Biznews

Capital Markets

Domestic government loan bonds restructuring

The Cabinet of Ministers has approved the issue of domestic government loan bonds worth up to UAH 229 billion with their maturity term over the period of 2025-2047 to be exchanged to previously issued domestic government loan bonds with a retirement period from June 2017 to November 2030, owned by the National Bank of Ukraine.

According to the Draft Resolution adopted without any amendments, the interest rate on new bonds was determined at inflation rate for the last 12 months plus 1.5% points. In case of deflation, interest income will be paid at a rate of 1.5% per annum. In the explanatory note to the document it is clarified that the exchange of new domestic government loan bonds is expected from the National Bank’s portfolio for a nominal amount of UAH 221.6 billion with an average weighted rate of about 12.85% per annum, as well as for an amount of about UAH 7 billion in the form of accrued and unpaid coupon profit as of the transaction date. The Cabinet of Ministers proposes to allocate funds which can be obtained from domestic government loan bonds restructuring conducted by the National Bank and the Ministry of Finance, for road construction. At issue is the sum of UAH 15 billion.

 

AMCU

Agroalliance International Ltd received permit for purchase of 8 agrocompanies

The Antimonopoly Committee of Ukraine (AMCU) granted permission to Agroalliance International Ltd to acquire participation interests in authorized capital of eight Ukrainian agricultural enterprises.

Agroalliance International Ltd (British Virgin Islands) will be able to acquire participation interests that will ensure more than 50% in the supreme management body.

Agroalliance International Ltd is the owner of Agroalliance LLC, whose liquidation was initiated by LLC Trade House AS-Tera. The ultimate beneficiary of Trade House AS-Tera is a businessman called Vadim Yermolaev. The company is engaged in the sale of agricultural equipment.

 

Burisma obtained permit to buy Diloretio Holdings Ltd

The AMCU granted permission to Cypriot Brociti Investments Limited (part of Burisma Group) to purchase more than 50% of Diloretio Holdings Ltd.

Diloretio Holdings owns three oil and gas companies in Ukraine: Systemoilengineering, Oil and Gas Industrial Geology and Technocomservice. The first one produces gas at Vodyanovskaya area in Kharkiv Region, while the second one has two mining permits in Poltava Region. The third one also has two licenses for hydrocarbon production in Kharkiv Region.

Burisma includes four operating companies, namely the energy service company Esco-Pivnich, Pari, the First Ukrainian Gas and Oil Company and Aldea.

Earlier, Burisma claimed that it expects to increase gas production by 64% to 1.8 billion cubic meters in 2017. Production in 2016 came to around 1.1 billion cubic meters.

 

Trade Policy

Antidumping duties imposed on carbamide and CAM imports from Russia

Antidumping duties on the import of carbamide and carbamide-ammonia mixture (CAM) from Russia imposed in the amount of 31.84% came into effect.

The Interagency Commission for International Trade (ICIT) considered information on the current situation with supplying agricultural producers with nitrogen fertilizers, as well as information on cessation of antidumping duty against the import of certain fertilizers of nitrogen group originating from Russia.

The ICIT confirmed the conclusion on the presence of dumping imports to Ukraine of some fertilizers originating from Russia in 2014, as well as of substantial damage to the national commodity producer, and decided to resume antidumping measures that were applied by its decision of 27 December 2016.

A duty in the amount of 31.84% will be applied to all carbamide and CAM producers from Russia.

 

Antidumping duties imposed against Russian chocolate

The Interdepartmental Commission for International Trade decided to apply an antidumping duty against chocolate products from Russia for five years.

The antidumping duty rate will be 31.33%. The commission drew a positive conclusion about the presence of dumping imports of certain types of chocolate and other ready-made food products containing cocoa originating from the Russian Federation to Ukraine during the investigation period (2015), and also about the validity of the method on the basis of which the dumping margin was determined.

The scope of damage caused to the national commodity producer were also provided, which are confirmed by deterioration in the socio-economic indicators of the national commodity producer during the investigation period (2013-2015). In particular, production volumes decreased (by 7.63%), sales in the domestic market of Ukraine fell (by 20.85%), there was a significant deterioration in financial results of sales of goods on the domestic market of Ukraine (by 63.36%), profitability of sales of goods in the domestic market decreased (by 26.42%), use of production capacities decreased (by 6.07%), warehouse stock balances increased (by 23.77%), and there was a reduction in the number of workers employed in the production of goods (by 11.06%).

 

Energy

Swiss vote approved plan for gradual rejection of NPP

A plan to gradually move away from Nuclear Power Plants and transition towards renewable energy by 2050, developed by the Government, was approved at a referendum in Switzerland held on 21 May. Citizens voted in favour of a step-by-step refusal of nuclear energy and transition to alternative sources.

The new law, which will come into effect in 2018, involves a gradual transition to renewable energy sources by 2050 and energy consumption reduction. Five Swiss nuclear power plants will operate until the expiry of guarantees for their reliable functioning, for another 10 to 15 years. At the same time, new NPP will no longer be built.

The new Swiss law also prescribes to limit emissions of carbon dioxide into the atmosphere and raises subsidies for development of renewable energy sources.

Currently, almost 60% of electricity is produced by hydroelectric power stations and other sources in the country; the share held by nuclear power plants is 40%.

 

Nikolayev CHPP listed for sale

The State Property Fund of Ukraine has announced a tender under the principle of an auction for sale of a stake of 99.912% in PJSC Nikolayev Combined Heat and Power Plant with a reserve price of UAH 97 million. The tender is scheduled for 12 July. Applications will be accepted until 26 June 2017.

The tender guarantee from a tender participant will be in the form of a cash contribution or a bank guarantee to the tune of UAH 4.85 million.

Nikolayev CHPP, with a determined electricity capacity of 40 MW and thermal power of 410 Gcal/h, serves about 40,000 consumers in the city of Nikolayev and operates on gas fuel. It employs 491 people.

In 2016, Nikolayev CHPP suffered a net loss of UAH 59.114 million against a net profit of UAH 0.309 million in 2015.

 

IT

CETAM will work on Blockchain

The Cabinet of Ministers of Ukraine has approved implementation of blockchain technology into the operation of the State Register of Proprietary Rights to Immovable Property and the Electronic Trading System of Arrested Property (CETAM). The introduction of this technology should improve the investment climate for development and support of innovative technologies. Blockchain is a chain of transaction blocks, built according to certain rules from generated transaction blocks.

 

Investments

EY European attractiveness survey published

According to the 2017 edition of the EY European Attractiveness Survey, foreign direct investment (FDI) into Europe hit a record high in 2016, with 5,845 FDI projects recorded (a rise of 15% year-on-year). This led to the creation of 259,673 new jobs (+19%).

The UK, Germany and France are the top three European FDI destinations in 2016, capturing more than half (51%) of European FDI inflows and recording 1,144, 1,063 and 779, respectively. Spain reinforced its fourth position (308), with Poland (256) raising one position in the FDI rankings, becoming the first country in Central Europe to enter the top five investment destinations. Of the top three destinations, France achieved the highest increase with 30% growth in FDI projects over the previous year, followed by Germany (12%) and the UK (7%). Germany, with 1,063 projects, strengthened its challenge to the UK’s longstanding European FDI leadership.

By number of FDI projects among the top 20 countries, Sweden, Italy and the Czech Republic are the top growth performers, with an increase of 76%, 62% and 57%, respectively, over the previous year. Only the Netherlands (-5%), Belgium (-5%) and Switzerland (-2%) recorded negative growth overall, a slowdown compared to 2015 when they all registered positive growth. 

Despite a positive 2016 for FDI into Europe — a region with more than 500 million consumers and 30 million companies — geopolitical and macroeconomic challenges are impacting investor sentiment in the short-term. Among 505 executives interviewed globally in March this year, only 28% plan to expand their European operations next year, down four percentage points from 32% in 2015. However, investor confidence about Europe’s longer term has surged with the proportion of investors expecting a return to steady economic growth after at least five years rising from 45% in 2015 to 56%.

Turning to workforce demographics, Central and Eastern Europe (CEE) recorded the strongest uptick in job creation, with Ukraine and Moldova notably achieving 435% and 220% growth, respectively, over the previous year. In 2016, thanks to foreign direct investment, 4,547 jobs were created in Ukraine, whereas in 2015 — 850. Poland ranks second in terms of 2016 job creation (22,074), following the UK, which leads with 43,165 new jobs attributable to FDI projects. In 2016, Russia, Serbia, France and Romania joined the ranks of the UK, Poland and Germany in each attributing more than 15,000 jobs to FDI projects.

Software and business services sectors together accounted for a quarter of FDI projects last year, underpinning Europe’s digital transformation. Software was the biggest source of FDI into Europe in 2016, generating 780 projects — up 12%. Business services followed as the second most active sector for FDI with the number of projects soaring 47% in 2016. This was driven by strong activity in the UK, Germany, France and Spain. Ireland and The Netherlands also posted impressive growth of 343% and 133%, respectively, in business services FDI projects in 2016.

Europe’s manufacturing sector, which accounted for 29% of FDI projects (1,455) and 53% of FDI jobs in 2015, attracted 1,538 FDI projects in 2016 — up 6% year-on-year. The survey also sees the CEE region increasingly positioning itself as the continent’s “workshop.” In 2016, CEE secured 755 projects, a 15% increase and an overall share of 49% of European manufacturing FDI projects, up from 45% in 2015.

Sales and marketing activities made up 46% of all FDI projects in 2016, a rise on the figure of 41% in 2015. Notably, companies originating FDI projects outside of Europe accounted for 45% of sales and marketing FDI projects.