Although that space is full, the retailer plans to open a sixth Kyiv store this year, on the left bank.

This fall, Kyiv region gains a cargo airport with the opening of international passport and customs controls at Bila Tserkva Airport, Infrastructure Minister Volodomyr Omelyan announced Monday. Belotserkovsky Cargo Aviation Complex, a new municipal enterprise, plans to handle cargo at the airport, one hour by truck from Kyiv’s circle highway. The airport’s new international status also will allow expansion of its existing jet maintenance and repair business. After Kyiv’s Boryspil was unable suspended air cargo deliveries during the Christmas period, Omelyan decided to fast track the opening of Bila Tserkva and to push Boryspil to start construction this spring on a new air cargo terminal.

Ukraine has passed the halfway marker in implementing the massive EU-Ukraine Association Agreement of 2017, according to Ivanna Klympush-Tsintsadze, deputy prime minister for European Integration. This year’s priority sectors for harmonizing laws and rules are: judiciary, energy, customs, and the digital market. Of the overall task of shifting Ukraine from Russian and Soviet standards, the work is 52% done, she told a Kyiv conference reviewing the Agreement. Hugues Mingarelli, EU ambassador, said: “There are areas where progress has been very, very limited: customs, taxation, transport, intellectual property rights.”

Over 15,000 Ukrainian companies have qualified to export to the EU. This business battalion expanded Ukraine’s EU exports by two thirds since the Maidan – from 25% in 2014 to 42% last year. According to the EU-Ukraine conference, the main buyers are Ukraine’s exports are: Poland – 17%; Italy – 14%; Germany – 10%; Hungary – 8%; and the Netherlands – 8%.

Soy oil, long overshadowed by Ukraine’s sunflower giant, achieved record exports last year — 215,000 tons, reports the Agrarian Economics Institute. By contrast, sunflower oil exports were 26 times greater — 5.6 million tons. Last fall, both crops had record harvests: soy up 13% to 4.4 million tons, and sunflower seeds up 12% to 13.6 million tons. Vegetable oils and seeds accounted for one third of Ukraine’s 2018 farm exports, reports the Ministry of Agrarian Policy and Food.

Canada’s Fairfax Financial Holdings has bought France’s AXA Insurance (Kiev) for $16 million. In Ukraine’s insurance market since 2007, AXA has 780 employees and 1,220 agents in Ukraine. At the end of last year, the company collected $68 million in insurance premiums. Toronto-based Fairfax has $65 billion in total assets and an investment portfolio of $39 billion.

Ukraine’s online advertising grew by 40% last year, to $125 million, reports the Ukrainian Internet Association. In-stream video totaled 42% of spending, banners for 37%, in-page video for 9%, ‘non-standard solutions’ for 7%, and sponsorships for 5%. Social media and instant messaging platforms accounted for 34.5% of the ad spend, up from 26% in 2017.

Next month, airBaltic will double its weekly airplane seats — to 5,760 — between Kyiv Boryspil and Riga, the largest airport in the Baltics. By shifting from Bombardier regional turboprops to Boeing 737 jets and increasing frequencies to three a day, airBaltic takes aim at the lucrative Ukraine-Russia transfer traffic developed by Belarus’ Belavia. Last year, Belavia increased its flights between Minsk and Kyiv by 10%, becoming Ukraine’s second largest foreign carrier, after Turkish Airlines. In a codeshare with Aeroflot, airBaltic offers up to eight flights a day from Riga to Moscow. This is Riga airport’s second busiest route, after London. On April 1, airBaltic starts service from Lviv to Riga. On March 2, Wizz Air starts flights from Kyiv Sikorsky to Riga.

DTEK Renewables has opened the second largest solar power station in Europe, the 200 MW Solar Farm-1, in the Nikopol district of the Dnipropetrovsk region. The contractor was China Machinery Engineering Corporation. The National Regulatory Commission has awarded the project the relevant green feed in tariff — €15.03 per MWh until 2030. The solar plant should power 100,000 households, about three times the population of Nikopol city. The largest solar plant in Europe is Cestas Solar Park, a 300 MW station in the Gironde region of southwest France.

In neighboring Kirovohrad region, DTEK plans to build three solar plants for a total of 190 MW by the end of next year. According to regional officials, DTEK plans to start building this year the 60 MW Morozivka station in Oleksandriia district. About 40 km to the west, in Dykivka, DTEK plans to start building next year Solar Farm 8 – two stations with a total capacity of 130 MW. Ultimately owned by Rinat Akhmetov, DTEK Renewables is already Ukraine’s largest producer of wind energy.

Ukraine’s first solar panel production plant starts work this week in Vinnytsia. Using Chinese technology, the Kness factory starts production at an annual panel capacity of 200 MW. By the end of this year, capacity is be 400 MW, says plant director Oleh Dovboschuk. Located on a once abandoned industrial site, the €5 million plant now employs 120 workers. Currently, Vinnytsia region has 250 MW of solar power and plans to add 60 MW more by the end of this year. Through 2025, Ukraine grants a 5% premium on feed in tariffs for solar projects using 30-49% domestically made equipment. For equipment with 50% or more local content, the bonus is 10%.

The Rada is expected to vote next month on a bill that would replace high renewable energy feed in tariffs with energy auctions. Matteo Pattrone, the new EBRD representative in Ukraine, warns excessively high feed in tariffs have provoked some governments to retroactively change the rates, hurting EBRD financed projects. A supporter of auctions, he tells the Kyiv Post: “It’s better to have sustainable compensation regime than one that is too good to be true.” To jump start foreign investment, Ukraine adopted in 2015 some of Europe’s highest feed in tariffs for renewable energy.

Donald Tusk, president of the European Council, visits Ukraine through Feb. 20, spending Monday and Tuesday in Kyiv and Wednesday in Lviv. His visit comes as EU foreign ministers meet today in Brussels to discuss sanctions against Russia for the Azov Sea attack and new road and railroad aid to cut the isolation of southeast Ukraine.

With the state railroad due to pay $150 million on a Eurobond next month, the Cabinet of Ministers has re-authorized Ukrzaliznytsia to issue up to $500 million in Eurobonds at interest rates up to 11% a year, slightly higher than the level authorized last September. Last December, a Eurobond launch planned was postponed in an adverse environment marked by delay in reaching the IMF accord and nervousness around the one month imposition of martial law. Today, the lead managers are JP Morgan and Dragon Capital. Separately, Evhen Kravtsov, chairman of the railroad, said Friday that Ukrzaliznytsia cut its hrvynia debt last year by 10%, to the dollar equivalent of $1.1 billion.

Ukrzalyznitsia plans to spend nearly $1 billion on capital expenditures this year – one third more than last year. Spending is to go for 3,650 new freight cars, the repair of 7,000 freight cars and the purchase of 15 locomotives from GE. Rail chair Kravtsov says an EBRD loan guarantees renovation of almost 6,000 freight cars through the end of next year.

“How much will these injections help solve the main problem of the railway – shortage of locomotives?” Aleksandr Krivoruchko, head of the Freight Car Owners Association, writes in Obozrevatel. “In the first 10 months of 2018, Ukrzaliznytsia fulfilled only 51% of its annual plan for repair of locomotives: repairing 95 units, while the investment plan provided for a complete overhaul of 187 locomotives….This “drop in the ocean” does not solve anything. Out of 1,758 freight locomotives listed in UZ’s inventory, only 945 are in operation – 54% (!) And the minimum need for UZ in new locomotives is 310 units for a period up to 2025.”

Germany’s Chancellor Merkel balanced her support of the Nord Stream 2 Russia-Germany gas line with support of Ukraine’s continued role as a gas transit country to Europe. “Ukraine must remain a transit country,” she said Saturday at the Munich Security Conference. She said Europe has a geostrategic interest in diversity of sources of energy supplies.

President Trump has signed bills that increase aid to Ukraine to nearly $700 million, Ukraine’s Embassy in Washington writes on Facebook. Last week, USAID launched an $85 million program by TetraTech, a U.S.-based engineering firm, to help implement free market changes and incentives to promote natural gas production, energy conservation, and renewable energy investment.

Ukraine’s deficit in foreign trade of goods and services slightly more than doubled last year, hitting $5.8 billion, reports the State Statistics Service. Exports of goods and services in 2018 grew by 8.6%, to $57 billion, while imports rose by 14.3%, to $63 billion, the statistics service said. Last year, the deficit in foreign trade in goods increased by 54.5%, to $10 billion. By contrast, the surplus in foreign trade in services – largely IT – increased by 15.5% to $6 billion.

The number of Ukrainians using Facebook increased by 30% last year, to 13 million, according to a survey by Agency PlusOne. Since May 2017, when Ukraine banned the use of Russia-based social media networks, the number of Ukrainians using Facebook, a US-based network, increased by 57%. About half of all Ukrainians aged 13 (the minimum age) to 45 use Facebook: 68% of the 18-24 year group; 62% of the 25-35 year group; 48% of the 36 to 45 year group. Users are skewed by gender: 59% female; 41% male. About two thirds access Facebook exclusively through their smartphones. Only 9% percent only through their computers.

 

The original English version is from our partner UBN – Ukraine Business News. For more information and news archive, go to: www.ubn.news.

 

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Ukraine Business News, Tuesday, February 19

 

 

 

 

  • Gas transit through Ukraine fell by 7%
  • Mariupol Cargo Diverted to Kherson and Mykolayiv
  • Fastest Growing Airlines in Ukraine
  • South Korea’s Posco Buys Mykolayiv Grain Terminal
  • M&A up 78%, Foreign Investment up 47%
  • Internet of Things Spreads
  • Roads, Railroads and a New Icebreaker: Ukraine’s €675 Million Wish List for EU Aid to Azov
  • Low Interest Loans to Ease Debt Burden
  • Izmail Airport, Port Dredging, Danube Ferry and New Road Open
  • More Rail Relief for Besieged Mariupol
  • A Boeing Maintenance Hub For Kyiv
  • Kyiv to See Record 6 Shopping Centers Opening in 2019
  • Ukrainians Go Cashless
  • Foxtrot, JYSK, Novus, ATB, and Brocard Expand in 2019
  • Restaurants Groups
  • Developers Shift to Offices, Warehouses

While Russian gas transit through Ukraine fell by 7% last year, it spiked up 26% year-on-year in January, to 7.6 billion cubic meters. Today, about one third of Russia’s gas exports to Europe cross Ukraine. Russian officials say they will not need Ukraine’s gas pipelines in the 2020s. But recent years show they needed Ukraine as a back up when the Nord Stream pipeline had problems. Russia’s 10-year gas transit contract with Ukraine expires at the end of this year. Russian officials say they will renegotiate seriously only after they know who will be Ukraine’s next president.

Posco’s purchase of the big grain terminal under construction in Mykolayiv means “billions of dollars and hundreds of additional jobs” for the Black Sea port, Yuri Budnik, head of the seller, Onexim Group, writes on Facebook. Writing “I don’t have the right to disclose the details of the agreement,” Budnik said negotiations with the South Korean company took two years. The terminal, capable of handling 2.5 million tons of grain a year, is to open in July.

Kherson and Mykolayiv, the two Black Sea ports closest to the Sea of Azov, had the biggest cargo increases of Ukraine’s 10 largest ports in January, the Sea Ports Authority reports. Because of Russian harassment of Ukraine-bound merchant ships, cargo handled by Mariupol in January was down 27% year-on-year. By contrast, cargo handled by Kherson last month was up 27% y-o-y. Cargo handled by Mykolayiv was up 19%. On Monday, EU Foreign Ministers meet in Brussels to discuss sanctioning Russia for its interference in shipping in the Azov.

Turkish Airlines, the busiest foreign airline serving Ukraine, increased its passengers on Ukraine routes by 28%, topping 800,000, the airline’s Ukraine director, Dinser Saychi, tells reporters. With the number of flights up 9%, the average occupancy was 71%.

Wizz Air was the fastest growing airline in Ukraine last year, recording a 73% increase in flights, to 15,251, according to UkSATSE, Ukraine’s air traffic control agency. For the other top five: UIA increased its flights by 8% to 61,691; Turkish up 9% to 29,972; Belavia up 10% to 16,003; and LOT Polish up 24% to 15,813. Ryanair launched flights last fall and was not counted in the year-on-year comparisons.

Kyiv’s train to the plane will expand with trains from Kharkiv and Dnipro going directly to the new rail platform at Boryspil Airport, Roman Wepritsky, regional rail head, tells Channel 5. Last year, Boryspil accounted for 61% of Ukraine’s 20.5 million air passengers. To make airport access easier for Kyiv residents, Ukrzaliznytsia is building a multimodal — rail, metro, bus and car — terminal at Vydubichi, the green line metro station. Launched in December, the airport line is a money maker for the state railroad. Each passenger pays the hryvnia equivalent of $2.85 – 15 times more than the ticket for a comparable suburban train ride.

South Korea’s Posco Daewoo is buying 75% of a 2.5 million ton a year grain export terminal under construction in Mykolayiv. South Korea, a nation of 52 million people, imports almost all its wheat and corn – about 15 million tons. This year, Ukraine is to export 47 million tons of grain. Last year, Choi Jeong-woo took over as Posco chairman and the steel giant on a path to become a global grain trader. Posco became a corporate member of President Poroshenko’s National Investment Council and sent executives to Ukraine on fact finding visits here. In a deal where investment values were not made public, Ukraine’s Orexim Group retains minority ownership of the terminal.

Ukraine increased food exports last year by 5.4%, to $15 billion, according to the Ukrainian Food Export Board. Grains accounted for about half of exports. India was the biggest buyer of Ukrainian farm products — $1.8 billion, largely soy and sunflower oil. China came in second — $1 billion, largely for corn and sunflower oil. The Netherlands came in third — $643 million for chickens, butter and corn. Spain was in fourth place, with Saudi Arabia close behind with $510 million.

Farm exports account for 39% of foreign currency entering Ukraine, Prime Minister Groysman told the Cabinet of Ministers Wednesday. President Poroshenko told the Dragon conference Tuesday that a key challenge for the 2020s is for Ukraine to add value to farm exports by increasing processing.

Mergers and acquisitions increased by 78% in 2018 year over year, to $1.8 billion, KPMG reports in its annual Ukraine M&A Review. The number of deals increased by 19%, to 80. Foreign investment increased by 47% to $508 million in 25 transactions. “The Ukrainian economy is recovering” says the report. Noting the two elections this year, KPMG predicts that foreign investment growth in 2019 will be “modest.” “Ukraine is now on the verge of change,” the report says. “And if reforms continue, the number of mergers and acquisitions will only increase with the growing number of foreign investors considering access to the local market.”

Despite the lack of a farm land market, agriculture attracted the highest portion of foreign investment. Saudi Agriculture and Livestock Investment Company, or SALIC, bought Mriya Agro Holding for a reported $242 million. Switzerland’s Julius Baer paid $73 million for a stake in Kernel Holdings. Japan’s Sumitomo paid $45 million for a controlling 51% stake in Spectrum-Agro and Spectrum Agro-Engineering. Noting last year’s record 70 million ton grain harvest, KPMG says: “International investors are even more closely looking at the Ukrainian agricultural sector.”

Capital investment grew by almost 20% in 2018, Prime Minister Groysman tells the cabinet Wednesday. “957 industrial and industrial facilities were repaired and reconstructed – new products and new jobs.” He says the government’s investment promotion office, UkraineInvest, is facilitating $2 billion in planned foreign investments.

Kyivstar, Ukraine’s largest mobile telephone company, is testing in Kyiv and Odesa its Narrowband Internet of Things network, or NB IoT. After testing with client businesses this month, it plans to launch the network nationwide later this year. This low power next network offers indoor coverage, low cost, long battery life, and high connection densities for items like gas and water meters. ‘Smart’ street lights turn on when it gets dark. ‘Smart’ traffic lights turn red when approaching cars break speed limits. ‘Smart’ water, gas, and sewage lines detect breaks.

Lifecell, Ukraine’s third largest mobile operator, is partnering with IoT Ukraine to launch IoT networks, first in Kyiv and Lviv, later in Dnipro, Kharkiv and Odesa. To cover 90% of Kyiv, the Turkish company is erecting 40 base stations, a network capable of connecting 200,000 sensors. With Kyivgas, lifecell’s IoT network allows the gas company to read thousands of gas meters. Ericsson, which supplies the radio equipment, estimates that, by 2024, four billion devices will be connected to the Internet around the world. Vodafone Ukraine is testing NB IoT Vodaphone technology, a platform used for 77 million connections worldwide.

EU foreign ministers meet Monday in Brussels to discuss aid to Ukraine’s southeast and sanctions on Russia for interfering with merchant shipping in the Azov. With unanimity needed, EU sanctions are expected to be wrist slaps. For aid, Ukraine has drawn up a wish list for improving road and rail access to its Sea of Azov ports, Berdyansk and Mariupol. With the airports of both cities closed, highways and faster trains would speed freight and bring tourists to the coast. Two weeks ago, Viktor Dovhan, Infrastructure vice minister, visited the area with EU officials. Last week, drew up this €675 million list

Rail:

€7 million to upgrade tracks and signals to increase freight and passenger train capacity by 60% on the 480 km Mariupol-Zaporizhia line.

€15 million for four new GE diesel locomotives and upgrading the locomotive depot at Volnovakha, Donetsk region.

Road:

€40 million to complete rebuilding the 224 km Mariupol-Zaporizhia road into a highway. With completion expected next year, half of roadwork is done.

€70 million to complete repairing the 143 km Berdyansk highway north to Vasylivka, on the Dnipro River.

€130 million to complete repairing the 321 km Dnipro-Mykolaiv road. A major artery feeding cargo to the Black Sea, this road takes seven hours to traverse.

€313 million to repair and rebuild the 419 km Mariupol-Berdyansk-Melitopol-Kherson road. Known as the M-14, this is Ukraine’s major east-west road running along the north shore of the Sea of Azov. If rebuilt as a highway, it would allow trucks to take cargo from Mariupol to Kherson port in five hours.

Ports:

€24 million – a dredging ship dedicated to Ukraine’s Sea of Azov portsν

€16 million – upgrade of navigation safety systems, weirs and sea wallsν

€60 million – a new icebreaker; Ukraine’s only icebreaker, the Kapitan Belousov, was built in 1954.

To escape poverty, Ukraine needs to grow by at least 5% a year, the Prime Minister said. After growing by about 3.3% last year, Ukraine’s GDP growth will slow this year to 2.8%, according to consensus forecasts. Vowing to continue free market reforms, Groysman said: “For us, a priority is the growth of the economy above 5%. This requires investments. In order for investments to come, we need clear rules and guarantees of the security of these investments.”

Interest rates could be lowered later this year if inflation stays on track to end the year at 6.3%, Yakiv Smoli governor of the National Bank of Ukraine, told Dragon. Last month, year-on-year inflation was 9.2%, down from 9.8% in December.

Within two months, Ukraine hopes to win the second tranche of EU €500 million macro financial aid, Finance Minister Oksana Markarova told reporters at Dragon. At the same time, she is negotiating a new loan guarantee with the World Bank and new low interest loans with G7 countries. In December, the World Bank extended a $750 million guarantee, enough for the government to borrow $1 billion at low rates. “Our priority is concessional lending,” Markarova said. She aims to use low interest loans to help Ukraine lower its indebtedness to 50% of GDP by 2021.

Izmail airport, closed for a decade, will reopen, Yuro Dimchoglo, deputy chairman for Odesa Regional Council, tells the Center for Transportation Studies. “We are planning to relaunch the airport,” he said referring to the 1,840 meter concrete strip which handled flights from Kyiv and Istanbul until 2009. This summer, European discount airlines are expected to start flying to Odesa and officials want to develop tourism in Bessarabia. On an Embraer 190 or an Antonov 158, Izmail would be a 45-minute flight from Kyiv, or a 15-minute hop from Odesa, 200 km to the east. While Odesa officials work on lining up the $1 million needed for airport upgrades, they also talk with a local air company, Odesa Aviation, about starting flights.

Ukraine’s long delayed car and truck ferry across the Danube, from Olivka to Isaccea, Romania, should start this summer, Maxim Stepanov, chair of the Odesa Regional Administration, writes on Facebook. He posted photos of Orlivka’s newly completed ferry terminal buildings for passport control and the road ramp to the Danube. On Tuesday, President Poroshenko inaugurated the newly rebuilt European route E47, a road that cuts the Odesa-Orlivka drive time to four hours. But to reach Isaccea – 800 meters across the river – drivers have to make a 2h15, 95 km detour, through Moldova. Ferry service would provide a big shortcut for truckers and tourists.

On the opposite end of the country, in Mariupol, work is underway to ease isolation caused by Russia’s harassment of merchant ships. To remove a rail bottleneck, Ukrzaliznytsia plans to double a final 25 km section of single track on the 480 km Mariupol-Zaporizhia line. This €4.5 million project would allow daily trains to increase from 30 today, to 49 in the future — 42 freight and seven passenger, Viktor Dovhan, deputy infrastructure minister, writes on Obozrevatel news site. Dovhan also said the state railroad might purchase four more GE diesel locomotives to service the line. Separately, Evhen Kravtsov, Ukrazaliznytsia, promises a “completely renovated Kiev-Mariupol night express,” referring to a ride that takes 17 hours.

Driving investment in rail, cargo at Mariupol sea port was down 27% in January, year over year, to 335,000 tons, the port administration reports. By contrast, cargo was down 10% in 2018, over 2017. After Russian harassment of Ukraine-bound ships proved enduring, some shippers reacted by boycotting the port, Ukraine’s largest on the Azov. Far from marginal, Mariupol carried the largest volume of metal exports for Ukraine last year – 4.1 million tons, just over the 4 million from Odesa.

Two Boeing 737-500 jets are undergoing maintenance and painting in Kyiv, a first step toward creating a Boeing maintenance hub next to Sikorsky (Zhuliany) Airport, reports BiznesTsenzor site. Using the same runway as the airport, Kiev’s Civil Aviation Plant 410 plans to expand beyond servicing Antonovs to service 40 Boeings a year by 2024. Ryanair, Europe’s largest carrier, has an all-Boeing 737 fleet. Last November, David O’Brien, the airline’s chief commercial officer, told President Poroshenko that the carrier has a five-year, $1.5 billion investment strategy for Ukraine. It includes basing and maintaining 15 Boeings in Ukraine.

Six new shopping centers, containing a record 400,000 square meters of rentable space, are to open in Kyiv this year, according to the Ukraine Retail Center. This would be eight times the new leasable space of last year and a record for the capital, says Daryna Kulaga, a market analyst for Jones Lang LaSalle Ukraine. Although developers often do not reveal construction costs, the six could total around $350 million.

By June, these Kyiv shopping entertainment centers are to open: Smart Plaza Obolon – 10,000 sq.m; Oasis, Heroes of the Dnipro metro station – 13,200 sq.m; Blockbuster Mall, Stephan Bandera Ave. — 135 000 sq. m; and River Mall, Dnipro Embankment Left Bank –59,682 sq. m.

By September, two more are to open: Ocean Mall, next to Ocean Plaza, Lybidska Metro station — 100,000 sq. m.; and Retroville, on Pravda Ave. — 80 718 sq. m.

In Odesa, Gargarin Plaza is to open by May with 20,000 sq. m.

The overall vacancy rate at Kyiv shopping centers fell to 3.7% at the end of last year, Jones Lang LaSalle reports. This is down from 5.6% at the start of 2018. Annual store rents rose to $1,140 per square meter, almost the level of 2013.

Ukrainians are among the world’s fastest adopters of contactless, cashless payments systems, Inga Andreeva, general director of Mastercard Europe SA, tells reporters. Last year, Ukraine registered the fourth fastest growth rate in the world for taking to this technology, which typically involves waving a smartphone or digital wrist watch in front of a terminal to pay with Google Pay or Apple Pay. Common in the Kyiv metro system, contactless terminals start working this week in the busiest station of Kyiv’s suburban ‘elektrichka’ trains.

With 38% of Ukrainians businesses accepting cashless payments, there is room to grow. The EU average is 60%, Mastercard says. Some businesses resist going to credit cards and contactless because it means paying taxes. But 64% of business managers surveyed by Mastercard say they prefer cashless for its simplicity and potential to boost sales. By last September, according to National Bank of Ukraine estimates, cashless payments accounted for 44% of transaction in Ukraine – a 13% increase since the start of the year.

Foxtrot plans to double online sales this year, to 20%, Valery Makovetsky, chair of the supervisory board of home appliances and electronics chain, tells Interfax-Ukraine. In traditional bricks and mortar, Foxtrot plans to invest $10 million this year reformatting about one third of its 162 stores. Last year, it opened 18 new stores across Ukraine, largely in small cities. Depot Development Group, the umbrella group controlling Foxtrot, also is building or expanding shopping centers in regional cities – Chernihiv, Kriviy Rih, Kropyvnytskyi, and Zaporizhia.

Danish furniture retailer JYSK plans this year “to dynamically expand the network in different regions of Ukraine,Yevhen Ivanytsia, JYSK Ukraine director. tells Interfax-Ukraine. Last year, JYSK expanded its Ukraine store network by one third, to 48. With stores in 20 cities, JYSK expanded into new neighborhoods – with three stores in Khmelnytskiy and five in Odesa.

Novus, the supermarket chain, opened five supermarkets and a 7,000 square meter warehouse last year in Kyiv, the retailer reports. Founded a decade ago, Novus now has 43 stores, 34 of them in Kyiv and Kyiv region. One year ago, the EBRD opened a $25 million credit line to Novus to open more stores and the logistics center.

ATB, the discount shop chain, plans to keep expanding this year, after opening 80 new stores and rebuilding 41 more last year, the Dnipro-based company reports. With 990 outlets, there are ATB stories in 253 cities and towns in 22 regions of Ukraine.

Brocard intends to open 5-7 new perfume and cosmetics stores this year in Ukraine, increasing its network to nearly 100, Brocard-Ukraine LLC tells Interfax-Ukraine. Three stores – for Dnipro, Kharkiv and Lviv – will be in a new compact format: Brocard Niche Bar. Last year, Brocard opened four stores – two in Kyiv and two in Odesa.

Owners of one of Ukraine’s largest restaurant groups plan to open 200 new restaurants by 2021, largely in Ukraine, Oksana Serediuk, co-owner of the chain, tells Interfax-Ukraine. Serediuk and her husband, Taras, operate restaurants under the brands Mafia, Casta, Bao, Nam, Georgia, Brilliant Bar and Yakitoriya. This year, the group plans to double its restaurants in Moldova to six. In Ukraine, six are under preparation, including one in Volnovakha, Donetsk, 15 km west of the front line.

Dmytro Borysov, the Kyiv restaurant entrepreneur, plans to open 100 ‘fast casual’ restaurants in Kyiv this year, he tells the Kyiv Post. According to his surveys, 70-80% of Kyiv residents eating out want to pay no more than $5.25 per person. One of his big hits, Bilyi Nalyv, on Kreschatyk, charges €1 or 29 UAH per menu item. In the last year, he has taken this successful formula to Kharkiv, Lviv, Lutsk and Odesa.

Coca-Cola has launched a €10.5 million production line in Brovary, Kyiv region. Capable of bottling 40,000 bottles an hour, the line expands the Brovary plant capacity to 100 million cases a year.

Ukrainians spend 44% of their income on food and non-alcoholic beverages, according to the latest household survey conducted by the State Statistical Survey. The average household cash income during the third quarter of 2018 was $335. The average household was 2.1 people.

Real estate developers now are moving from residential to offices and warehouses, says Volodymyr Mysak, head of capital markets for the Ukraine office of Cushman & Wakefield. Offices vacancy rates have dropped to 4.9% and monthly rental rates have increased to $29 per square meter. Similarly, warehouse vacancies are at a cyclical low – 3%. Last year, investment in commercial real estate hit $300 million, a 10-year high, he told the Ukrainian Steel Construction conference.

 

The original English version is from our partner UBN – Ukraine Business News. For more information and news archive, go to: www.ubn.news.

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Ukraine Business News, Tuesday, February 12

 

 

 

 

  • Germany’s Used Diesel Cars Flow to Ukraine
  • Banks Make First Profits Since 2013
  • Online Auctions Sell State Properties
  • Make Market For Farmland Rents
  • First New Highrise in a Decade Proposed for Kyiv
  • Boryspil: Europe’s Fastest Growing Airport in its Size in 2018
  • Foreign Exchange Freedom Starts Today
  • Agro Businesses Power Crop Growth
  • Sunflowers Up, Sugar Down
  • Oil & Gas Tenders Advance
  • Central Bank Wants to Cut Inflation in Half This Year
  • Banker Survey: Loans to Grow
  • Foreign Trade Hits $100 billion
  • Food Sales to EU up 50% Since 2016
  • €4.5 Billion to Upgrade Roads, Railroads, Ports and Airports in the 2020s
  • GDP Grew by 3.4% in 2018
  • Dragon and AVentures Invest in Ciklum
  • Retail Up
  • E-Commerce Up More

With diesel bans spreading through Germany cities, 71% of the 51,500 used cars registered in Ukraine last month were diesels. Volkswagen, Opel, Audi and BMW accounted for about half of the imported used cars. Further depressing prices of Germany’s 15 million diesel cars, manufacturers are offering trade in deals, offering new, lower emission for older models. In coming years, diesel bans are expected to take effect for the city centers of Athens, Copenhagen, Paris and Madrid.

After four years of losses, Ukraine’s banks collectively earned a profit last year — $775 million. In 2016, the banks lost $1 billion. Part of the profits came from expansion of retail lending in hryvnia, which increased by about 30%, says Kateryna Rozhkova, first deputy governor of National Bank of Ukraine. Of the nation’s 77 banks, 64 were profitable. The most profitable were banks with foreign capital and PrivatBank. The main losses took place at Russian state capital, which underwent severe restrictions.

Foreign direct investment totaled $2.5 billion last year, reports the National Bank of Ukraine. About $1.5 billion of the total went into the real sector. For an economy the size of Ukraine’s — $125 billion – foreign direct investment should be five times higher, over $12 billion economists say.

Mini-privatizations – the sale of state properties under $9 million – are on track, with auctions selling 187 properties in January. During the rest of 2019, 605 more properties are to go on sale, reports the State Property Fund. Started six months ago, the program has brought $25 million to the state treasury and has released hundreds of properties to the private sector.

Since September, rents for 301 state-owned plots of farmland have been set through electronic auction, reports the Justice Ministry. Using Blockchain technology, OpenMarketLand has been the electronic platform, often serving to set land lease prices in a transparent way. So far, the government has netted $1.1 million through the new leasing system.

After a decade long drought in high rise construction starts in Kyiv, a Ukrainian group wants to build a 100-meter tall hotel and office complex at 107-109 Velyka Vasilkivska, facing the Palace of Ukraine metro station and concert hall. Located midway between St. Nicholas Roman Catholic Cathedral and Ocean Plaza shopping mall, the builders, Ukrzhitlobud, would need a city variance for rising higher than the 27-meter limit on buildings in the historic district. Nashi Groshi news site notes that building permits have been given for ‘hotels’ that end up being apartment buildings. Of the 11 buildings in Kyiv higher than 110 meters, eight are residential. All were built in the 2000s. The last one, No. 1 Obolon Embankment, was completed in 2013.

Kyiv Boryspil’s 19.4% passenger growth rate last year was the highest of any European airport of its class, 10 to 25 million passengers. According to Airports Council International Europe, runners up were: Moscow Vnukovo — +18.4%; Budapest — +13.5%; Warsaw Chopin –+12.8%; and St Petersburg — +12.1%. By comparison, the average growth rate for non-EU European airports last year was +8.3%. Boryspil handled 12.6 million passengers last year. With more growth expected, Boryspil reopens Terminal F in April.

Albania, Greece and Italy are targets for new, scheduled flights from Kyiv. Italy’s Ernest Airlines plan to launch flights this summer from Kyiv Sikorsky to Tirana, Rome and Genoa. (On March 21, it starts flights from Kharkiv to Rome and Milan.) On March 31, Wizz Air starts flights from Kyiv Sikorsky to Athens and Thessaloniki. On the same day, Greece’s Astra Airlines is to launch Kyiv-Athens service on its BAe 146 regional jets. Two days later, on April 2, Ryanair starts flights from Kyiv Boryspil to Athens.

Starting from February 7, foreign currency exchange rules are liberalized in a package of laws drawn up under a guiding philosophy: “Everything that is not directly prohibited is allowed.”

Replacing laws dating back to 1993:

– Currency controls are abolished on transactions up to UAH150,000, currently $5,360.- Individuals

– Ukrainians and foreigners

– will be allowed buy foreign currency online up to UAH 150,000 per day.

– To transfer foreign currency abroad, licenses are abolished and replaced by electronic limits: €50,000 per year for individuals; €2 million per year for companies.

– For foreign individuals, the limits for sending money abroad without having a bank account in Ukraine are increased 10-fold, to UAH150,000, or $5,360.

– Ukrainian companies are allowed free use of accounts in foreign banks, except for transferring funds to their accounts

– The doubling of the deadline to settle export-import operations – to one year.

Most major banks will offer account holders the option to buy foreign currencies online, Oleh Churiy, deputy governor of the National Bank of Ukraine, predicted to reporters Wednesday. “Some already starting Feb. 7. Some maybe later.” Asked if the new laws mean the end of Ukraine’s ubiquitous exchange shops, he said no. “After all, they work not only with the population, but also with the “gray” and “black” markets.”

Starting Friday March 1, the central bank cuts the mandatory amount of foreign currency that businesses must sell for hryvnia to 30% of export earnings, from 50% today, Churiy said. Without specifying dates, he said the Bank will eventually abolish this limit and the limit of on repatriation of dividends. As the first step on dividend repatriation, he said the bank plans to raise the monthly limit to €10 million, from €7 million today.

Olha Trofimtseva has been promoted to Acting Minister of Agrarian Policy and Food, replacing Maxim Martyniuk who was appointed Acting Minister two months ago. Trofimtseva earned a doctorate in agricultural science from Humboldt University of Berlin and worked for a decade for German farm companies and institutions. Fluent in German and English, Trofimtseva became well known to foreign investors after becoming Deputy Agriculture Minister for European Integration in September, 2016.

Farming companies powered last year’s big jump in grain and bean production, the Statistics Service reports. Production by agro businesses increased by nearly 17%. Family farm production was flat. Overall, production rose by 12.7% to a record 70 million tons. Year over year, the big gainers were: corn – up 44% to 36 million tons; barley – up 11% to 7 million tons; rye — up 23% to 400,000 tons; and rice – up 8% to 69,000 tons. The big loser was wheat – down 6% to 25 million tons.

Ukraine increased sunflower production last year by almost 16%, strengthening its lead over Russia as the world’s largest producer of sunflower oil. Production increased to 14.2 million tons, according to the Statistics Service. Other oil seeds also increased: soy – up 14% to 4.5 million tons; and canola up 25% to almost 3 million tons.

The EU may expand its Ukraine import quotas for beef, pork and poultry, Ukraine’s Agrarian Confederation reports, drawing on comments to the Rada Agricultural Committee by Christian Ben Hell, head of Agriculture section of the EU Delegation to Ukraine. Noting that Ukraine’s food exports to Ukraine have increased by one third since 2017, he reportedly said: “We are doing everything possible to enable Ukrainian products to enter the EU markets. In particular, we plan to expand the quotas for the supply of beef, pork, poultry products.”

With $2 billion in American, European and Chinese windpower investment planned for Ukraine’s Azov Sea coast, Troshchenko pitched visiting EU and European Investment Bank officials for financing for a German-made Liebherr LHM 550 mobile harbor crane to unload and store wind turbine blades. Logistics operator Holleman Ukraine is considering building a warehouse at Berdyansk for windpower equipment. Denmark’s Vestas Wind Systems A/S, General Electric Wind Energy and China Machinery Engineering Corporation are already using Berdyansk, the closest port to the three largest wind projects. In the last year, 12 ships with oversized wind turbine cargo docked at Berdyansk.

Tender terms for Ukraine’s first petroleum sharing agreements since 2012 will be released in two weeks, reports Drilling for web site. Companies will have until mid-May to submit applications. The 12 PSAs are expected to be valid for 50 years. To stimulate investment, winners will have to spend $16 to $36 million in the first five year on seismic research and exploration wells. Foreign companies are encouraged to bid.

Separately, the government puts up for auction on March 6, 10 blocks for production under a royalty formula. A second auction, of seven blocks, will be auctioned on April 29. Oleh Kirilyuk, director of Ukraine’s Geological and Mineral Service, described these seven blocks last week in London as “more than 2 thousand square kilometers, {with] the estimated resources of more than 2 billion cubic meters of gas.” By the end of this year, government plans to auction off rights to 30 onshore blocks. Foreign companies can participate through Ukraine subsidiaries.

Determined to cut inflation in half – to 5% next year – Ukraine’s central bank retained its key interest rate at 18%, the highest level in Eastern Europe. The interest rate was hiked by two percentage points last year, contributing to inflation falling to 9.8% in 2018. Economic growth this year will be 2.5%, down from an estimated 3.3% last year, predicts the National Bank of Ukraine. High interest rates contribute to a vicious cycle: with interest rates high, local entrepreneurs can only turn to friends and family for business loans; a lack of good paying jobs prompts labor migration; wage remittances – currently $1 billion a month – fuel demand, pushing up inflation.

Loans and deposits will grow in 2019, Ukrainian bankers tell the central bank in a survey of 61 Ukrainian banks, accounting for 96% of all banking assets in the country. Three quarters of banks surveyed predict growth of corporate loans and 62% of respondents predict growth of consumer loans. Two thirds predict growth in deposits from the public and from businesses. “The value of deposits is the highest in the entire history of observations,” the National Bank of Ukraine said, referring to the quarterly survey. The bankers did not predict a change in interest rates this year.

Ukraine’s foreign trade recovered to $100 billion last year, according to the National Bank of Ukraine. Exports were up 9%, to $43.34 billion, while imports were up by 14%, to $56.3 billion, leaving a trade deficit of $13 billion. For exports, the growth champions in dollars were: grain – up 11%; and metals up 15%. On the import side, the big growth sectors were: energy — up 15%; engineering products –up 18%; food up 18%; and industrial goods – up 21%. With the loss of much of the Donbas industrial area, Ukraine’s foreign trade last year was 28.5% below the 2014 level of $140 billion.

If reelected this spring, President Poroshenko promises to improve the rule of law, allowing Ukraine to become one of the top 50 countries in the world for investors by 2022. Currently, Ukraine ranks in 71st place, out of 190 countries, in the World Bank’s Ease of Doing Business index. In 2014, at the start of his presidency, Ukraine was in 87th place. In an interview with “Ukraine” TV channel. Poroshenko also promised to make Ukraine self-sufficient in energy. The presidential election vote will be March 31, with a second runoff round on April 21.

Ukraine’s food exports to the EU have increased by 50% since 2016, hitting $6.3 billion last year, reports Olha Trofimtseva, Deputy Agriculture Minister for European integration. Last year, the top three products were: grains –$2.2 billion; oil seeds — $1.1 billion; and vegetable oil –$1.1 billion. The top five buyers in the EU were: the Netherlands — $1.2 billion; Spain — $1 billion; Italy — $739 million; Germany –$667 million; and Poland — $657 million.

With food processing growing, Ukraine is moving from “Europe’s breadbasket” to “supermarket of the world,” Trofimtseva tells EURACTIV. She calls for more investment in food processing and agro tech.

The best aid for Ukraine is free trade, argues Ben Aris, editor/founder of bneIntelliNews. “If the West really wants to help Ukraine, it should drop the quotas on imports from the Ukraine – or at least greatly expand them,” he writes. “Business would boom and investment should flow behind very quickly.” Noting that Ukraine’s egg and poultry sector “could largely destroy the industry in Western Europe,” he says: “If quotas are to be lifted it would have to be done in steps.” Noting political realities, he adds: “Relaxing the restrictions on Ukrainian exports to Europe would benefit everyone, except the European agricultural lobby.”

Ukraine’s poultry exports jumped by 30% in dollars last year, hitting $507 million, according to the State Fiscal Service. In volume terms, exports were up 21%, to 329,000 tons. Top buyers were: the Netherlands, Slovakia and Saudi Arabia. Last year, Ukraine rose in the world ranking of chicken exporters to 6th place, overtaking Russia and Canada.

Through 2023, €4.5 billion in low interest loans have been committed to support 39 infrastructure projects to upgrade many of Ukraine’s highways, ports, airports, and railroads to EU standards. Largely designed to speed freight and passengers on east-west lines between Ukraine and the EU and to move export goods to the Black Sea ports, the aid is coordinated by the European Commission and is composed of European Investment Bank and World Bank loans and some grants, Infrastructure Minister Volodymyr Omelyan tells reporters.

The building package includes: 13 highways — €2.15 billion; nine ports — €873 million; nine rail — €851 million; six airports — €470 million; and two river projects — €112 million. Several projects will be open to public-private partnerships.

Ukraine’s GDP grew by 3.4% last year, reports Stepan Kubiv, Minister of Economic Development and Trade. Ukraine’s GDP grew by 2.5% in 2017 and by 2.3% in 2016. The 2018 growth is the highest since 2011, when growth was 5.5%.

Dragon Capital and AVentures Capital have acquired minority stakes in Ciklum, the London-based IT outsourcing company with about 3,000 employees in Kyiv. Andriy Nosok, Dragon’s Managing Director and Co-Head of Private Equity, said: “We believe that ongoing global digital transformation will support increasing demand for IT solutions and services, and that Ciklum is very well positioned to capitalize on this sustainable trend.” Michael Boustridge, Ciklum CEO, said: “This investment will continue to propel Ciklum’s rapid growth in delivering cutting edge technologies to clients around the globe.” All three companies are privately owned and the investment amounts were not made public.

Retail trade in Ukraine increased 6.1% in real terms last year, slightly below the 6.5% increase for 2017. The biggest jumps were in Ukrainian-controlled Luhansk – up 27% — and Donetsk – up 14%. Fueled partly by remittances from Ukrainians working abroad, retail was one of the three pillars of growth last year’s 3.4% growth – led by agriculture – up 8.2%; and construction – up 6.3%. Concorde Capital’s Evgeniya Akhtyrko writes: “We expect real retail to increase 6-7% yoy in 2019. It will be driven by real disposable income growth.”

E-commerce grew by 31% in Ukraine last year, the second fastest rate in Europe, following only Romania’s 37%, according to the Better Regulation Delivery Office, or BRDO, a regulatory advisory body funded by the EU. While growing faster than the world average of 24%, Ukraine has plenty of room to grow, Alexander Kubrakov, BRDO IT director, tells reporters. In 2017, online accounted for 3.2% of retail sales in Ukraine, compared to 8.8% in the EU, 10.2% in the US, 17.8% in Britain. To further promote online sales, the BRDO recommends the government allows online stores to email sales receipts, instead of requiring they issue printed paper receipts.

 

The original English version is from our partner UBN – Ukraine Business News. For more information and news archive, go to: www.ubn.news.

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Merry Christmas and a Happy New Year!

Dear Clients, Colleagues & Partner,

The team at HWC wishes you peace, joy, and prosperity throughout the coming year. Thank you for your trust and partnership. We look forward to working with you in the years to come.

We’re so glad to have you as a client and look forward to serving you in the future.

Happy holidays and warm wishes for 2019!

Веселого Різдва і щасливого нового року!

Шановні клієнти, колеги та партнери,

Команда HWC бажає вам миру, радості та процвітання протягом усього наступного року. Дякуємо за вашу довіру та партнерство. Ми з нетерпінням чекаємо на співпрацю з вами у наступному році.

Ми дуже раді, що ви є нашим клієнтом, і будемо раді служити вам у майбутньому.

Щасливих вам свят!  З теплими побажаннями на 2019 рік!

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Investing in Ukraine: Success Stories, Trend and Best Practice

On 26th of November 2018, the Ukrainian Circle Vienna and the Ambassador of Ukraine Dr. Alexander Scherba invited to a discussion evening with the title “Investing in Ukraine: Success Stories, Trends, and Best Practice” in the Palais Kaiserhaus in Vienna. A very interesting and multifaceted lecture by Wolfgang Gomernik, partner of DELTA Ukraine, created the right framework for the subsequent bilateral discussions with representatives of companies already investing in Ukraine and interested in Ukraine as a business location. From the perspective of HWC partner Sven Henniger, the event was an all-around success.

Інвестиції в Україну: Історія Успіху, Тенденції та Найкраща Практика

26 листопада 2018 року бізнес-клуб Ukrainian Circle Vienna та Посол України д-р Олександр Щерба запросили на вечір-дискусію під назвою “Інвестиції в Україну: історія успіху, тенденції та найкраща практика” у Палаці Кайзерхауз у Відні. Дуже цікава та багатогранна лекція партнера компанії DELTA Україна Вольфганга Гомерніка створила правильну основу для подальших двосторонніх дискусій з представниками компаній, які вже інвестують в Україну та зацікавлені в Україні як місці розташування бізнесу. З точки зору партнера HWC Свена Хеннігера, ця подія була суцільно успішною.

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Updated information on taxes, accounting, and personnel in Ukraine

Henniger Winkelmann Consulting tries to stay up-to-date with all the changes happening in business and, especially, accounting sphere in Ukraine. We want to satisfy all our clients’ necessities and to provide our services on the highest quality level. Thus, we decided to update most of our brochures on the web-site to share new and useful information. The brochures contain information on topics such as Tax Payer, HR, Payroll, Residence & Work Permit, Tax & Accounting Issues, Renewable Energy, Agribusiness, IT R&D center and others.

Оновлена інформація з питань податків, обліку та персоналу в Україні

Хеннігер Вінкельманн Консалтинг намагається бути в курсі всіх змін, що відбуваються в бізнесі та, зокрема, в бухгалтерській сфері в Україні. Ми хочемо задовольнити всі потреби наших клієнтів і надавати наші послуги на найвищому рівні. Таким чином, ми вирішили оновити велику кількість наших брошур на веб-сайті, щоб поділитися з вами новою та корисною інформацією. Брошури надають інформацію з податкових питань, HR, розрахунку заробітної плати, дозволу на проживання та роботу, проблем податкової та бухгалтерської звітності, відновлювальної енергії, агробізнесу, центру інформаційних технологій та інших питань.

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Going Global, 14 & 15 Nov. 2018, ExCel London

Despite economic political and social challenges across the Globe, expansion overseas remains high on the UK business agenda. But for any company looking to enter international markets – including Ukraine, getting to grips with payroll, accounting, business set up, documentation, staffing regulations, taxation and navigation of the business world in a foreign language can be daunting. HWC with partner Sven Henniger took part at this event with 3.000 visitors to provide guidance, understanding in possible opportunities, and confidence to prepare for and successfully overcome the nuance of conducting business in Ukraine.

Going Global, 14 & 15 Лист. 2018, ExCel London

Незважаючи на економічні, політичні та соціальні проблеми на земному глобусі, експансія за кордоном залишається у порядку денному у Великобританії. Але для будь-якої компанії, яка прагне вийти на міжнародні ринки, включаючи Україну, залучення до заробітної плати, бухгалтерського обліку, створення бізнесу, документації, штатного розкладу, оподаткування та навігації діловим світом на іноземній мові може бути складним. HWC разом зі своїм партнером Свеном Хеннігером взяла участь у цьому заході з 3000 відвідувачами, щоб забезпечити керівництво, розуміння своїх можливостей та впевненість у підготовці та успішному подоланні нюансів ведення бізнесу в Україні.