- Europeans Clamor for Ukraine Eurobonds, Push Down Interest Rate
- Zelenskiy Aide Wants 3-4 Year IMF Deal to Set Stage for ‘East European Tiger’
- More Gastarbeiter Flights to Poland, Germany
- Dnipro River Cargo up 68%
- Not a Passenger: Mystery Complainant Tries to Ground Thriving Discount Airline
- Train Passenger Traffic to EU Up 13X
- Germany’s Flixbus Goes Big Into Ukraine
- FX Trust Test: 6-Year Hryvnia Bond Sells Out
- EU Wants to Cut Ukraine Poultry Exports in Half
- Reserves Down, Hryvnia Up
- Zelenskiy Party Platform Promises ‘Radical’ Changes
- Chicken, Eggs, and Milk for Qatar
- Kyiv Ranks 5th for Road Congestion in Europe
- Drill, Baby, Drill: Ukraine Tops Europe Rig Count
- DTEK Plans Ukraine’s Largest Wind Farm
- Norway’s Scatec Aims for 500 MW Solar
- No More Leningrad: Kharkiv Airport Offers Flights to Vienna, Rome, and Paris
Reflecting foreign investor confidence in a future Zelenskiy government, investors oversubscribed Ukraine first Eurobond since October by a factor of six, bidding the final interest rate below the range set by the Finance Ministry. After drawing €6 billion in bids, the Finance Ministry placed the 7-year €1 billion bond at 6.75%. “Today’s strategic transaction is demonstrative of the continued investor support for our country,” Finance Minister Oksana Markarov said Thursday after the placement, which capped a four day, four EU city roadshow by her team. BNP Paribas and Goldman Sachs International acted as joint lead managers on the transaction.
Separately, foreign investment in Ukraine government hryvnia bonds has increased nearly 8-fold since the start of the year. With last Tuesday’s weekly auction, foreign holdings of the T-bills increased by 13% to 48.7 billion UAH, the equivalent of $1.84 billion. Foreigners bought more than half of a new six-year bond offering this week. These bonds, the longest in the Ukraine government portfolio, placed at 15.85% per annum.
The Zelenskiy administration wants to negotiate a 3-4 year program with the IMF, to lay the foundations for Ukraine to become the “East European Tiger,” Olesiy Honcharuk, deputy head of presidential administration, says in an interview with NV.Business. “In it, we will try to lay structural reforms, which over the years will lead the country to a qualitatively new level,” he said.
Low incomes and insecurity about Ukraine’s future are the prime drivers for emigration, according to the “Barometer of Happiness in Ukraine,” a new internet survey conducted by the European Business Association. Of the 1,118 respondents, largely Kyiv office workers, the EBA said: “51% consider their income level insufficient for a normal life…72% of respondents are not satisfied with the state of security in the country and feel insecure about their own future.”
With an eye to the labor migrant market, Wizz Air plans to double flight frequencies from Lviv to Bratislava, Wroclaw, Gdansk, Berlin and Dortmund. Starting Oct. 20, most of these flights will be five times a week. Similarly, Wizz Air plans to expand in October its flight frequency from Kyiv Sikorsky to Tallinn.
LOT Polish plans to start service next year from Łódź to Kyiv Boryspil, reports news site Rynek lotniczy, or Aviation Market. In two weeks, Wizz Air plans to start flights from Kyiv Sikorsky to Lublin. With these two new flights, there will be airlfights from Ukraine to 10 of Poland’s 12 largest airports.
River cargo on the Dnipro is up 68% compared to the first five months of last year. Through this May, barges have moved 3.2 million tons. The increase is attributed to an early break up of ice on the river and last year’s bumper 70-million ton grain harvest straining truck and train capacities to the Black Sea ports.
Nibulon, the main grain transporter on the river, is building four new river barges this summer at its Mykolaiv shipyard, the company reports. The four B1500 class vessels are to be launched by the end of this year.
In the latest surprise decision by a Kyiv court, a district judge suspended on Wednesday the operating license of SkyUp, Ukraine’s one-year-old discount airline. With Ukraine’s peak summer travel season starting this week, the airline appealed. The Infrastructure Ministry found a legal mechanism to keep the airline operating and making all its flights. In its first year of operation, the airline carried 870,000 passengers on 5,203 flights, largely to southern vacation destinations. Last week, SkyUp received its eighth Boeing passenger jet.
The court decision was in response to a complaint by Oksana Pasenko, who charged that the airline is unsafe and suffers from flight delays. The airline counters that she never bought a ticket with SkyUp. Interfax-Ukraine cites an Infrastructure ministry official saying Pasenko “has more than 30 administrative offenses, a significant part of which is related to alcohol.”
Corporate “raiding” is behind the court decision in an area which is the jurisdiction of the State Aviation Administration, Infrastructure Minister Volodymyr Omelyan writes on Facebook. “What is happening now is a clear attempt to intervene in the created mechanism of free competition…it’s again an attempt to return to the aviation monopoly in the sky,” writes Omelyan. He changed his Facebook home page photo to show a SkyUp Boeing landing at Boryspil with the warning: “They want to end the freedom to fly.”
With 31 regular and 15 charter routes, SkyUp now has direct international flights from Kyiv Boryspil and 10 regional airports. The two significant airports that do not have SkyUp flights are Dnipro and Ivano-Frankivsk, both owned by Kolomoisky. SkyUp’s strategy clashes with the spoke and Boryspil hub strategy of Ukraine International Airlines, also owned by Kolomoisky. Last year, UIA lost $100 million.
In the two years of Ukraine’s visa-free regime with the EU, Ukraine’s international air routes have increased by 48%, to 129, Ivanna Klympush-Tsintsadze, vice prime minister for European Integration, writes on Facebook. The number of foreign air carriers has nearly doubled, reaching 39 today. The number of discount airlines has increased from eight in 2017 to 13 today. Referring to the 28-nation European Union, she writes: “Six low-cost airlines carry passengers and cargo on 125 routes to 24 EU countries.”
Thanks to visa-free travel with the EU, train passenger traffic between Ukraine and the EU has grown 13-fold in two years. In 2016, before visa-free travel to the EU, Ukrzaliznytsia carried 62,000 passengers between Ukraine and the EU. In 2018, the first full year of visa-free travel, the state railroad carried 821,000 passengers. Today, 16 trains ply the EU market, traveling to eight EU nations — Latvia, Lithuania, Hungary, Austria, Romania, Poland, Slovakia, Bulgaria. Shortly, UZ plans to add dedicated trains to two more national capitals: Kyiv-Berlin and Mukachevo—Prague.
Since visa-free travel to the EU started on June 11, 2017, UZ carried 980,000 passengers to the EU. But during the same two years, it carried 615,000 passengers back. It is unclear what happened to the missing 365,000 Ukrainians – the population of a Vinnytsia. Presumably, most stayed. Others may have earned enough money to fly home.
In the first two years of visa-free Ukrainians made 42.6 million trips to the EU, reports the Interior Ministry. Nearly 3 million Ukrainians traveled without visas, using only their biometric passports. In the second year of visa-free, 2.35 million Ukrainians traveled on biometric passports — 4.2 times the 560,000 who used the new passports for travel in the first year. Land crossing volumes were: Poland -1 million; Hungary – 350,000; Romania – 245,000; and Slovakia – 226,000. In addition, 1 million Ukrainians flew to the EU, visa-free, using only biometric passports.
Flixbus, Germany’s largest intercity bus company, is aggressively expanding its Ukraine routes. On Tuesday, the Munich-based operator announced EU routes from nine cities: Kyiv, Lviv, Kharkiv, Dnipro, Odesa, Chernivtsi, Ivano-Frankivsk, Vinnytsia, and Ternopil. Partnering with Euroclub, a Ukrainian bus company, Flixbus offers low prices: Kyiv-Krakow – €21; Kyiv – Prague – €44; and Kyiv-Hanover – €72. Michael Lehmann, Flixbus CEO for Poland and Ukraine told reporters in Kyiv that all 24 buses serving Ukraine are to have wifi, electrical charging sockets, onboard entertainment systems, clean toilets, an app to track the bus location, and, for safety, two drivers at night.
If Germany opens its labor market next year as planned to skilled non-EU workers, one-quarter of all Ukrainians working in Poland could migrate west to Germany by 2023, according to an employee poll by the National Bank of Poland. Ukrainian labor — about 800,000 workers — has increased Poland’s GNP growth by about one percentage point for each of the last five years, Jakub Growiec, a central bank analyst, tells Business Insider Polska.
A regular Kyiv-Leipzig container train is to start in coming months, Ukrzaliznytsia CEO Yevhen Kravtsov says after talks in Munich with IPC Business UG. Running 1,500 km from Kyiv to the industrial city in eastern Germany, the train will benefit from Ukraine’s double-digit growth in container traffic. Next month, UZ launches a container train between Odesa and Chisinau, capital of landlocked Moldova. Also next month, the Chinese Association of CCTA and Chengdu International Railway Service Co., Ltd. plan to restart the Trans-Caspian International Transport Route, running a container train from China to Poland, through Ukraine.
The EU and Ukraine have agreed to a poultry accord that would essentially cut Ukraine’s poultry exports in half, to 70,000 tons, Deutsche Welle reports in a story headlined “How Ukrainian poultry becomes Europe’s Produce.” Ukraine’s EU quota this year is 18,400 tons for chilled poultry and 20,000 tons for frozen chicken. However last year, Ukraine exported 123,000 tons, taking advantage of an EU law allowing unlimited exports of semi-processed chickens. Under this exemption, MHP, Ukraine’s largest poultry producer, exported chickens for final processing at its plants in Slovakia and the Netherlands.
Pending parliamentary approval in Brussels and in Kyiv, the deal comes after news stories in Austria charged MHP with using ‘tricks’ to exploit legal loopholes. Hardly a victim of Ukraine’s poultry giant, the EU exports 180,000 tons of poultry to Ukraine – more than double its proposed import level. Ukraine is the third largest exporter of poultry to the EU. Thailand and Brazil supply more than twice as much, Deutsche Welle reports.
Determined to become Europe’s largest poultry producer, MHP is investing $420 million over five years to increase its poultry production by 19%, to 855,000 tons in 2023. To feed the chickens, the company plans to increase its land under cultivation by 35%, to half a million hectares. Forecasting stagnation or shrinkage in EU market share, the company plans to develop the Middle East and North Africa, increasing that segment from 34% of sales last year to 43% by the end of 2020.
Depending on the success of the Finance Ministry in the Eurobond market, Andriy Kobolyev, CEO of Naftogaz, has said that he would be next to enter the foreign borrowing market, most likely after the July 21 Rada elections.
Central bank reserves were down 5.5% m-o-m in May to $19.4 billion, enough to cover 3.2 months of imports. The drop, not a surprise, was largely caused by a planned redemption of a $1 billion 2014 Eurobond. Year to date, reserves are down 6.8%, or $1.4 billion, largely due to debt repayments.
Since the start of the year, the hryvnia has gained 3%. Dragon Capital attributes this to: the $1.3 billion growth in foreign investor holdings of hryvnia bonds, strong farm export prices, and favorably commodities – namely high iron ore and low gas prices.
Saying “Ukraine needs radical changes,” the new program of President Zelenskiy’s party proposes to take police powers away from the State Fiscal Service and to pull the National Police and State Security Service (SBU) away from ‘business infringement.’ Unveiled Sunday, the Servant of the People platform calls for ending immunity of Rada members from criminal prosecution, for mandatory confiscation of property from corrupt officials, and for transferring the maximum amount of state services online. It holds out the possibility of a one-time tax and amnesty on unexplained wealth. The platform calls for breaking up energy monopolies and for allowing private passenger and freight trains. A legal framework would be created for blockchain currencies. Foreign investors of Ukrainian origin would receive favored treatment. Illegal logging would be a criminal offense.
The program calls for “the harshest punishment for corruption and theft in the Armed Forces and Defense Ministry, decentralizing and de-monopolizing defense procurements, and spending on defense no less than 5% of GDP.” In a key step to opening the black box of defense spending, Aivaras Abromavičius, a reformist who was Economy Minister from 2014-2016, is expected to be named director general of UkrOboronProm, the state-controlled defense industry conglomerate.
President Vladimir Zelenskiy introduced Monday urgent draft laws to postpone for one year – to July 2020 – the launch of an electricity market and to retain the ‘green tariff’ for household solar plants. The draft laws were announced by Andriy Gerus, the president’s representative to the Cabinet of Minister. The former head of an NGO, the Association of Energy Consumers and Utilities, Gerus criticized the planned July 1 market liberalization as poorly thought out and supportive of DTEK, the energy monopolist. The National Electricity and Utility Regulatory Commission estimated that ‘inefficiencies’ in the new market would cost companies and consumers an extra $1.4 billion a year.
Ukraine can now export to Qatar chicken, eggs, beef, milk, fish and other food products, according to Ukraine’s state service for food safety and consumer protection. While Qatar has only 2.6 million residents, it has virtually no agriculture and its $184 billion GDP is one third larger than Ukraine’s.
The EBRD is arranging a €116 million syndicated loan to Kronospan’s Ukraine unit to build an oriented strand board plant and 45 MW biomass boiler energy plant in Novovolynsk, near the Polish border. Based in Austria, Kronospan is the world’s largest producer of wooden building boards. Austrian banks Raiffeisen Bank International AG and Raiffeisenlandesbank Oberösterreich will loan €50 million of the total.
Kyiv has the fifth most congested streets in Europe, ranking close behind Moscow, Istanbul, Bucharest and Saint Petersburg. According to the TomTom Traffic Index, Kyiv drivers spend an extra 46% time stuck in traffic. By comparison, the figure in Moscow is 56% and in St. Petersburg it is 47%. While traffic congestion reflects economic growth, it also reflects the inability of city officials to take steps to speed traffic, to reduce bottlenecks and to promote mass transit.
Ukraine accounts for 45% of the 186 active oil and gas drilling rigs active in Europe today, according to the monthly Baker Hughes European Rig Count. Russian rigs are not counted in the Europe listing. With 84 active rigs, Ukraine is stepping up exploration and production as doubts cloud future supplies from Russia.
By the end of next year, all Ukrainian apartment buildings should have a gas meter for each apartment, Gennady Zubko, deputy prime minister for Housing and Communal Services, told the Rada. Moving from the Soviet legacy of building-based metering, individual meters have expanded from 23% of apartments in 2014, to 80% today.
DTEK Energy Holding plans to build Ukraine’s largest wind farm, Tylihulska with a 500 MW capacity, in southern Mykolaiv’s Berezanka district. With 130 turbines spaced 1.5 km apart, the project would occupy 35,000 hectares and require 250 km of high voltage above ground and buried cables. Taking advantage of winds blowing up the Tylihul Estuary, DTEK plans to also build Tylihulska 2, a 65 MW plant. Currently, Europe’s largest onshore wind farm is across the Black Sea in Romania: the 600 MW Fântânele-Cogealac project. Next year, Norway is to commission Fosen Vind, a complex of six onshore wind farms with a total capacity of 1 gigawatt.
By the end of this year, Norway’s Scatec Solar expects to see its total Ukraine investment hit €250-300 million and its portfolio of completed projects to hit 400 MW, Scatec Solar CEO Raymond Carlsen tells Energy Reform. Counting projects in the pipeline, Scatec hopes to hit 500 MW next year. “We would like to participate in auctions in Ukraine, expected in 2020,” he says.
In Scatec’s biggest project, Power China Guizhou Engineering Co. is building a €124 million project, 148 MW solar plant in Prohresivka, Mykolaiv. With Power China covering 65% of the project capital costs, the plant is to be launched in the first half of next year.
SkyUp started flights from Kharkiv to Paris. After flights from Kharkiv to Rome and Milan on Ernest Airlines and to Dortmund and Vienna on Wizz Air, the Paris flight is part of a new western orientation of an airport built in the mid-1920s to connect the capital of the Ukrainian SSR with Moscow and Leningrad. Today, the airport’s busiest flight is LOT Polish to Warsaw. Monday, Ryanair inaugurated service from Kharkiv with a flight to Krakow. In October, it adds Poznan and Vilnius. In August, Wizz Air adds Krakow, its fourth Polish destination. In May, international traffic from Kharkiv increased by 34% y-o-y, to 95,100 passengers.
The original English version is from our partner UBN – Ukraine Business News. For more information and news archive, go to: www.ubn.news.