Ukraine is a rich country whose great minds and huge resources – not the least of which are in alternative energy – make it ripe for investment.
Right now, however, as the country struggles to crawl out of recession, investors are weighing opportunities versus risks.
There are political shifts every week, real troubles with the banking system, corruption and other negative points that bring Ukraine to the very bottom of investment attractiveness indexes. On the other hand, no one can ignore the great opportunities that exist within the country. In spite of all the negatives, there are a large number of interested foreign and national investors at the moment, as proven by the strong turnout at the Adam Smith Investment Summit in London at the end of May. They are all just a bit hesitant to invest because of the minuses.
Ukraine is certainly going through difficult times at the moment, but it offers great opportunities that cannot be overlooked in terms of the long-term investment horizon. One area of investment that doesn’t receive enough attention is technology and alternative energy.
Ukraine has a rich pool of well-educated people and scientists who contribute to innovations of products in the area of research and development. And even though many talented people already left Ukraine to work on similar projects abroad, we still have an inexhaustible pool of talent in the country. In most cases, from start-up to large-scale manufacturing projects, labor is very cheap in Ukraine. These factors even help to balance out Ukraine’s lamentable investment climate.
The opportunities in alternative energy are mostly wind power and solar solutions. Ukraine has abundant natural resources, such as direct access to strong winds in the south of the country, and large unused areas in the countryside which can be used to harvest solar power close to agricultural plots.
Ukrainian companies working in these areas will start up and develop these types of projects, whether foreign investors are involved or not. On the other hand, it will be mutually beneficial if there is additional investment to push the project forward quickly to achieve great results. The International Finance Corporation, part of the World Bank group that finances and advises private ventures, has spotted the potential and is in talks to finance wind farm projects.
It is a big surprise that foreign investors interested in such technologies have not yet found the companies that are involved in such projects. One idea would be to create an organization to bring investors and promising companies to one table. Right now the exchange of potential projects between investors and business owners is happening without a serious systematic approach.
There are many potential wind energy projects in Ukraine right now, but most of them are not securing the investment needed to build the wind farms in the south of the country. It may be due to the fact that the farms being planned are way too large and the projects need billions of dollars of investment. It would be better to focus on small wind farms with lower investment needed in order to get the process moving, followed by the development of more powerful systems once the business model is in place and begins to be profitable.
It is not a surprise that, as of now, most investors and developers are focusing on wind energy instead of solar. Wind energy offers great opportunities in today’s market, but has limited long-term perspectives. Solar energy is the most promising, however, as it has greater potential for future developments and breakthroughs.
Solar systems currently have limited efficiency and that is why wind energy is now viewed with more interest. However, the efficiency barrier for solar energy transformation is constantly being broken down, and there are many research and development programs going on. In addition, the methods of gathering solar power are also being revised, from sending satellites to grab the power from orbit to innovative constructions that catch more of the lost solar radiation.
One Ukrainian company working in this interesting innovative sector is Karbon. This group has companies from telecoms to aircraft manufacturing, allowing it to build almost everything in-house. Karbon recently focused on the extensive research and development program in the area of alternative energy, manufacturing wind turbines and solar energy systems, and it is now setting up a joint venture to produce solar panels in Ukraine for the worldwide market.
And the company is not the only one in Ukraine that is moving forward in the alternative energy sector despite the tough financial climate. So there is definitely room for mergers and acquisitions and investments into the Ukrainian market.
Max Panfilov is corporate business director of Grata Consulting Group, which represents leading international auditing network Kreston International in Ukraine. He has 20 years of experience in the technology sector. He can be reached at [email protected].
