Business news from Ukraine

IFC may mobilize about $345 million to build wind power capacity in Ukraine

The World Bank Group’s IFC plans to mobilize about $345 million to build a new 350 MW wind power capacity in Ukraine, the corporation said on its website on Wednesday.

The report said the initiative was presented among other initiatives aimed at supporting Ukraine at the URC-2024 recovery conference in Berlin.

Now these projects, which are planned to be implemented in order to improve energy security and support further development of renewable energy in Ukraine, are undergoing due diligence and awaiting approval by the IFC management and Board of Directors, the corporation specified.

As reported, at URC-2024, Knud Rissel, commercial director of the German company Notus Energy, said that it is engaged in the implementation of a 300 MW WPP project in the Odessa region, the first phase of which will be 120 MW.

“We already have all the permits, in particular those related to land. Banks are supporting us, although they are taking a risk by supporting us. But we are all ready to work even under martial law,” he said.

According to Rissel, the company also signed some agreements on the project realization at this conference.


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IFC to cover EUR 40 mln of credit risks of Ukrainian Credit Agricole Bank

On December 15, Ukraine’s Credit Agricole Bank signed a EUR 40 million hryvnia equivalent risk-sharing agreement with the International Finance Corporation (IFC) under the IFC Small Loan Guarantee Program to empower Ukrainian businesses, the bank said in a release on Thursday.

“This will allow the bank to support investments by micro, small and medium-sized enterprises (SMEs), in particular in the agricultural sector, which are crucial for the sustainability of the country’s economy,” the statement said.

It is specified that the agreement was signed under the IFC Small Loan Guarantee Program, which is supported by the European Commission through the European Fund for Sustainable Development. The project is part of the IFC’s $2 billion Economic Resilience Action (ERA) program to support Ukraine’s private sector.

According to the National Bank of Ukraine, as of October 1, 2023, Credit Agricole Bank ranked 11th in terms of total assets (UAH 100.36 billion) among 63 operating banks in the country, with 141 outlets. The bank is fully owned by French Credit Agricole SA.

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IFC may provide MHP with $30 mln loan

The International Finance Corporation (IFC), a member of the World Bank Group, plans to resume cooperation with MHP, Ukraine’s largest chicken producer, and provide a loan of up to $30 million to its subsidiary Vinnytsia Poultry Farm LLC to finance the modernization and expansion of the plant’s biomethane production capacity from agricultural waste.

According to the IFC website, the corporation’s board of directors plans to consider this project at a meeting on September 19 this year.

It is noted that the company already operates two biogas plants to process manure from its farms into green energy. As part of its decarbonization strategy, MHP plans to increase biomethane production in Ukraine by modernizing and expanding the capacity of its biogas plants in several stages. The first stage, which will be financed under the project, will serve to demonstrate the viability of liquefied biomethane production.

The total cost of the project is estimated at $52 million, and in addition to the IFC loan, MHP expects to finance it with its own funds. It is also expected that the project will be supported by a $15 million guarantee from the European Fund for Sustainable Development Plus, the UK, and other donors.

It is specified that the construction is planned at a biogas plant in the village of Vasylivka (Haisyn district, Vinnytsia region), which was launched in 2019 and is the largest such plant in Ukraine with a capacity of 12 MW.

At the first stage of the project, it is planned to modernize the existing facilities to produce 14 thousand tons of liquefied biomethane per year, and at the second stage – to expand the capacity to 20.5 MW.

IFC specifies that if approved by the board of directors, this will be the corporation’s sixth investment in MHP since 2003, the last of which was opened in 2014 and closed in 2019.

The corporation also points out that since 2018, members of local communities, with the support of a number of environmental organizations, have complained about the investments of IFC and the European Bank for Reconstruction and Development to the CAO (Compliance Advisor Ombudsman). As noted in the CAO’s materials, despite the efforts of all parties, no final solution was found.

In February 2022, the CAO published its final report and referred the case to the Compliance Department. After the case was suspended in Ukraine in March 2022 due to the full-scale war against Ukraine launched by Russia, the CAO resumed its work on the case on October 17 after consultations with stakeholders.

MHP is the largest chicken producer in Ukraine. It also produces grain, sunflower oil, and processed meat products. MHP supplies chilled chicken half-carcasses to the European market, which are processed, in particular, at its facilities in the Netherlands and Slovakia. In February 2019, the holding completed the acquisition of the Slovenian company Perutnina Ptuj.

The founder, majority shareholder and chairman of the board of MHP is Ukrainian businessman Yuriy Kosyuk.

In the first quarter of 2023, MHP’s revenue increased by 34.7% compared to the first quarter of 2022 to $745.60 million, and net profit amounted to $49.07 million against a net loss of $108.25 million (with a foreign exchange gain of $4.18 million against a foreign exchange loss of $95.32 million).

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IFC insures half of portfolio risks of OTP Bank and OTP Leasing for EUR40 mln

The International Finance Corporation (IFC) is launching a EUR20 mln risk-sharing facility for the Ukrainian subsidiaries of Hungary’s OTP Bank: OTP Bank and OTP Leasing, to support small and medium-sized enterprises (SMEs), especially those operating in the agribusiness sector or owned by women.

“IFC assumes half of the risk on a combined EUR40 million portfolio covering key segments of the Ukrainian economy,” the corporation said in a press release on Friday.

It is specified that these will be the first risk-sharing arrangements in Ukraine under the IFC Small Loan Guarantee Program, which is supported by the European Commission and which will help save jobs, provide essential goods and services, restore supply chains, as well as generate export revenues and budget revenues.

IFC recalls that in 2021, SMEs accounted for 99.97% of all enterprises in Ukraine, generated about 60% of gross domestic product (GDP) and employed more than 7 million people. SMEs suffered significant losses in the second half of 2022, and now only 6% of them are doing business at the same levels as before Russia’s full-scale invasion.

“A strong private sector is key to Ukraine’s economic revival. Expanding access to finance for businesses is critical to counteract the macroeconomic instability and supply chain disruptions that are now severely hampering economic activity in the country,” IFC Vice President for Europe, Latin America and the Caribbean Alfonso Garcia Mora was quoted as saying in the release.

He added that IFC aims to ensure access to credit and stimulate innovation as a key prerequisite for Ukraine’s recovery.

As reported, initially IFC from the World Bank Group considered the project of providing partial risk coverage of new financing for Ukrainian OTP Bank and OTP Leasing for EUR60 mln – EUR30 mln for each financial institution, estimating its possible participation in risk coverage up to EUR30 mln.

OTP Bank was the eighth among 65 Ukrainian banks in terms of total assets (103.33 billion UAH) at the beginning of June this year. The Bank has 75 branches in Ukraine.

“OTP Leasing is the largest leasing company in Ukraine with the share of about 45% according to the results of the first quarter of this year. The CEO of OTP Leasing Andrey Pavlushin reported earlier that in the first half of 2023 the company financed Ukrainian clients for UAH 2.2 billion, which is 3-4% more than the indicator of the first half of 2022.

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$2 bln IFC program designed to ramp up support for Ukraine’s private sector and boost economy

A $2 billion IFC program designed to ramp up support for Ukraine’s private sector and boost economic resilience amid Russia’s invasion of Ukraine is receiving new financial support from the Netherlands and Switzerland, IFC has said.

“The Netherlands will be providing $43 million to support Ukraine’s agricultural sector and ensure emergency liquidity for private companies in critical agri-related industries. Switzerland will provide $11 million to support Ukraine’s small-scale farmers,” IFC said in the press release.

IFC said that Ukraine’s private sector generated up to 70% of gross domestic product before Russia’s invasion and provided crucial jobs, goods, and services. In spite of one in five micro and smaller business closing (as of mid-April 2022), the sector continues maintaining strategic exports and providing taxes.

The private sector will also have a crucial role to play in the country’s reconstruction efforts, estimated at $411 billion as of February 2023 – far more than government and donors can muster alone, the corporation said.

“A strong private sector is essential to help Ukraine’s economy recover and support reconstruction efforts. We welcome the contributions made by the Netherlands and Switzerland and their strong support for Ukraine. Ukraine’s economy remains on life support, and we will continue working with other development partners to provide the guarantees and grants the private sector needs,” IFC’s Managing Director Makhtar Diop said in the press release.

IFC recalled that IFC’s $2 billion Economic Resilience Action (ERA) response package includes finance from IFC’s own account working alongside guarantees and concessional finance (or grants) from donor governments. It complements efforts IFC has made with its own capital to support the private sector in Ukraine without donor support. As of April 2023, IFC’s outstanding portfolio was nearly $300 million to private companies and financial institutions in Ukraine.

IFC expects to be able to leverage these donor funds from the Netherlands and Switzerland between 3-4 times, meaning these contributions can potentially support over $200 million of financing.


International Financial Corporation and EBRD will create a new fund for $80 million in Ukraine

The International Finance Corporation (IFC) from the World Bank Group will enter the capital of a new fund managed by Horizon Capital – Horizon Capital Growth Fund IV (HCGF IV) with a contribution of $30 million, and the European Bank for Reconstruction and Development (EBRD) – with a contribution of $50 million.
According to the information on the corporation’s website, the project has been approved and the relevant documents are awaiting signing, this will be the first IFC investment in Ukraine since the start of a full-scale war that began in February 2022.
The EBRD clarified that its board of directors approved entry into HCGF IV on 6 September.
The target size of the new fund is $250 million. IFC specifies that the fund will invest primarily in fast-growing technology and export-oriented mid-cap companies operating in Ukraine and Moldova and competitive in the global market.
The fund is expected to invest $10-30 million to acquire minority stakes in 10-15 mid-cap companies worth $50-150 million.
According to the materials, HCGF IV is the successor to Emerging Europe Growth Fund III (EEGF III, 2017) and will follow a similar investment strategy focused on IT services and products, as well as e-commerce, innovative consumer products and fintech.
IFC recalls that it invested in EEGF III and EEGF II (2008), while the EBRD was an investor in EEGF III and EEGF II, as well as HCGF II.
IFC’s participation in the fund with equity capital, in an environment where the fund will not be able to raise this money in the market after the start of the war, will be critical to achieving the minimum first close of $100 million, and IFC’s continued participation will allow it to reach the final size of $250 million, the report says.
“This is a landmark event – despite the war, IFC decides to allocate money for investments in Ukraine. This should be a positive signal for other potential investors: you can and should start investing in the Ukrainian economy now,” the First Vice President commented on the IFC decision. Prime Minister of Economy of Ukraine Yulia Sviridenko.
According to the Ministry of Economy, the German Investment and Development Corporation (DEG), the Swiss Investment Fund for Emerging Markets (SIFEM), the Dutch Financial Company for Emerging Markets (FMO), the Western NIS Enterprise Fund, the Rockefeller Foundation are also planning to join the HCGF IV fund. and others.
Horizon Capital is a large investment company that manages five private equity funds (more than 40 institutional investors) with assets of $1.1 billion, including WNISEF (with a capital of $150 million), Emerging Europe Growth Fund (EEGF, $132 million), EEGF II ($370 million) and EEGF III ($200 million), as well as HCGF II ($258.3 million). The resources of these funds are invested in projects in Ukraine and Moldova.
The company currently has two founding partners, CEO Lenna Koszarna and head of investment committee Jeffrey Neal. The company’s offices are located in Kyiv and Chicago.

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