Business news from Ukraine

KYIVSHLIAKHBUD CEO OLEKSANDR RASCHUPKIN: IF THEY DECIDED TO SCRAP THE BIG CONSTRUCTION PROJECT, UKRAINE’S ECONOMY WOULD FALL INTO AN ABYSS

Exclusive interview of Kyivshliakhbud road construction company CEO Oleksandr Raschupkin for Interfax-Ukraine
– The coronavirus (COVID-19) pandemic has dramatically influenced on the economic situation in the country. However, the government decided to refuse from scrapping its infrastructure projects. Why?
– We are grateful to the president for taking a correct view of the branches that can support the country’s economy during the quarantine. The road construction industry financing has provided enterprises with orders and launched the goods and money chains. Hence, the number of jobs is growing and the state receives taxes from business operations of hundreds of enterprises and suppliers.
In particular, the road industry was put on the list of priority branches for financing, the budgeting was not cut by even a kopeck and, moreover, a significant amount of money was added to it. The plans the president had at the end of 2019 and the beginning of 2020 are being implemented in full.
If they decided to scrap the Big Construction project, Ukraine’s economy would fall into an abyss.
– What anti-epidemic protection measures does your company take amid the spread of COVID-19 in Kyiv? Do your workers use special protective equipment during road repairs? Are there any COVID-19 cases among your employees?
– Kyivshliakhbud operates within the limits of a megalopolis – Kyiv. Of course, there is a lot of responsibility on our company. We have taken all necessary measures at all of our bases, facilities, dormitories where our employees live and the plant: sanitizers and face masks have been purchased. The premises are treated with disinfectant, we also have express tests and we use them even when the least cold symptoms are detected.
What’s more, we have toughened discipline among employees and strengthened our healthcare teams. We have twenty medical workers today. They carry out temperature screening among all employees every day in order to take necessary measures if anything goes wrong. Thank God, we don’t have COVID-19 cases as of the end of April.
– The number of unemployed people is growing due to the pandemic in Kyiv and all over Ukraine. In addition, dozens of thousands of citizens have returned from abroad. Will Kyivshliakhbud provide crisis-affected Ukrainians with new jobs within the governmental program?
– Definitely. The RDS group, a part of which is Kyivshliakhbud, has announced its plans to increase its personnel by 900 employees, but they are mostly connected with the Ukravtodor’s projects which we are working on.
As to Kyiv, we are working on seven facilities in Kyiv. We hope that by the end of H1 we will overcome the peak of the pandemic and the financing of our project will be increased. We want people, who have returned from abroad and lost their jobs, as well as many people, who have been laid off in Ukraine, to get jobs. According to a moderately optimistic scenario, we will additionally employ around 300 people in Kyiv by the end of the year.
– The prime minister said that the people, who have lost their jobs recently, will have an opportunity to earn UAH 6,000-8,000 in road construction. What level of wages do you have in your sector? How did the epidemic influence it? Has labor supply increased?
– UAH 6,000-8,000 is a beginner’s salary. Of course highway engineers earn much more. We will do the utmost to revive the prestige of our job, and the level of wages you’ve mentioned is just the beginning.
– Foreign contractors, including Turkish, Azerbaijani, Belarusian companies, have been actively working on the Ukrainian market in recent years. How has the crisis affected or may affect their activities? Is there a possibility of them passing the contracts they had won in tenders?
– The foreign companies continue working. The only problem they may face during the quarantine is the fact that their employees, who are often citizens of other countries, could be banned from entering the country. The implementation of some projects may slow down due to this fact. The companies cannot pass the contracts they had won in tenders. A contract may be only dissolved and a new tender will be held after that.
As a national company we are aware of the importance of proceeding with works on all big and significant tenders. If necessary, we are ready to provide assistance to our foreign colleagues who work shoulder to shoulder with us, but I am sure that foreign companies won’t face any problems in Ukraine.
– What plans do RDS and Kyivshliakhbud have regarding the entry to European markets amid the quarantine and lockdown restrictions?
– We constantly monitor tenders in Bulgaria, Moldova, Romania, and Poland. These countries are close to us, although there are some nuances there. If we meet the qualification requirements of the tendering authorities, of course we will file bids for it, we have ambitions and skills.
– Did the situation in the country affect Kyivshliakhbud’s contractors? Is there a shortage of asphalt or other materials necessary for the production?
– No, there are no shortages, all contractors are working. Why is the road construction industry important to Ukraine today? Because, for example, when we win a tender, a range of industries is getting involved. Soil, crushed stone and sand quarries start to work. Mineral filler, concrete and many other raw materials are necessary for the production. We need high quality granite paving slabs and everything related to diesel fuel. Kremenchuk [Oil Processing] Plant is operating.
All these spheres start to work as soon as we win a tender. The processing and goods and money chains are created.
– Intensive traffic on Kyiv roads has become one of the main problems of the city in recent years. A traffic standstill during rush hours has become a norm in some districts. How does Kyivshliakhbud participate in the elimination of the traffic problems in the capital? Are you planning to build new road junctions?
– We are not an authority and we cannot directly influence the development strategy of Kyiv. However, as far as I know, Kyiv City State Administration and the mayor, Mr. [Vitali] Klitschko pay much attention to the settlement of this problem. As a contractor, we carry out the set tasks after winning a tender. We have to fulfill them.
I know that many works are being carried out on road junctions in Kyiv downtown and expansion of bridges, which are being constructed and repaired today in order to facilitate traffic. I know that Kyiv had ordered and is studying now a traffic survey. Taking it into account the city plans the construction of new road junctions, expansion of streets, and modernization of the traffic lights system. I know that these works are in progress and we cannot ignore this so as not to lose our competitive ability.
I wish we were involved as consultants on the issues of further infrastructure development in Kyiv and other cities.
– Repairs and construction of bridges and highways is also one of the key infrastructure problems in Kyiv and all over the country. Do you plan to participate in projects in this sphere?
– We regularly file bids for such tenders as we have our bridge department, which has to be provided with orders. We have completed work on five road junctions in the country as of today. And now we are working in Poltava and Odesa regions, we have completed an overhaul of road junction on Odeska Square in Kyiv.
Currently we are working on highways as a subcontractor for the organizations that have won tenders. Today construction of bridges is a priority all over the country and especially in Kyiv. In general, it is one of the most important directions for our development as well.
– It is known that the RDS group uses concrete technologies. In your opinion, is it reasonable to build concrete roads in Kyiv and other cities?
– A few years ago we successfully entered the concrete construction market. The issue of reasonability of such construction is regularly discussed in the country. There are clear reasons for use of concrete: concrete is a raw material which is produced by Ukrainian manufacturers and it should cost less and be more durable taking into account the fact that construction solutions are rather serious and a guarantee for them is provided for a longer term than for asphalt.
At the same time, we should take into account the technology of concrete road construction. In my opinion, concrete surface should be used mainly on roads of first category with a median strip. When we build a new road, it doesn’t matter what we use – concrete or asphalt – because it has a separate land allocation and it does not hinder traffic. However, construction costs and constructability should be taken into account. We are building concrete roads N-31 in Poltava region and N-14 in Mykolaiv region.
Speaking about Kyiv, I think, concrete roads could be built on large avenues or belt highways. The concrete technology can be used today.
– In what concrete road construction projects of the RDS group outside Kyiv do you plan to participate?
– We are working on the N-31 Poltava-Dnipropetrovsk project in Poltava region and N-14 in Mykolaiv region, which is known as one of the worst roads in the country. We won tenders for more than UAH 1 billion in one region and for UAH 1.5 billion in the second one and we perform works without delays.
The government has allocated financing in full. We are planning to bid for tenders for the construction of the N-14 Mykolaiv-Kirovohrad road. We are also planning to participate in the construction of the M-05 Kyiv-Odesa road in Odesa region. It was reported that there are plans to build a concrete road between Kherson and Mykolaiv seaports. We will be taking interest in this project. We have invested a lot in the concrete pouring technology and we are very competitive in this segment.
– Are there any new technologies in the sphere you are planning to use?
– The road construction industry has been actively developing in recent years. We never miss important exhibitions abroad and actively participate in trade shows from Germany to the UAE. We won’t be competitive without buying new equipment.
Automated equipment ensures higher quality of laying asphalt as well as base layers. The compounds that are added to asphalt and geogrids that are used in the technology of laying the base layers. We constantly monitor all of this in order to stay an advanced company on the market. We have our own design organizations which controls these tasks.
We do the utmost to show our customers the implementation of various technologies which improve quality and sustainability of roads.
– Do you have a vision of Kyiv’s road infrastructure in future? What should the municipal authorities focus on while planning road construction?
– Naturally, as a company that has been working in the road construction business for 15 years, we have overhauled roads from the greenfield: from replacing all utility lines – all engineering networks – to coating with asphalt and road furniture. And we have been working in Kyiv for nine years.
I think a comprehensive approach to road construction is important as it allows making them durable and helps to prevent replacement of pipes and breaking new asphalt in future. As utility lines in the city are very old, it is obviously impossible to change everything immediately. All cities have the same problem.
On the sites where new construction is planned and the cities’ general plans are approved, it would be clear where a new residential district and a new shopping mall would be built. Of course, then we could instruct monopoly owners of gas, electricity, water supply systems and other organizations to plan all of these projects for a 10-15 years perspective before road overhauls. And this road would serve there for a long time and one would not need to dig anything there. Speaking about replacement of old utility lines, the city as a customer always takes these technical conditions into account.
I can see a strategy in approving the city’s general construction plan with Kyivavtodor, and replacement of all supply systems could be envisaged by it. We also need a traffic survey as it is something you plan for a five to seven years perspective depending on the construction of residential and non-residential buildings. An increase in traffic, expansion of streets and other things should be planned.
– On April 29, the Antimonopoly Committee of Ukraine received from non-governmental organizations an appeal on the alleged violation of the antimonopoly legislation by the RDS group and Avtomagistral-Pivden. Can you comment on the issue?
What a curious coincidence! On April 28, Head of the state-run Ukravtodor Oleksandr Kubrakov spoke about the industry’s most acute problem of the domination of “tender trolls” (that’s how we in our professional community call the companies that disrupt tenders), called the names of the organizers, the names of the companies, estimated the total number of broken-down tenders at UAH 8.7 billion, and in a day the Antimonopoly Committee of Ukraine receives this appeal…
I think the owners of the RDS group will comment on the situation on their own. As a top manager I can say for sure that we work in line with the legislation, cooperate with our western partners and it is unprofitable and unacceptable for us to break any rules. Such appeals to the anti-trust agency are obviously a result of a shadow fight for the introduction of harmful to the country principles in the new procurement methodology in the sphere of road construction.
– The National Association of Road Builders of Ukraine and several other self-regulating associations stood up for this new methodology of procurements in the sphere of road construction, but the document also has opponents. What is your opinion about it?
– I support the new methodology of holding tenders. Ukraine has been actively adopting European experience, norms and legislation for recent ten years, therefore we should not neglect the laws and rules that exist in the European practice of road construction companies.
Today events in our country are developing in two directions: world financial institutions invest money in our country for road overhauls, the financing is provided by the World Bank and the European Bank for Reconstruction and Development, which work according to tough rules and criteria. Among them there is a requirement to demonstrate a fulfilled contract for the same amount for which a new tender is announced, availability of the volume of works fulfilled under the contract which is put up for tender, availability of equipment, qualified specialists and many other things.
It is a worldwide trend that experienced companies should work on big national roads. It guarantees reliability and quality of roads in the future. Without this it will be hard to implement initiatives of the country’s leadership aimed at the improvement of road quality, while the so-called “tender trolls” (small companies that disrupt tenders in order to blackmail big companies) will remain on the market with all consequences for the government and citizens.
We have invested big money in the development of our capacities over 15 years, we raised loans, we leased assets and took credits in order to reach the level at which we meet European criteria and build national roads. We are strong enough to fulfill any kinds of projects in Ukraine and abroad.

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UKRAVTODOR STARTS ISSUING GOVT-SECURED BONDS

The State Automobile Roads Agency of Ukraine (Ukravtodor) has started issuing bonds totaling UAH 5.782 billion, the agency has said on the website of the National Securities and Stock Market Commission.
The agency said in the statement that the issue of Ukravtodor bonds for the indicated amount was included in the public register of securities issues on April 28, 2020.
The Cabinet of Ministers of Ukraine approved the conditions for borrowing and providing government guarantees by the State Automobile Roads Agency of Ukraine (Ukravtodor) for a total amount of about UAH 19.27 billion at the meeting on April 1.
According to the decision of the Cabinet of Ministers, Ukravtodor will issue five series of government-secured bonds without a public offering.
The interest rate on bonds is set at 12.5% per annum and will be paid quarterly. The maturity of the bonds is from one to five years, depending on the series.
Bonds of Ukravtodor are redeemable by state-owned Ukreximbank.

STATE-RUN UKREXIMBANK AND UKRAVTODOR SIGN AGREEMENT ON FIRST TRANCHE OF UAH 5.782 BLN FOR UPDATING ROADS

JSC Ukreximbank and the State Agency of Automobile Roads of Ukraine (Ukravtodor) with the participation of President of Ukraine Volodymyr Zelensky have signed an agreement to provide the first tranche for updating roads in Ukraine in the amount of UAH 5.782 billion from the amount of financing, which will total UAH 19.3 billion.
“Despite the quarantine measures in our country, the most important thing is that the state works and, together with the banking sector and construction companies, builds kilometers of roads and “sews” our country! As I said, roads, bridges are a priority,” Zelensky said after the signing of the agreement.
He emphasized that the Big Construction program is the image of Ukraine as a country with modern and high-quality roads on which you can travel. The president also noted that the program will contribute to the creation of new jobs.
The president’s press service notes that the attraction of funds from Ukreximbank under state guarantees by Ukravtodor became possible due to the adoption of laws on amendments to the budget that Zelensky signed on February 4, 2020, and thanks to the decision of the National Bank to lower the refinancing rate. The loan interest rate will be 10.5% per annum.
“We, as a state bank, support the Big Construction project. With the signing of the agreement, Ukravtodor will receive the first tranche in the amount of UAH 5.782 billion at a rate of 10.5% per annum, which is 2% lower than the Cabinet of Ministers foresaw,” chairman of the board of Ukreximbank Yevhen Metsger said.
He said that Ukreximbank is ready to become a financial partner of the Big Construction project and lend its shoulder to all companies, in particular contractors, that will be involved in the construction of the facilities under this program.

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STATE-RUN UKRAVTODOR STARTS REPAIRING BORYSPIL-MARIUPOL ROAD

The State Automobile Roads Agency of Ukraine (Ukravtodor) has started overhaul on N-08 road in Cherkasy region on the site from the turn to Kaniv in Sofiyivka village to Pischane village of Zolotonosha district. Ukravtodor said in its Telegram channel that this is the first overhaul in Cherkasy region over the past 12 years.
The agency plans to repair 33.5 kilometers of N-08 road Boryspil-Dnipro-Zaporizhia-Mariupol in 2020.
Under the overhaul of the site, in particular, it is planned to carry out a complex of the following works: regeneration of structural layers of the road surface using cold recycling technology; strengthening the road’s sides and the drainline system from the roadway; construction of the road surface; furniture of auxiliary lanes; construction of road surface and road exits from three layers of asphalt concrete; construction of new landing and stopping areas; furniture of road surface marking and information signs.
In addition, it is planned to repair the bridge over the Supiy River, namely, to install a new monolithic slab and new barrier railings.

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STATE-RUN UKRAVTODOR STARTS BUILDING ROAD TO STANYTSIA LUHANSKA

The State Automobile Roads Agency of Ukraine (Ukravtodor) starts building a road to Stanytsia Luhanska, Head of Ukravtodor Oleksandr Kubrakov said during an online briefing on Thursday, April 9. “The main thing that starts this week is the road to Stanytsia Luhanska. There are several road sections, but the total length will be 130 kilometers and we are starting to construct this road today,” he said.
According to Kubrakov, there are plans to finish this road construction until mid-July.
The head of Ukravtodor also said that the H-31 Dnipro-Reshetylivka and H-30 Vasylivka-Berdiansk roads are currently under active construction.
“H-31 road is fully in operation. There are 29 kilometers along which no work is underway, because the feasibility study is being developed, but we understand that the president’s task is to complete this road this year, thus we are following the plan. As for H-30 Vasylivka-Berdiansk, some roads are already being commissioned. We hope that when the quarantine ends and the tourist season comes, this road will be opened,” Kubrakov said.

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CABINET OF MINISTERS OF UKRAINE APPROVES CONDITIONS FOR BORROWING BY STATE-RUN UKRAVTODOR

The Cabinet of Ministers of Ukraine has approved the conditions for borrowing by the State Automobile Roads Agency of Ukraine (Ukravtodor), Infrastructure Minister of Ukraine Vladyslav Krykliy said in his Telegram channel.
According to him, the funds will go to works at about 100 state-sustained building facilities.
“The interest-bearing bonds will be issued without making a public offer, the obligations under which are secured by the government. The conditions are the following: face value of one bond is UAH 1,000; interest income on bonds – 12.5% per annum and paid quarterly; bond circulation period – from one up to five years depending on its Series; the bonds is issued in five Series,” he said.
Krykliy said that this will restore roads, create jobs and stimulate contracting enterprises.

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