The Overseas Private Investment Corporation (OPIC), the U.S. government agency that helps American businesses invest in emerging markets, has doubled its investment pool and is mulling more deals in Ukraine.
OPIC has increased its total investment capacity from $30 billion to $60 billion and aims to fund more projects in Ukraine, a manager said at a meeting of the US-Ukraine Business Council in Kyiv on Sept. 12.
These changes are taking place as OPIC finalizes its transition into another organization, the US International Development Finance Corporation, or DFC, which will be completed by Oct. 1.
“Hopefully now with this new DFC we will not have those capacity limits and can do more support, more projects in Ukraine,” said John Didiuk, a representative of OPIC.
The most important change for Ukraine is that under the new DFC Ukrainian businesses no longer have to meet so-called “US requirement”, a 25 percent of the project’s equity to be traced back to the US. This opens more doors for Ukraine, said Didiuk.
Only private sector business can apply for such funding. It is long term, for 10 years and longer. The debt financing amounts from $1 million to $350 million per project. However, not every business idea will be considered by DFC – only highly developmental and if the sources for financing it is not available otherwise said Didiuk.
“If somebody comes to us with a project, an idea for a new mall in Kyiv or another five-star hotel in Kyiv we probably will not be able to look at that as we do not see this as developmental and we do not see there is a need to have our financing,” he stressed.
“Since 2014 straight after the EuroMaidan our portfolio (in Ukraine) stood at $115 million, today it is over $1 billion across 18 different projects in different types of sectors,” continued Diduk.
In April 2019 OPIC gave a $6 million loan to the Ukrainian Catholic University, based in Lviv, to expand its campus. Earlier, in 2017, the agency financed $150 million along with up to $250 million in political risk insurance to EuroCape Ukraine I, LLC for constructing a wind farm project in Zaporizhia.
OPIC or DFC is not the only tool for the Ukrainian businesses to attract American money. The Export-Import Bank of the United States, or EXIM, the official export credit agency of the U.S., reopened its programs for Ukraine in January after a five-year pause.
However, the conditions of work were approved only in summer so the bank has just started its work in Ukraine. It offers up to one-year short-term program and up to seven years medium-term program. The limit amounts are $25 million per transaction.
“The way they measure their qualification is that they look at the goods that are being shipped – first of all, it needs to be shipped out of the US. They look at minimum US content in the product of 50 percent in order to consider the financing,” explained Alexander Gordin, managing director at Broad Street Capital Group, that represented EXIM at the US-Ukraine business council meeting.
The Ukrainian company AgroVista, a former part of UkrAgroCom and Hermes-Trading group, based in Kirovograd region found itself eligible for such funding. It applied for credit and received $9 million for purchasing American elevator equipment.
It is complicated to persuade the foreign creditors to fund your project, but it pays off with plenty of benefits, said Vladyslav Vyniarsky, former executive director at AgroVista.
“It requires a very serious approach; it would take a year of negotiations. You have to have great financial statements, holding and consulting companies, high-quality top-management and of course an interesting project itself,” he said.
One of the benefits is quite a low-interest rate – lower than Ukrainian banks can offer, according to Vyniarsky. EXIM gave credit to AgroVista for under five per cent of the actual rate.
“When your company receives such a credit it becomes much more attractive for investors. It is also a quasi-political umbrella for Ukrainian businesses – currently I hope it seems we will not need it any longer for protecting businesses in Ukraine, but just a few years ago it was still very relevant – protection of an American investor in Ukraine. If someone puts pressure on your business you have some backing,” said Vyniarsky.
EXIM estimates Ukraine as the highest risk county for doing business in. Despite that American investors perceive the Ukrainian market as highly attractive.
Morgan Williams, CEO of U.S.-Ukraine Business Council said that during past month he had started receiving calls from American businessmen eager to “take a new look at Ukraine.”
“One of them is the second-largest privately held corporation in the US. They have never been here. They are huge. We have also got a Wall Street company that has just called us – they said ‘We have never invested in Ukraine and we would like to find a place to put $250 million’. We said we could probably help with that,” Williams recalled.
“The sense of optimism, the sense of enthusiasm is here,” he said.
