The European Bank for Reconstruction and Development (EBRD) and Multilateral Investment Guarantee Agency (MIGA) signed the first co-financing agreement in their history, under which MIGA provides guarantees for up to $200 million of trade finance risks to EBRD under its Trade Facilitation Program (TFP).
“The first country to benefit from this agreement will be Ukraine…The guarantee will cover EBRD trade finance in selected state banks, primarily in Ukraine,” the bank said in a press release Tuesday.
According to it, the MIGA guarantee was signed by the agency’s executive vice president, Hiroshi Matano, during a visit to EBRD President Odile Reno-Basso.
The EBRD recalled that it had sent EUR1.7 billion to Ukraine in 2022 and promised to increase this amount to at least EUR3 billion by the end of 2023, and had established an international partnership to help Ukraine and its financing with shareholders and donors.
“The MIGA and EBRD partnership will facilitate needed trade finance in Ukraine and other countries supported by MIGA and EBRD at a time of growing economic pressures and heightened geopolitical risks affecting trade, supply chains and critical imports,” Matano said in the release.
“This guarantee will be important in helping us expand our trade finance business in Ukraine, which is one of our strategic priorities in working in the country,” Reno-Basso said in turn.
The EBRD pointed out that since the outbreak of the war in Ukraine in February 2022, trade flows and supply chains in Ukraine have been seriously disrupted. In particular, the agricultural sector, which accounts for 11 percent of the country’s GDP, nearly 20 percent of the labor force, and nearly 40 percent of all exports, has been affected.
In addition to the physical disruption of transportation routes, financial intermediation has been a significant problem, as foreign commercial banks have stopped taking any direct risk on trade finance transactions in Ukraine. To address this problem, the EBRD’s TFP Program significantly increased the provision for Ukrainian banks to cover some of the increased demand.
Since February 2022, TFP has supported more than EUR400 million in trade transactions involving critical commodities for the Ukrainian economy. TFP also supports the entire supply chain to address food security issues: facilitating imports of seeds, fertilizers, fuel, tractors and combines into Ukraine, as well as exports of grain, oilseeds and vegetable oils to other EBRD countries of operations, including Egypt, Morocco, Turkey and Tunisia.
The EBRD has developed its Trade Facilitation Program to promote and facilitate international trade with and within Central and Eastern Europe, the CIS and Southern and Eastern Mediterranean countries (SEMED). TFP provides guarantees to international commercial banks to cover political and commercial payment risk on transactions made by issuing banks in the EBRD’s countries of operations.
More than 100 issuing banks in 26 countries participate in the program, working with more than 800 confirming banks and their subsidiaries worldwide.
Since the program’s launch in 1999, TFP has supported over 30,000 trade finance transactions totaling over EUR30 billion, including 3,000 foreign trade transactions of Ukraine totaling over EUR4 billion.
EBRD will become the owner of the shareholder of 35% of M10 Lviv Industrial Park, investments will amount to $24,5 million, $5,5 million of which will be allocated for financing of the completion of the first stage of the project, the press service of the EBRD informed.
M10 Lviv Industrial Park, a multifunctional industrial park located 60 km from the Ukrainian-Polish border and being built by Dragon Capital Investment Limited, will provide new manufacturing and logistics facilities necessary for sustainable humanitarian and economic activities in Ukraine during the war and post-war reconstruction.
According to the release, the EBRD will invest up to $24.5 million in total to develop the $70 million project, of which up to $5.5 million will be used to complete the first stage of the project. Construction of the first phase was interrupted by Russia’s military invasion of Ukraine in February 2022, but resumed in the summer. The first 14,400-square-meter warehouse complex is expected to be completed in the second half of 2023.
“This is an especially important project for Ukraine in these difficult times and EBRD investment will be a strong signal to local and foreign investors. By increasing the availability of high-quality storage facilities, the project will increase Ukraine’s access to vital services and products,” Vlaho Kojakovic of the EBRD was quoted in the release.
The EBRD’s investment in M10 Lviv Industrial Park closes the financing gap caused by unfavorable market conditions and is also in line with the EBRD’s stance on Ukraine and the bank’s overall response to the crisis.
“We are pleased to welcome the EBRD as our partner in this important infrastructure development project for Ukraine. The M10 Lviv Industrial Park, located near the EU border, will create new logistics and manufacturing facilities in western Ukraine, which are in high demand after the start of the full-scale Russian invasion,” Dragon Capital CEO Tomasz Fiala was quoted in the release.
As emphasized in the release, the EBRD sees a special mission in overcoming the current crisis. After more than 30 years of promoting economic transformation in Ukraine, the bank’s emergency response to the war is focused on supporting the country’s economy and preparing for future recovery.
In addition to strengthening energy security, EBRD financing for Ukraine is used to finance trade to support the circulation of essential commodities, food security and vital infrastructure. EBRD financing is also used to help refugees in neighboring countries and to help host municipalities.
In October 2022, during a visit to Kiev to meet Ukrainian President Vladimir Zelensky, EBRD President Odile Reno-Basso informed the Ukrainian leader of the Bank’s strong intentions to support Ukraine in its defense against Russian aggression and promised that the EBRD would provide up to EUR2 billion to help Ukrainian business and economy continue to operate. In 2022, the EBRD allocated EUR1.7 billion for Ukraine and attracted another EUR200 million through partner banks.
The European Bank for Reconstruction and Development (EBRD) has deployed €1.7 billion in Ukraine in 2022 and mobilised a further €200 million from partner banks. This represents more than 10 per cent of the Bank’s annual business volume.
This means the EBRD is on track to deliver on its commitment to invest €3 billion for Ukraine over the period 2022-23, with the exceptional support of shareholders and donors who share part of the risk of the investments that the EBRD has taken on its own books.
The results were achieved despite the extremely challenging global economic environment in the wake of Russia’s war on Ukraine and confirm the EBRD’s countercyclical role in supporting its countries of operations and clients.
“The Bank and its shareholders moved swiftly, following the beginning of the war, to provide adequate support,” said EBRD President Odile Renaud-Basso. “This impressive operational performance is testimony to our resilience and determination to support our countries of operations and clients.”
To support the real economy in Ukraine through investments in vital infrastructure, energy and food security, trade and support for the private sector, the EBRD deployed €1.7 billion. A further €200 million were mobilised from partner banks.
The Bank raised €1.4 billion of donor funds in 2022, including unfunded guarantees, which are dedicated to Ukraine and other countries most affected by the war in 2022 and 2023. The Bank bore 60 per cent of the risk related to the investments deployed in Ukraine in 2022.
Highlights of EBRD work in Ukraine in 2022 – which has successfully attracted further foreign grants – include providing Ukrzaliznytsia (Ukraine’s railway company) and Ukrenergo (the national power grid operator) with €150 million each of emergency liquidity last summer, to keep the country’s trains running and the lights on.
The Ukrzaliznytsia financing was supported by partial risk coverage from France and the European Union, and the financing for Ukrenergo by the European Union, United Kingdom, United States of America and The Netherlands.
A later financing package of €370 million to Ukrenergo in the autumn consisted of a €300 million EBRD loan and a €70 million grant from The Netherlands, for emergency repairs to the national power grid necessitated by Russia’s strikes on civilian infrastructure.
Likewise, the EBRD provided the gas company Naftogaz with a financing package of just under €500 million to compensate for the loss of natural gas production following the Russian invasion. Norway will provide a €190 million grant, which complements the €300 million financing line from the EBRD, which is supported by partial risk coverage by the USA, Canada, Germany and France.
The EBRD provided Ukraine with a total trade finance turnover of €459 million during 2022.
Together with partner financial institutions, it also supported food security by providing more than €280 million to the agribusiness value chain, and bolstered the resilience of other private-sector companies, including small and medium-sized enterprises, with €170 million.
Policy activity remains intense, via the Ukraine Reforms Architecture programme (a comprehensive technical assistance programme jointly managed by the EBRD and the European Union since 2016, following requests by the government of Ukraine for support with the implementation of key reforms), the promotion of good governance in state-owned enterprises with which the EBRD works, and support for human capital in partnership with Ukraine’s Ministry of Education.
The EBRD’s focus in 2022 has been on providing emergency liquidity to keep the lights and heating on and the trains running, supporting communities and sustaining companies. This is now shifting to providing finance for emergency repairs and the rebuilding of infrastructure that is coming under Russian attack.
“In the future, we also intend to expand our work with municipalities, including in de-occupied zones. For this, we foresee that we and our partners will need new financial instruments – a higher proportion of grants rather than loans. We have been requesting further support from shareholders or donors, either in the form of donor funds or guarantees, to continue sharing the risks of investing in Ukraine with us this year,” said President Renaud-Basso.
The EBRD President added: “We will remain agile in 2023, responding to changing circumstances and making adjustments according to the needs on the ground as we did last year.”
“When circumstances allow, we will help launch a reconstruction programme for Ukraine to rebuild livelihoods, jobs and businesses, vital infrastructure, good governance, and access to services. As the largest institutional investor in the country, one with an unrivalled presence on the ground, the EBRD is ready and willing to play a central role in reconstruction.”
The EBRD is a multilateral bank that promotes the development of the private sector and entrepreneurial initiative in 36 economies across three continents. The Bank is owned by 71 countries as well as the EU and the EIB. EBRD investments are aimed at making the economies in its regions competitive, inclusive, well-governed, green, resilient and integrated. Follow us on the web, Facebook, LinkedIn, Instagram, Twitter and YouTube.
NEC Ukrenergo and the European Bank for Reconstruction and Development signed an agreement on a EUR70mn target grant to the company from the bank’s Special Fund provided by the government of the Kingdom of the Netherlands, NEC CEO Volodymyr Kudrytskyy said.
As Kudritsky explained on his Facebook, the funds will be used exclusively to purchase the equipment needed to resume the reliable operation of Ukraine’s energy infrastructure.
“We are grateful to our international partners for such a high level of confidence in our company and strong support in the restoration of Ukraine’s energy system. We are now actively working with manufacturers around the world to deliver the necessary equipment as soon as possible,” said the head of Ukrenergo.
As earlier reported, at the beginning of December, NEC Ukrenergo noted that it had attracted EUR300 mln of credit funds from the EBRD, EUR150 mln of which would be allocated for the purchase of equipment necessary for substations that have been subject to massive Russian missile strikes.
The rest EUR150 mln of the EBRD loan will be used to replenish Ukrenergo’s working capital, in particular, to fulfill the company’s financial obligations in the electricity market amid the non-payments that arose in the market because of the war.
At the same time, there was also talk about attracting EUR72 million in grant funds from the Netherlands to restore networks and improve the financial stability of the company.
European Bank for Reconstruction and Development (EBRD) will provide ArcelorMittal Kryvyi Rih PJSC (AMKR, Dnipropetrovsk oblast) with a $100mn loan to replenish its working capital.
“The loan will be used to finance the company’s working capital needs to ensure business continuity in Ukraine,” the bank said in a statement Thursday.
According to it, the bank’s board of directors approved the project at a meeting on Dec. 14.
The EBRD recalled that it provided financing to AMKR in 2017, developed a comprehensive Environmental and Social Action Plan (ESAP) and monitored its implementation by PESM, making monitoring visits to the company in recent years.
“Overall, the company was on track for implementation and reported as required. The provision of working capital under the concept of sustainability of Ukraine will allow, among other things, to continue investment plans and implement the existing ESAP, which, in turn, will significantly improve the environment, health and safety at the site,” – pointed out the bank.
The EBRD clarified that a key aspect of the current investment program is the modernization of the sinter plant, and this investment process is ongoing, with work on the sinter lines as well as the air treatment facilities, but some investments planned for 2022-2023 have been postponed due to the ongoing war and the proximity of the front.
“ArcelorMittal Krivoy Rog is the largest producer of rolled steel in Ukraine. It specializes in the production of long products, particularly rebar and wire rod, and is owned by ArcelorMittal.
On November 24 this year, after the blackout caused by Russian missile attacks on the energy infrastructure, AMKR reported about critical limitation of electricity consumption and suspension of most of the production processes. According to the company, the available amount of electricity is not enough to maintain production even at 20% of capacity.
In addition, on the night of December 5, AMKR was hit by a Russian missile strike.
The European Bank for Reconstruction and Development (EBRD) may lend state-owned Ukreximbank up to EUR50 million to finance private corporate clients and municipalities in Ukraine affected by the war.
“The loan will provide Ukreximbank with much-needed medium-term financing during wartime and will allow the bank to support its private corporate clients and municipalities using its strategic focus, proven experience in corporate lending to critical sectors and strong regional presence,” the bank said in a statement Wednesday.
According to it, the project will be supported by donors: EUR25 million of first-loss risk coverage will be provided by the EBRD’s Special Crisis Response Fund as part of the EBRD’s special Ukraine War Response Package.
Ukreximbank was founded in 1992. The sole owner of the financial institution is the state.
According to the National Bank of Ukraine, as of July 1, 2022 Ukreximbank in terms of total assets ranked third (228.608 billion UAH) among 68 operating banks in the country, or about 10% of total assets of the banking system.
The bank has 51 branches across the country and two representative offices in London and New York.
