Today's Contents
Reporter's Notepad:
- Heard in Ukraine: "Lack of qualified bidders" and "lack of bankable projects"
Just The Facts:
- Zelensky says Ukraine's ready for 'strong, effective' deal with US on investment, security
- Ukraine seeks to nationalize Ferrexpo's Poltava mining plant
- Ukraine faces $400 million arbitration claim over Sense Bank nationalization, Vedomosti reports
- IMF, Ukraine start talks on 7th review of EFF loan program
- Ukraine carried out 18 of 31 recommendations to fight graft, CoE anti-corruption body says
- Ukraine's anti-corruption body develops recommendations to fight graft in reconstruction
Here's What They Think:
- Former Ukrenergo CEO: Ukraine can attract energy investment despite war if barriers removed
- Ukraine's ambassador to Japan: Japanese experience in rebuilding, mine clearing essential for Ukraine
Sober Second Thought:
- Ukraine's M&A market remains stable in 2024; total deal value $1.1 billion, KPMG analysis shows
Dear subscribers,
Phrases such as "lack of bankable projects" and "lack of qualified bidders" are often heard from the lips of development finance professionals with millions of euros to spend in Ukraine.
In summary: There's money to be spent and a dire need for the money, but the two often don't meet up.
An online session hosted by GIZ, Germany's main development agency, and the German-Ukrainian Chamber of Industry and Commerce (AHK Ukraine) yesterday illustrated this fact.
Andriy Laktionov, executive director of the Ukrainian Social Investment Fund (USIF), a non-profit organization that coordinates projects for various donors, said he is currently carrying out five projects financed by the European Union and Germany's Federal Ministry for Economic Cooperation and Development (BMZ) and supervised by German development bank KfW.
"We are procuring works for more than €20 million. Also some goods for €2.5 million, and consulting services. Thanks to KfW and the German government, we have a pretty big portfolio. Unfortunately, in the Ukrainian market we are experiencing a lack of qualified participants."
"Maybe some of you or your partners could be interested in participating in our biddings," he said, addressing the 110 or so webinar participants.
"We, are focusing mostly on rehabilitation works, supported with some goods provision and services provision. Here are some examples of the biddings we are going to conduct this year:"
Laktionov's comments illustrate a point made by many: Ukraine has a shortage of contractors able to meet the exacting needs of development finance projects.
In the same webinar, Jan Heinemann, senior investment manager for DEG, a subsidiary of KfW that finances and supports private sector companies, reported another lack. This one, though, is related more to the structure and circumstances of the projects rather than the qualifications of the participants.
DEG has a €60 million portfolio for Ukraine this year, including through ImpactConnect, a program that the organization adapted from its African operations to suit Ukraine and other countries. DEG's portfolio supports established German or European Union companies to invest in the agriculture, logistics and IT sectors of Ukraine.
"Speaking very openly," Heinemann said, "there are a number of limiting factors for making new investments in Ukraine. And that is not only the case for DEG, but for almost all development finance institutions."
Firstly, "it's a matter of the size of the investment. We need a relatively large minimum ticket size for a DEG investment, which is probably around €15 million."
"Combined with that, there is a certain reluctance among companies to invest in Ukraine, particularly on this order of magnitude."
"And the third factor is definitely, during war times, sovereign guarantees or other types of coverage are hard to get ahold of."
Heinemann's words are reminiscent of an interview URN Daily did late last year with Hanna Loikkanen, investment director of Finnish development finance institution Finnfund, which was allocated €25 million to invest in Ukraine:
"Regardless of how hard we try, I don't really think that we are going to be able to find a lot of bankable and investable investments," Loikkanen said. "We have struggled in identifying such."
Yesterday's webinar wasn't all about the lack - it offered a good overview of German development finance in Ukraine and the projects and financing available. Here, by the grace of AHK Ukraine, GIZ, and the Agency for Business and Economic Development, are the slides presented at the session.
KfW's Engagement in Ukraine (An 8-slide overview)
DEG & ImpactConnect (Eight slides of details, including Ukrainian examples of successful projects in building materials, solar power, plant breeding and automotive cables)
develoPPP (Overview of a private-sector funding programme of the German BMZ)
USIF bidding opportunities (Just the one slide, already shown above)
As usual, email the editor, Adam Brown, at adam.brown@ukrainerebuildnews.com with any suggestions, tips, requests, complaints, etc.
And now, on with our headlines ...
Zelensky says Ukraine's ready for 'strong, effective' deal with US on investment, security
Ukrainian President Volodymyr Zelensky said on Thursday that Ukraine was ready for a "strong, effective" investment and security agreement with the US President Donald Trump.
"We have proposed the fastest and most constructive way to achieve results. Our team is ready to work 24/7," Zelensky said following a meeting with the US envoy for Ukraine and Russia, Keith Kellogg.
Zelensky wrote in a post on X that he discussed the battlefield situation, the return of prisoners of war, and effective security guarantees with Kellogg.
Zelensky and Kellogg planned to hold a joint press conference after the meeting but the conference was canceled at the request of the US delegation, Euronews reported, citing a spokesperson for Zelensky.
The meeting between Zelensky and Kellogg came less than a day after Trump called Zelensky a "dictator without elections," amid the ongoing rift between the two presidents over Trump's approach to resolving the war in Ukraine.
On Wednesday, Zelensky rejected a demand from the US for Ukraine to hand over $500 billion worth of mineral resources to repay the military aid the US has provided the country during the war with Russia as part of the proposed economic partnership deal with the US.
Speaking of the proposed agreement to reporters on Thursday, White House national security adviser Mike Waltz said that Zelensky "needs to come back to the table."
"We are gonna continue to have discussions about where that deal is going," Waltz noted.
Ukraine seeks to nationalize Ferrexpo's Poltava mining plant
Ukraine's State Bureau of Investigation said on Thursday it is preparing, jointly with the Ministry of Justice, to submit an appeal at the High Anti-Corruption Court seeking to nationalize the Poltava mining and processing plant owned by Swiss-headquartered and London-listed miner and iron ore pellets maker Ferrexpo.
In September last year, the Bureau indicted seven officials and employees at Poltava and its investigation revealed the plant's management embezzled over UAH 370 million ($9 million). As part of the pre-trial investigation, this and other property and corporate rights of the company were seized.
In a press release, the Bureau said it will seek the nationalization of 541 real estate objects owned by the plant, as well as 172 land plots that are under early lease to the plant for 49 years.
It will also ask the court to consider the transfer to the state of corporate rights in the amount of 49.5% of the authorized capital of the Poltava mining and processing plant.
Ferrexpo is majority-owned by Ukrainian oligarch and former MP Konstantin Zhevago who is wanted in Ukraine in an embezzlement case involving Finance and Credit Bank, his former bank that went bankrupt in 2015.
In 2023, a Ukrainian court ordered the seizure of a 50.3% stake in the Poltava, Eristivskiy, and Bilanivskiy mining plants that belonged to Zhevago through Ferrexpo, following compensation claims over Finance and Credit Bank, Reuters reported at the time.
Last week, Ukraine imposed sanctions and announced criminal proceedings against a number of Ukrainian businessmen and former high-ranking officials, including Zhevago, as reported by the Kyiv Independent.
In a statement on Thursday, Ferrexpo said it noted the announcement by the Bureau but that it has not received any formal notification regarding the claim.
Earlier this month, Ferrexpo said that a civil claim totaling $3.76 billion had been filed against its Ukrainian subsidiary, Ferrexpo Poltava Mining (FPM), over alleged illegal mining activities and the sale of waste products.
Ukraine faces $400 million arbitration claim over Sense Bank nationalization, Vedomosti reports
Dutch special purpose entity E.M.I.S. Finance has filed an arbitration claim against Ukraine seeking to recoup $400 million in lost investments due to the nationalization of Sense Bank, former Alfa-Bank Ukraine, Russian business newspaper Vedomosti reported.
Ukraine's government completed the nationalization of Sense Bank, the country's top commercial lender controlled by Russian billionaire Mikhail Fridman at the time, in July 2023, as part of the broader effort to diminish Russia's economic influence following Moscow's full-scale invasion in February 2022.
Between 2018 to 2021, E.M.I.S. provided 10 loans totaling $470 million to Cyprus-based ABH Ukraine (ABHU), through which Fridman and his business partners Petr Aven and Andrey Kosogov invested in Ukraine, Vedomosti reported earlier this week, citing unnamed sources familiar with the claim.
For these loans, E.M.I.S. issued debt securities, or so-called loan participation notes (LPN), which allowed investors to buy parts of the outstanding E.M.I.S. loans in favor of ABHU.
ABHU's main asset in Ukraine at that time was Alfa-Bank Ukraine, and its operating results were the main source of funds for servicing E.M.I.S. notes, according to Vedomosti.
Ukraine sanctioned Fridman, Aven and Kosogov in 2022 following the full-scale invasion. Later, ABHU and other business entities associated with the trio also fell under sanctions. Already in the spring of 2022, E.M.I.S., stopped paying its obligations to creditors, the report said.
"Ukraine's misconduct has effectively left ABHU a depleted shell with no receivables and no notable assets," the sources told Vedomosti. This has significantly undermined the company's ability to raise additional debt and has effectively expropriated E.M.I.S.'s investments in Ukraine, they added.
E.M.I.S., which filed the claim against Ukraine with the International Centre for Settlement of Investment Disputes (ICSID), on Monday sought consent from the holders of the disputed securities for a six-year postponement of the repayment date and of the payment of interest until the new maturity date, and to launch any proceedings in the interest of noteholders.
In May last year, Luxembourg-based ABH Holdings initiated a similar claim against Ukraine over Sense Bank nationalization, seeking $1 billion in damages.
IMF, Ukraine start talks on 7th review of EFF loan program
The International Monetary Fund (IMF) mission and Ukrainian officials on Thursday started discussions on the seventh review of the Extended Fund Facility (EFF) loan program.
The purpose of the mission, which will continue over the next few days in Kyiv and Warsaw, is to discuss Ukraine's implementation of the Memorandum of Economic and Financial Policies that sets out monetary and fiscal reforms Ukraine must execute under the arrangement with the IMF.
A successful review of the program would allow Ukraine to tap $917.5 million of IMF funding, Ukraine's Finance Ministry said in a press release.
Through the six earlier EFF reviews, Ukraine has attracted to the state budget about $9.8 billion of the total $15.6 billion for the 2023-2027 period.
In 2025, Ukraine plans to attract $2.7 billion via the program through four quarterly reviews, the ministry said earlier.
Ukraine must meet the necessary conditions in the areas including strengthening financial stability, supporting economic recovery, improving the governance of state institutions, and Eurointegration, for the EFF program to continue in 2025.
Ukraine carried out 18 of 31 recommendations to fight graft, CoE anti-corruption body says
Ukraine has made progress in its efforts to prevent corruption among judges, prosecutors and members of parliament despite the "extremely difficult" wartime conditions, the Council of Europe's anti-corruption group body has found in its latest report.
The country has carried out 18 of Greco's 31 recommendations, including changes to better supervise financial declaration requirements of officials, regulate lawmakers' relationships with lobbyists and streamline the process of appointing judges, said the Group of States Against Corruption (Greco).
"Important legislation has been adopted, and members of the High Council of Justice, of the High Qualification Commission of Judges, and of the Public Council of Integrity were appointed," Greco said in its report.
However, Ukraine has only partially implemented 11 of the recommendations and has not implemented two at all.
The two that haven't been implemented are related to prosecution, including introducing a system to randomly allocate cases to prosecutors and introducing more precise definitions of "disciplinary offences relating to prosecutors’ conduct and compliance with ethical norms."
Greco "continues to recognise the strong commitment shown by Ukraine in respect of work to counter corruption at an extremely difficult time for this member state," the body said. "The country continues to function under martial law and hence has to adjust its priorities."
The organization asked Ukraine to provide it an updated progress report by Nov 30 of this year.
Greco, headquartered in Strasbourg, was established in 1999 by the Council of Europe to monitor compliance with anti-corruption standards among member states. Membership goes beyond Europe, encompassing 46 countries, including the United States.
Ukraine's anti-corruption body develops recommendations to fight graft in reconstruction
Ukraine's National Agency on Corruption Prevention has developed a series of recommendations specifically to fight corruption in the reconstruction of the country, said the agency's deputy head.
"NACP is systematically working to eliminate corruption risks in the reconstruction sector," said Serhii Hupiak. "We have investigated common threats in the processes of compensation payments and reconstruction of destroyed facilities and developed recommendations."
He said the recommendations will "help prevent corruption and financial crimes and ensure transparent business participation in the reconstruction process. This will contribute to the trust of international partners and donors in Ukraine's reconstruction system."
Hupiak made the comments in a panel at the FinSec25: Finance and Security in a Changing World conference in London earlier this month and they were posted this week on the NACP website this week.
The article on the website didn't describe the recommendations in greater details.
Former Ukrenergo CEO: Ukraine can attract energy investment despite war if barriers removed
Volodymyr Kudrytskyi, former CEO of Ukrainian transmission system operator Ukrenergo, argued in an op-ed for the Atlantic Council that Ukraine has the potential to attract investments into its energy sector, including decentralized balancing capacity and renewables, but it has to remove obstacles hindering private initiatives.
Kudrytskyi listed regulatory uncertainty and market debts, access to financing, and poor communication between communities and businesses as the main issues private investors in Ukraine's energy sector face and noted solving these problems should be the main priority of Ukrainian energy strategy for the next five years.
Ukraine's ambassador to Japan: Japanese experience in rebuilding, mine clearing essential for Ukraine
Japan's immense experience in rebuilding after natural disasters as well as in mine clearing is a vital source of guidance for Ukraine in its reconstruction efforts, Sergiy Korsunsky, Ukraine's ambassador to Japan, wrote in an op-ed for Nippon.com.
"There is no country in the world with a greater understanding of reconstruction work," Korunsky wrote of Japan, giving examples such as the country's recovery after earthquakes and World War II. Korunsky, who also mentioned Japan's involvement in clearing landmines in Cambodia, noted Japan comes third after the US and EU when it comes to contribution to Ukraine's recovery and that one-third of the equipment being used to clear mines in Ukraine came from Japan.
Ukraine's M&A market remained stable in 2024, with a total deal value of $1.1 billion, KPMG analysis shows
The number of M&A transactions in Ukraine remained the same in 2024 as in the previous year, at 49, despite a modest economic recovery, with a total deal value amounting to $1.1 billion, an analysis conducted by KPMG showed.
The total overall deal value was 15.7% lower than in 2023. However, adjusted figures that exclude exceptionally large transactions indicate a 40.5% increase in the total deal value, KPMG said.
"Driven by a diverse range of smaller and mid-sized transactions, this trend indicates that market participants in the Ukrainian M&A have adapted to the new economic environment and that there is capacity for future growth in 2025," the authors wrote.
In 2024, M&A transactions involving Ukrainian investors remained a key driver of the domestic market, accounting for 38.6% of total deal value and 53.1% of total deal volume, according to the paper.
Despite macroeconomic challenges and capital outflow restrictions, the number of domestic transactions remained steady at 26 deals, compared to 25 in 2023. However, the total deal value declined by 10.2% to $406 million, primarily due to a 20.7% drop in the average transaction size, which fell to $24 million.
Real estate and construction ($209 million), industrial goods, and agriculture emerged as the leading sectors by domestic deal value. Notable transactions included Dragon Capital's acquisition of Karavan Outlet Mall in Kyiv ($40–60 million) and the privatization of the Hotel Ukraine by Maksym Kryppa ($60 million).
In 2024, Ukrainian companies actively expanded into international markets, completing 10 cross-border M&A transactions, which made up 20.4% of all deals. A key transaction was software development firm Ciklum's $30 million acquisition of US-based digital services company Infogen, reinforcing its position in the IT sector, KPMG said.
Despite persistent war-related risks, foreign investors continued to show interest in the Ukrainian market, making up over 25% of total transactions and more than 50% of total deal value in 2024.
The innovation and technology sector remained the leading force behind inbound investments, accounting for seven deals totaling $287 million. The most notable transaction was Sapphire Ventures leading a $200 million investment round in Creatio, bringing the company's valuation to $1.2 billion.
Social Media Posts
Ukraine Recovery Conference
The Ministry of Finance of Ukraine posted about a meeting of the organizing committee behind the Ukraine Recovery Conference 2025, the fourth such high-level annual event, scheduled for July 10-11 in Rome.
“Attracting investment in the recovery and strengthening cooperation with foreign business are among the key objectives of the event," said Ukrainian Finance Minister Sergii Marchenko. "The conference should continue to consolidate international support for the reconstruction, reform and modernization of Ukraine."
German Aid
GIZ Ukraine, the local branch of the German development agency, recapped a meeting with Federal Economic Development Minister Svenja Schulze. The local team presented her the results of German aid that helped "ensure energy security and heating supply—supporting an estimated 2.5 million people."
"This rapid assistance was made possible by close coordination with local municipalities. GIZ Ukraine is also focusing on 'green' reconstruction through energy efficiency and renewable sources."
Sparrow Park Lviv
Invest in Lviv, the municipal promotion agency, which posted earlier about progess in development of the Formatsia Industrial Park, now posted about new construction phases in another industrial park in the city.
"Sparrow Park Lviv has completed the third phase of construction and is preparing to launch the fourth phase. The new phase will include warehouses, administrative and utility buildings, auxiliary structures, and a transformer substation. The industrial park has already received urban planning conditions and restrictions for the fourth phase of the project."
URN Daily: Sense Bank and Ukrgasbank for sale? And US seeks to cancel $4.7 billion of Ukraine's debt
