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  • 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.