Ukraine's leading English-language newspaper since 1995

U.S. Sen. Charles Schumer has expressed concern with a Ukrainian court battle that he contends may threaten a $330 million American-British investment. Courtesy photo U.S. senator concerned over investment threat; Automakers say they need taxpayer bailouts; EBRD loans money to Ukraine’s state railway; Insurer postpones its plans for expansion; Automaker freezes plans for new factory; Lviv chooses Donetsk billionaire for stadium

U.S. senator concerned over investment threat

U.S. Sen. Charles Schumer (D-New York) has written to his country’s ambassador in Kyiv expressing concern over a challenge in Ukraine’s courts that threatens a $330 million investment by “major American and British real estate funds.”

The project headed by Terra LLC in Kyiv Oblast along the Kyiv-Boryspil highway involves construction of a business-office park, a 400-room hotel, a conference hall and sports facilities. “It will greatly benefit Ukraine and better prepare Kyiv for the European 2012 Football Championship,” according to a Nov. 12 statement.

The investment project tied up in an obscure court battle is backed by The Apollo Group and the European Future Group, and loans which have been fully funded through credit lines from leading European banks.

The statement said the project has been challenged by a Boryspil prosecutor, who is seeking to cancel a land-lease agreement, the statement added. Terra has written to the court explaining that there is no possible lawful basis for the prosecutor’s allegations.

Along with Terra, the prosecutor has named the Kyiv Regional State Administration as a defendant in the case. The Kyiv Regional State Administration views the prosecutor’s actions as “troublesome” and “interfering in the foreign investment process that is so important for Ukraine during the current world-wide financial crisis.”


Automakers say they need taxpayer bailouts

Faced with declining sales due to frozen credit markets, Ukraine’s automakers have appealed to the country’s leadership for a $300 million bailout package.

The country’s automakers are seeking help to refinance their short-term debts and the adoption of protection measures to curtail foreign competition, namely a hike on import duties for imports, from 10 percent to 25 percent. Such an increase would return import barriers to levels that existed before Ukraine was this year formally accepted into the World Trade Organization, according to the Kyiv branch of investment bank Renaissance Capital.

The automakers are also seeking the establishment of a state-owned leasing company that would help boost sales and establish a “car trade-in system.”

Renaissance Capital said that such measures would boost troubled domestic automakers and assemblers of ready-made car kits, including the Bogdan automobile and bus manufacturer. However, Renaissance Capital concludes that such financial support is unlikely to restore domestic demand for new cars in the mid-term.

Consumer spending power has fallen due to high inflation and the depreciating currency, which explains the 10 percent decrease in expected new car sales this fall. The downturn is likely to continue into next year, further squeezing the revenues of domestic automakers, according to Renaissance Capital.


EBRD loans money to Ukraine’s state railway

The European Bank for Reconstruction and Development and the European Investment Bank have approved Ukraine’s state railway company, Ukrzaliznytsia, with loans of $125 million and 175 million euros, respectively.

Ukrzaliznytsya, the monopoly railway holding in Ukraine, is badly in need of upgrades and modernization. The loans, to be used for the purchase of new railcars and to renovate existing stock, come ahead of Ukraine’s preparations to co-host with Poland the Union of European Football Association’s Euro 2012 soccer championship.

“These funds will be used to expand the stock of Ukrzaliznytsya,” Prime Minister Yulia Tymoshenko said on Nov. 12.

According to a report by Kyiv-based investment bank Dragon Capital, Ukrzaliznytsya announced plans to buy 5,000 railcars in 2009 to partially renovate its rolling stock. With railcar prices down to an estimated $84,000 per car in October from their summer peak of $120,000 and reportedly continuing to decline, Dragon said the loans will enable Ukrzaliznytsya to meet at least half of its 2009 railcar purchase target.


Insurer postpones its plans for expansion

ING, the Dutch financial and insurance giant, announced earlier this month that it had postponed plans to develop its life insurance business in Ukraine, the group’s subsidiary ING Life Ukraine said in a statement.

The group had earlier said it would launch its life insurance business in Ukraine in the first half of 2009.

However, these plans were delayed due to the deteriorating economic situation, the company said in its statement.

ING said its banking and leasing operations in Ukraine would continue to work normally, and the group said it still held firm in its plans to become one of the top five banks in Ukraine, in part by expanding its branch network throughout the country.

The group has been present in Ukraine since 1994, serving mostly corporate clients through a handful of branch offices. The group, however, has plans to develop a network of 250 sites across the country in the near term.


Automaker freezes plans for new factory

Bogdan, the auto and bus manufacturer owned by Ukrainian businessman and central bank supervisory board chairman Petro Poroshenko, has frozen plans to build a brand new production facility in Russia.

Bogdan, which currently has production factories in Ukraine’s Cherkasy and Lutsk oblasts, hoped to expand into the vast Russian market by building a production facility in that country’s Nyizhnegorodsky region. But these plans have been put on hold due to difficulties in financing the project now that credit markets have frozen, Bogdan’s press service said, citing the company’s president, Oleg Svinarchuk.

The company said a cut in Russian state financing for new bus purchases has also played a big role in putting such expansion plans on hold. Preliminary agreements on the project, which is also backed by another leading Ukrainian automaker, the Ukravto group controlled by lawmaker Tariel Vasadze, were signed in 2006.

It was envisioned that construction of the Russian assembly plant would cost nearly $500 million.


Lviv chooses Donetsk billionaire for stadium

Serhiy Taruta, the billionaire who co-owns Ukraine’s leading steel group, Industrial Union of Donbass, has been accepted by Lviv city officials as the investor who will provide some 85 million euros in the construction of a brand new soccer stadium, the city’s mayor Andriy Sadovy said.

“We had all the documents signed today and the construction machinery has already arrived in Lviv,” Sadovy said on Nov. 12.

Lviv is one of several Ukrainian cities earmarked to host the Union of European Football Associations games during the championship matches that will be co-hosted with Poland. The construction and reconstruction of stadiums at the other cities is well under way and backed by Ukraine’s billionaires. Soccer-crazed Ukrainian businessmen are backing stadium projects in other host cities, including Donetsk, Kharkiv and Dnipropetrovsk. In Kyiv, reconstruction efforts at the city’s main stadium have commenced.

But Lviv has struggled to find backing for a new stadium. News that Lviv officials had chosen Taruta comes weeks after an Austrian construction group, Alpine Bau, announced it had backed out of the project to build a stadium in Lviv. City officials also recently announced that two foreign companies had agreed to take part in developing the new stadium: Italy’s Codest and Spain’s Horwath Art Consulting.Taruta will be making the investment through his Azovintex company, which has been represented in talks with Lviv officials by his son.