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Nov. 19, 2009, 10:03 p.m. |

Poltava-based Aerocopter, which designed and builds the AK 1-3 chopper (above), has been purchaed by a Dubai-based group. (UNIAN)

Dubai group buys Ukrainian chopper plant; Dubai mulls buying Ukrainian planes; Tycoon seeks $8 billion in damages from Ukraine; Retail sales decline; Gazprom: Won’t fine Ukraine's Naftogaz; EBRD delays $300 million loan to Naftogaz; State railway defaults on Barclays loan; ISTIL Group buys Kyiv's historic Leipzig Hotel. Dubai group buys Ukrainian chopper plant

Dubai-based Perla Group International, a diversified investment group, announced on Nov. 16 that it had purchased Aerocopter, a small Ukrainian helicopter factory which produces the two-seat AK 1-3 petrol-powered chopper.

The value of the deal was not revealed, but media reports dubbed it as a multi-million-dollar transaction.

Perla said that it planned to relocate the Ukrainian helicopter business based in Poltava Oblast to the United Arab Emirates, “in order to gain an edge” in supplying the Middle Eastern and African markets. The factory’s Ukrainian management, however, was nevertheless upbeat about the relocation, suggesting the current team will remain in place.

Ihor Polituchy, who directs and founded the factory in 1999, said: “The acquisition of Aerocopter by Perla Group International is a great opportunity for us. This means our company will enter into a new level of opportunities with new market prospects.”

In the statement, Perla said fresh investments into the company will also help complete design of a new 4-5 seat helicopter.

Charles D’Alberto, the president and founder of Perla, said vast opportunities exist for the business, adding that there are currently no serious competitors on the market for the light AK 1-3 chopper.


Dubai mulls buying Ukrainian planes

The United Arab Emirates is the most recent country to express interest in purchasing Ukrainian designed and built airplanes, President Victor Yushchenko said during a visit to the Middle Eastern country on Nov. 16-17.

The Dubai leadership has expressed interest in purchasing Ukraine’s An-148 mid-ranged passenger and cargo aircraft, the Ukrainian president said while attending Dubai Airshow 2009.

“This is a unique visit which could bring several billion in investments to Ukraine,” he added.Orders for Ukrainian planes, seen as relatively inexpensive options for developing countries, have been slowly lining up.

Ukraine has designed several promising aircraft, but has struggled to land enough contracts to launch mass production. Officials said contracts for aviation equipment and Ukraine’s An-70, An-74, An-140 and An-148 to India, Russia, Libya and China are slowly piling up. To launch mass production, about 13-15 planes need to be built annually. Officials hope to complete seven by the end of this year and believe that the government alone could order 30 new aircraft in the next four years.

In October, Ukrainian producers delivered a second An-74 aircraft to Laos. Officials also said on Oct. 17 that long-delayed mass production of another promising Ukrainian aircraft, the An-70 cargo transporter, could shift into higher gear after Russia agreed to resume financing for the joint project. In September, Prime Minister Yulia Tymoshenko announced that her government planned to disburse more than $400 million to modernize the country’s aviation design and manufacturing factories to boost sales.


Tycoon seeks $8 billion in damages from Ukraine


Billionaire Dmytro Firtash has launched a fresh lawsuit against Ukraine, again claiming that his rights were violated as part of last January’s natural gas accord between Kyiv and Moscow, which squeezed him out as a middleman in the lucrative business of supplying Ukrainian consumers with gas. This, the newest of several claims made this year in Ukrainian and foreign courts, raises the total in sought damages by him and affiliated companies.

In a Nov. 15 report, Russian business daily Vedomosti put the total damages sought by Firtash and companies affiliated with him at $8.26 billion.

Yevhen Korniychuk, Ukraine’s deputy justice minister, said on Nov. 16 that Firtash’s new lawsuit accuses Ukraine of violating the Energy Charter Treaty. The dispute centers on 11 billion cubic meters of gas that Russia’s Gazprom allowed Ukraine to take over from Swiss-registered RosUkrEnergo and affiliated companies. Firtash, who was Gazprom’s partner in monopolizing control of gas imported to Ukraine via RosUkrEnergo, says he never gave permission for the 11 billion cubic meters of gas to be taken over by Ukraine’s state energy company, Naftogaz Ukraine.The new lawsuit was filed by Centragas, a company through which Firtash controlled nearly 50 percent of RosUkrEnergo. Gazprom, which controls a 50 percent stake in Rosukrenergo, has remained silent on the dispute.

Yulia Tymoshenko, Ukraine’s prime minister, led the charge to remove RosUkrEnergo, insisting it was corrupt and accused her bitter rival, President Victor Yushchenko, of backing the company. Her Russian counterpart, Vladimir Putin, has also linked Yushchenko to RosUkrEnergo, suggesting the Ukrainian-owned stake in the company may have been used as a source to fund election campaigns. Tymoshenko has also insisted that backers of her main opponent in the January presidential election, Victor Yanukovych, had an interest in Rosukrenergo.

Foreign and domestic courts are not expected to rule on any of the politically-sensitive lawsuits until after the presidential election.


Retail sales decline,improvement expected


Ukraine’s retail trade revenue, which includes sales by enterprises engaged in the retail and restaurant sectors, declined an annualized 23 percent in October to Hr. 21.3 billion, worsening from September’s 22 percent decline, and was down 21 percent in the first 10 months of the year to Hr 188 billion, Dragon Capital said in a note to investors.

According to Dragon Capital, “the statistics demonstrate continuing weakness in domestic consumer demand against the backdrop of a double-digit economic decline and falling household incomes. According to earlier released government data, salaries in Ukraine declined by 11 percent year-on-year in real terms in September.”

Oleksiy Blinov, an economist at Astrum Investment Management, said: “The 3.1 percent month-on-month growth in October is due mostly to seasonal factors, as it is a recovery from the usual September plunge. October is the last month of 2009 to be compared against the pre-crisis baseline of 2008.”

“In particular, retail trade in October 2008 was supported by the start of the hryvnia’s devaluation, with Ukrainians spending on a shopping spree in order to prevent their hryvnia savings from devaluing and trying to buy imported durable goods before they become significantly more expensive. We expect that contraction indicators will improve slightly, starting from November 2009. However, the Ukrainian consumer market should really regain robustness only in the second half of 2010,” Astrum’s Blinov added.


Gazprom: Won’t fine Ukraine's Naftogaz

Alexander Medvedev, deputy chairman of Gazprom, confirmed on Nov. 15 that the Russian gas giant would not penalize its Ukrainian counterpart Naftogaz Ukraine with hefty fines for importing less gas than required by their bilateral contract.

According to a Dragon Capital note to investors, the agreement with Gazprom obliges Naftogaz to buy at least 33 billion cubic meters (bcm) of gas this year on a “take or pay” basis, meaning Ukraine has to pay for the specified gas volume even if it buys less. Ukraine’s actual imports, however, are expected to total 28 bcm, with potential penalties for the under-imported volume variously estimated at $5-7 billion.

Dragon Capital said: “The news is definitely positive for Naftogaz as this seems to be the first official statement from Gazprom regarding its decision to refrain from fining the Ukrainian company. Earlier Ukrainian Prime Minister Yulia Tymoshenko said she had reached “an informal agreement with her Russian counterpart Vladimir Putin on the matter.”


EBRD delays $300 million loan to Naftogaz


(Reuters) - The European Bank for Reconstruction and Development said on Nov. 17 that it is postponing a decision on forwarding a portion of a loan to Ukraine’s Naftogaz, as the company has delayed key reforms.

The delayed $300 million is part of a larger loan package intended to fund the Ukrainian state energy firm’s import and storage of natural gas from Russia. It was contingent on a series of reforms in the sector and the company, including regular audits, the reform of its tariff policy and proper legislation on state purchases.

“Unfortunately it became evident that very little progress has been achieved and that’s the reason the project has not been submitted for the board’s consideration at this time,” said Anton Usov, a spokesman for the EBRD’s Kyiv office.

Initially, a ruling on the loan was scheduled to take place during the EBRD’s Nov. 17 board meeting. Usov also said talks were continuing with the company and Ukrainian officials on a second, $450 million portion of the loan scheduled to be distributed next year.

The EBRD’s Usov said the bank’s decision not to rule on the loan, was of a “technical manner.” “We’ll look for more progress and if we see it, we’ll be ready to consider project initiation,” Usov added.

Naftogaz, the sole buyer of Russian gas for domestic use, has been entangled in a series of payment disputes with Russia’s Gazprom.Rows between Kyiv and Moscow over gas bills and prices led to winter supply cuts in January that affected hundreds of thousands of Europeans. The EU receives about 20 percent of its gas from Russia via pipelines that cross Ukraine.


State railway defaults on Barclays loan


Ukrzaliznytsya, Ukraine’s state railway monopoly, has missed a $110 million payment on a three-year $550 million syndicated loan which was attracted in 2007 from British banking giant Barclays.

The default is the second by a Ukrainian state-enterprise this year and signals that more problems could be brewing by recession-pinched companies in the country which are deep in debt. This autumn, state gas company Naftogaz fell into a technical default on its $500 Eurobonds. But the energy company averted a full-fledged default after foreign creditors agreed to restructure the bond and bilateral loans totaling some $1.6 billion.

Ukrainian officials said the state railway would seek to restructure its external debt obligations, which according to Dragon Capital include a $700 million seven-year facility from Deutsche Bank attracted in 2004, and a $120 million long-term loan from the European Bank for Reconstruction and Development inked back in 2004.

“While Ukrzaliznytsya said it was making timely payments on the EBRD loan, we do not rule out that the company’s liquidity problems could make matters worse. Additionally, if the terms of the state-guaranteed $700m loan include cross-default covenants, the latter could also become due, creating an additional burden on state finances. However, we consider this scenario unlikely and expect Ukrzaliznytsya to agree with creditors on restructuring,” Dragon Capital said in a Nov. 17 note to investors.


ISTIL Group buys Kyiv's historic Leipzig Hotel

ISTIL Group, the diversified business holding controlled by Kyiv Post publisher Mohammad Zahoor, announced on Nov. 17 that it had closed a $35 million acquisition of Leipzig Hotel, a historical building located in downtown Kyiv on the corner of Prorizna and Volodymyrska Streets.

The building is a former elite hotel that was constructed originally in 1900. But reconstruction efforts have stalled in recent years. It was purchased by ISTIL from a group of private investors with permission from Kyiv city officials. ISTIL pledges to invest $25 million into developing the property into a 12,000 square-meter hotel of 4-star quality offering 180 rooms. The hotel is expected to open its doors in 2012, the year Ukraine and Poland are to co-host the Union of European Football Associations Euro 2012 soccer championship.

Ukrzaliznytsya, Ukraine’s state railway monopoly, has missed a $110 million payment on a three-year $550 million syndicated loan which was attracted in 2007 from British banking giant Barclays.



The default is the second by a Ukrainian state-enterprise this year and signals that more problems could be brewing by recession-pinched companies in the country which are deep in debt. This autumn, state gas company Naftogaz fell into a technical default on its $500 Eurobonds. But the energy company averted a full-fledged default after foreign creditors agreed to restructure the bond and bilateral loans totaling some $1.6 billion.

Ukrainian officials said the state railway would seek to restructure its external debt obligations, which according to Dragon Capital include a $700 million seven-year facility from Deutsche Bank attracted in 2004, and a $120 million long-term loan from the European Bank for Reconstruction and Development inked back in 2004.

“While Ukrzaliznytsya said it was making timely payments on the EBRD loan, we do not rule out that the company’s liquidity problems could make matters worse. Additionally, if the terms of the state-guaranteed $700m loan include cross-default covenants, the latter could also become due, creating an additional burden on state finances. However, we consider this scenario unlikely and expect Ukrzaliznytsya to agree with creditors on restructuring,” Dragon Capital said in a Nov. 17 note to investors.


ISTIL Group buys Kyiv's historic Leipzig Hotel



ISTIL Group, the diversified business holding controlled by Kyiv Post publisher Mohammad Zahoor, announced on Nov. 17 that it had closed a $35 million acquisition of Leipzig Hotel, a historical building located in downtown Kyiv on the corner of Prorizna and Volodymyrska Streets.

The building is a former elite hotel that was constructed originally in 1900. But reconstruction efforts have stalled in recent years. It was purchased by ISTIL from a group of private investors with permission from Kyiv city officials. ISTIL pledges to invest $25 million into developing the property into a 12,000 square-meter hotel of 4-star quality offering 180 rooms. The hotel is expected to open its doors in 2012, the year Ukraine and Poland are to co-host the Union of European Football Associations Euro 2012 soccer championship.
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