Ukraine

June 2011

FOREIGN DIRECT INVESTMENTS - Three of top- 10 Ukrainian M&A deals in 2011, were financed by foreign capital. These are: Ukrtelecom, Inkerman, VAB Bank.

IT - Viettel will invest 430 M€ in Ukraine during the next 5 years to supply broad-band internet services after signing a MOU with its Ukraine partner. Earlier Viettel has invested to Laos, Cambodia, Haiti, Peru and Mozambique.

IT - DataArt, a US custom software development company, announced the opening of its 3rd development center in Ukraine.

TELECOM - Austrian company EPIC has bought Ukrtelecom with EUR 367 M€ from the Ukrainian State.

BANKING - Centragas Holding AG took control of Ukraine’s VAT Nadra Bank after purchasing the lender’s additional shares for 300 M€.

FOOD INDUSTRY - Kraft Foods plans to invest 35 M€ in the construction of a logistics center in Sumy region.

BAKERY INDUSTRY – Entrée, the Georgian- French bakery chain, stated it will start operations in Ukraine by the end of 2011 year. The first bakery outlets are to going to be opened in Kyiv and Donetsk.

PACKAGING INDUSTRY - Guala Closures, one of the largest bottle top producers in the world, will invest 2 M€ in the construction of a second production facility in Sumy.

HEALTHCARE - Advent International, a private equity firm, announced that it has acquired a controlling stake in ISIDA, one of Ukraine’s leading medical treatment and healthcare providers.

PHARMACY INDUSTRY – EBRD has agreed to finance Ukrainian wholesale pharmaceutical distributor Alba Ukraine’s project with 25 M€ to improve its stock management and logistics and help it expand market share to 20% by 2016. Altogether EBRD has invested 6 Bn € into 264 projects in Ukraine and is the largest financial investor in the country.

HEALTHCARE – US WellTek Inc., acquired Stem Cells for Hope Inc., which carries stem cell treatments in Ukraine and Mexico.

LOGISTICS - State Railways Administration Ukrzaliznytsia is in talks with Skoda on the production of dual-system locomotives in Ukraine according to the technical documents of the Czech company.

RETAIL - Gap opened in June 2011 its first store, with 1 200 m2, in Kyiv on the Khreschatyk street in June 2011.

RETAIL - Prada announced it will open its first, 300 m2 directly operated store in Kiev by the end of 2011. Prada, with Louis Vuitton, are the first mono-brand luxury brand stores in Ukraine, whereas other retailers have preferred to operate via franchises.

RETAIL - L'Etoile Group, the largest perfume chain in Russia, has announced the acquisition of Brocard and Bonjour perfume chains in Ukraine.

ENERGY - Austrian Activ Solar plans to invest additional 700 M€ in solar energy projects in Ukraine. Activ Solar already invested 300 M€ in semiconductor factory in Zaporizhzhya.

ENERGY - Italy's Enel is interested in the privatization of Ukrainian energy facilities

March 2011

GDP DEVELOPMENT - Ukrainian GDP grew by 6 % in 2/2011 y-o-y. The forecast for whole 2011 is 4,5 %.

INFLATION – inflation fell to 7,2 %, the lowest level since 7/2010.

INVESTMENT CLIMATE - The risks of investing into Ukraine have grown due changes in taxation and worsening corruption. Starting of the promised reforms are hoped to change the development.

CONSUMER CONFIDENCE – Consumer confidence dropped by 7% in March across Ukraine and by whopping 25% in cities with over 0,5 M inhabitants as public trust to government declined.

CONSTRUCTION - The value of construction rose in 1-2/2011 by 6,1 % y-o-y to 400 M€. The strongest growth was registered in Rivne (48%), Mykolaiv (44%), Ivano-Frankivs (40%) and Crimea (33%) regions.

OIL - Britain's oil and gas company with assets in Ukraine Cadogan Petroleum plc plans to invest 20 M€ to develop business in Ukraine.

HEALTHCARE - Advent International, a global private equity firm, has made its first investment in Ukraine and has become the co-owner of the Isida-IFV private obstetric-gynaecological clinic in Kyiv. The fund focuses on the consumer sector and financial services with investments ranging between 40 M€ and 500 M€.

AGRICULTURE – French AgroGeneration, with 20 M€ turnover in Ukraine, has signed preliminary agreements to buy four farms the 7 000-14 000 ha size to further increase its already 48 000 ha cultivated land area.

December 2010

GDP DEVELOPMENT - GDP grew in 1-9/2010 5% compared with a 15% contraction last year. The average forecast for 2011 GDP growth was lowered to 4.6% from 4.8%. The main risks in 2011 will be internal factors related to tariff and fiscal policies, as well as the development of the banking system. Inflation forecast for 2011 was revised to 10,7% from earlier 10,0%.

FREE TRADE AGREEMENT – EU and Ukrainian representatives expect full implementation of the free trade agreement to take until 2022.

CREDIT RATING - Moody's raised Ukraine's sovereign rating from negative to stable after the country secured a 11 Bn€ bailout loan from the IMF and showed signs of recovery.

TAX SYSTEM - Efforts to reform Ukrainian tax system, ranked the third worst in the world, risks further alienating investors while failing to provide a much-needed revenue boost. Propositions that have drawn public criticism include a de facto bar on imports of second-hand clothes - a popular business in a country with an average monthly wage of about 190 € - and taxing interest earned on bank deposits of over 19 000 €.

BUSINESS REGULATIONS - Ukraine inching up two places to 145th out of 183 countries on World Bank’s most recent business regulations study is not comforting as its peers in Eastern Europe and Central Asia are reforming faster and leave Ukraine second to last in regional comparison.

WAGE DEVELOPMENT – Real wages in Ukraine in 8/2010 grew by 12,3% y-o-y. The highest growth in real wages was seen in Rivne (14.2%), Volyn (13.5%), Poltava and Dnipropetrovsk (13.2%), Luhansk (13.1%), and Cherkasy (13%) regions.

CAR SALES – Car sales grew in 10/2010 to 17 000 vehicles, which is up 31,7% y-o-y.

M&A – The value of M&As in 2010 was 1,9 Bn€, which is 30% higher than in 2009.

PRIVATIZATION - Ukraine will initiate privatization of all state-run coal mining companies in 2011.

GAS – TNK-BP, Russia-British oil company, said it could spend 38 M€ in gas exploration in Ukraine in the next few years and 1,5 Bn€ over the next 25 years.

GAS - TNK-BP, Russian-British oil company, is planning to invest over 76 M€ in methane extraction in Ukraine. TNK-BP has prepared a draft memorandum with the Cabinet of Ministers on methane extraction at one of coal extracting enterprises in Luhansk region.

GAS - Ukraine plans to build a liquefied natural gas terminal on the Black Sea by the end of 2016 as it seeks to reduce dependence on Russian supplies. The terminal will cost 0,9-1 Bn€ and may be located either at Odesa region, Mykolayvska region or in Crimea.

OIL - Ukraine’s largest petrochemical company KarpatNaftoKhim, owned by Lukoil, launched in operation its newly built chlorine and caustic soda plant and polyvinyl-chloride (PVC) production facility in Kalush.

FUEL - Socar, the State Oil Company of Azerbaijan, has opened 10 gas stations in Ukraine and the company plans to grow the number to 30 by the end of 2011.

MINING - Bulgarian minerals producer Kaolin has made a 11 M€ investment into building a quartz enrichment plant – largest Bulgarian investment to date in Ukraine.

TELECOM - Ukraine's State Property Fund postponed the auction of its 93% stake Ukrtelecom in Dec. due to having received only one bid from an Austria-based investment firm Epic. The value of Ukrtelecom is estimated to be 1,3 Bn$ and earlier also Ukrainian System Capital Management and Russian tele operator MTS were believed to be interested in the company.

AUTOMOTIVES – Sсania, Swedish heavy trucks and busses producer, plans to invest 3-4 M€ in Q1/2011 into opening its third center selling and servicing Sсania trucks and buses in Lviv region. The existing Scania centers are in Dnipropetrovsk and Kyiv.

REAL ESTATE - ISTIL Group with real estate, media, film production and industry assets in Ukraine, is to keep its pace of investment in the country and inject about 38 M€ more in 2011 mainly to building the Leipzig Hotel in Kiev and to completion of business centers and a logistics facility. ISTIL Group's assessed investment as of the end of 10/2010 were 143 M€.

REAL ESTATE - Ukrainian-Canadian JV Toronto-Kiev plans to open a 80 000 m2 multi-purpose complex in Kyiv in Q1/2012.

REAL ESTATE - Rinat Akhmetov, Ukraine’s richest man and the owner of SCM, recently acquired 23% in TSUM, Kyiv’s aging Soviet Central Department Store, and is set to buy a controlling stake in the company. Akhmetov aims to develop the department store into Ukrainian equivalent of London’s Harrods. At the same time in July Mandarin Plaza’s Vagif Aliev was reported to have won a state auction to buy 39% of TSUM for around 8,4 M€. The unclear situation around the department store may be a prelude to future court battles.

INSURANCE - Horizon Capital, a private equity fund manager, has acquired 100% of Fortis Life Insurance Ukraine from Belgian-Dutch group Ageas.

BANKING – HSBC bank is closing its representative office in Ukraine after a change in strategy. The bank registered a representative office in Ukraine in January 2008, just months before the financial crisis swept across the world.

RETAIL - Metro Cash&Carry has postponed opening of two METRO Baza outlets from 2010 to 2011 because of still searching for appropriate premises. So far Metro has invested 476 M€ in the Ukrainian economy and created 7 000 new jobs.

RETAIL - Merx Group furniture concern is the developer of a trade center with a total area of 70 000 m2 near the Teremky-2 district in Kyiv, which will be part of the largest mall in the country. The concern plans to develop the project on a 4 ha plot and be ready in 2012.

DAIRY INDUSTRY - Danone is set to open its 5th Ukrainian agricultural co-operative in a row this year to secure milk supply in the country. In these co-operatives Danone unites private farmers and supplies them with institutional support and equipment. Another 15 will follow next year.

PHARMACIES - Med-Service plans to open 100 drugstores in Ukraine in 2011, which will bring the total number of outlets to 348. The company plans to expand its network to 700 drugstores by 2015.

PHARMACIES - System Capital Management (SCM), the largest financial and industrial group in Ukraine, has acquired Farmatsiya Donbasu, which manages a chain of over 120 drugstores in Ukraine.

AVIATION - New 21 000 m2 terminal at the Kyiv International Airport opened in 10/2010. With the extension the airport can serve 1 500 arriving and departing passengers per hour.

TOBACCO INDUSTRY – Russian Megapolis distribution group is considering acquisition of two large tobacco distributors in Ukraine's west region: Lviv-based West Tobacco Group LLC and Ternopil-based Podillia-Tiutiun LLC.

HOTELS - Kyiv-based Reikartz Hotel Management, will open three new hotels in Ukraine this year in Dnipropetrovsk, Ternopil region and Lviv bringing the overall number of the chain's hotels to nine with 600 rooms in total. The company plans to expand its chain of three- and four-star hotels in Ukraine to 20-25 hotels by 2015.

IT – Selectica, a US producer of business software, has opened a 30 person research and operations center in Odesa.

MEDIA - Forbes launches Forbes Ukraine through a licensing agreement with United Media Holding. The first issue of the magazine will appear in Q1/2011.

ENTERTAINMENT - Ukrainian Cabinet of Ministers is revising gambling legislation to end the ban on casinos and slot parlors in early 2011 in preparation for the Euro 2012 soccer tournament.

September 2010

RESCUE PACKAGE - EU has approved a 500M€ macro-financial assistance to Ukraine to help it overcome the financial crisis.

GDP GROWTH - Ukraine's GDP growth in 1H/2010 was around 6.3% and for the full year 3.5 % is expected. Next year World Bank estimates GDP growth to be 4 % and 5 % in 2012.

CAR SALES - New car sales in Ukraine in May 2010 fell by 9% y-o-y. Despite the trend Renault Ukraine opened a dealer center in Poltava.

REAL ESTATE PRICES - The average price/m2 on the secondary housing market in Kyiv fell by during 1-6/2010 by 7% to 1779€/m2.

EDUCATION - Sheffield University will start offering master’s courses – including MBAs – at the Kyiv Business School and the opportunity for undergraduates to complete the final two years of study in Sheffield.

WHITE GOODS - Electrolux has invested 19 M€ to acquire a washing machine factory in Ivano-Frankivsk, from its Italian owner company Antonio Merloni S.p.A.

STEEL INDUSTRY - Illich Iron & Steel Works of Mariupol and the Metinvest conglomerate are likely to merge creating one of the world's top 20 steel firms.

STEEL INDUSTRY - ArcelorMittal has acquired OJSC Beryslav Construction Materials Plant in Ukraine to supply limestone to its subsidiary steel mill OJSC ArcelorMittal Kryviy Rih in Ukraine.

PRIVATIZATION – Preparations for the sale of the second-largest ammonia producer in Ukraine, VAT Odeskyi Pryportovyi Zavod, are ongoing. The starting price for the company is set to be 488M€.

RETAIL - Metro Cash & Carry plans to open several stores in the million cities in 2010-2011. The company also plans to open a Metro Base store in Kirovohrad in fall this year.

IT - Google expands Ukraine operations. Seven employees will work in Kyiv on Ukrainian-language versions of the company’s services, including search tools, Internet maps and the browser Chrome.

LOGISTICS - China National Technical Import & Export Corporation is interested in investing in the construction of the Yevpatoria maritime logistics complex in Crimea. According to a statement, the Chinese company is also interested in the construction of railways and roads, railway terminals, airports, seaports and maritime container terminals, as well as projects on wind energy and water supplies.

AVIATION - Boryspil Airport in Kiev, is opening a new 32M€ passenger terminal in October.

REAL ESTATE DEVELOPMENT - Swissotel has signed an agreement to manage a five-star hotel in the twin towers that are with 165m and 210m to become the tallest buildings in Kiev.

REAL ESTATE DEVELOPMENT - Mriya Ltd. (Odesa) is preparing the documents to start construction of the first five start hotel in Odesa in the spring of 2011. The company will invest into the project roughly 75M€.

REAL ESTATE DEVELOPMENT - Estonian real estate company owned by Hillar Teder will open a 200,000 m2, 116M€ shopping and entertaiment centre in Kyiv. The second phase is going to be completed in 2012 at a cost of 46M€.

AGRICULTURE - China will invest in five projects as part of a joint agri-park in Ukraine: oilseed crops cultivation, a mixed fodder plant, a veterinary medicine production plant, an oilseed processing facility and joint research in biotechnologies and cattle breeding.

June 2010

POLITICAL ENVIRONMENT - The coalition of Yanukovich's arch rival, Prime Minister Yulia Tymoshenko, has collapsed and the assembly is due to hold a vote of no confidence in her government. Ukraine's parliament voted to appoint a new prime minister, Mykola Azarov, who is a staunch ally of new President Viktor Yanukovych.

STEEL INDUSTRY - ArcelorMittal, the world’s largest steel producer, plans to invest 162M€ to modernize and boost efficiency at its Ukrainian steel mill in 2010.

FOOD INDUSTRY - Nestle, the Swiss-based food and nutrition giant, announced on Feb. 26 that it had purchased a leading Ukrainian culinary company. The acquisition, valued by analysts at 105-146M€, yields Nestle 100 percent ownership over Technocom, a top Ukrainian producer of dehydrated food products such as noodle-based soups and mashed potato, which are sold under the Mivina brand.

RETAIL - Germany’s Praktiker, one of the leading European home improvement and do-it-yourself hypermarket chains, opened its fourth store in Ukraine on March 12 and its first in the country’s capital city. The 9,500m2 facility now joins a chain which includes stores in Makiyivka, Donetsk oblast, the first to open in 2007, and later additions in Mykolayiv and Lviv. Praktiker, which in 2008 announced plans to open a total of 25 stores in Ukraine – each at a cost of about 9-11M€ – had planned to open a store in Odesa last year, but the project faced delays.

RATINGS - Ratings agency Standard & Poor's has increased Ukraine's sovereign credit rating by one notch, saying reduced political risks after an election will help it raise money and access bailout loans. S&P raised Ukraine's foreign currency sovereign credit rating by to B-/C from CCC+/C. Fitch Ratings has revised Ukraine's Outlooks to Stable from Negative.

INVESTMENTS - Vivex Capital Group, a Ukrainian-Polish investment venture which focuses on information and Internet technologies, announced late in February that it has launched a real estate consultancy in Ukraine called ARPA Real Estate. The group claims that its new property consultancy will bring new levels of service, innovation and standards to Ukraine’s real estate market.

ITC - Microsoft Corporation, the global software development giant, announced on March 10 that it had launched an information technology innovation lab in Kharkiv, the second in Ukraine thus far. It will cooperate closely with the first Microsoft IT lab launched in Ukraine, at Kyiv’s Taras Shevchenko University, and with about 130 such centers operating in 60 countries across the globe.

SALARIES - The Ukrainian population's real disposable income in 2009 fell by 8.5% year-over-year. The nominal income of the population grew by 6.2% over the period year-over-year. The average disposable income per capita in 2009 was 1513€, which is 6.5% up year-over-year. The expenses of the population grew by 6.2% in 2009 year-on-year.

OIL & GAS INDUSTRY - The Russian-British TNK-BP company is interested in the development of the Ukrainian shelf of the Black Sea and intends to enter the natural gas market of Ukraine. In December 2009, the TNK-BP signed an agreement on the acquisition of Kyiv-based Vik Oil limited liability company, which owns 118 filling stations in 13 regions of Ukraine. TNK-BP plans to invest 407M€ during the forthcoming three years into the development of the Lysychansk oil refinery in Luhansk region.

REAL ESTATE - Housing prices in Kyiv until the autumn of 2010 will grow only within the level of inflation. There will be a slight growth in prices, and the average value of deals will slightly rise. At present the average price of housing in Kyiv is 1465€ per m2.

AVIATION - Development Construction Holding, a real estate development company owned by billionaire Oleksandr Yaroslavsky, announced that construction of the new terminal at Kharkiv airport (above) should be completed by the end of 2010. The total investment in the airport, where work began in fall 2009, would reach 65M€. The new terminal will cover 20,000 m2 over two stories, with an initial capacity of 650 passengers per hour, boosted to 2,450 for the Euro 2012 soccer tournament. A 350-space car park will also be constructed, and the airport hotel renovated.

GDP FORECASTS - In Ukrainian the gross domestic product grew by 5% in the Q1 of the year. The government predicts GDP rise of 3.7% in 2010, with a nominal GDP of 100B€. The consumer price index (December on December) is expected at 113.1%, and the index of industrial producers' prices 114.4%.

BANKING SECTOR - An industrial group registered in Vienna, Austria has made the Ukrainian government an offer to buy a stake in the troubled Kyiv-based bank Nadra. The potential investor is ready to put about 0,5B€ toward the bank's recovery if the government invests the same amount.

TELECOMS- Ukraine is to put up an entire 92.79% state-owned stake in telecoms giant OJSC Ukrtelecom at an auction. The tender is to be called in August 2010. The government started the preparation of Ukrtelecom for privatization late in the 90-ies. A minor stake (7.14%) was soled on closed subscription to the company's employees, and 92.79% still remain in state ownership.

COMPETITIVENESS - Ukraine ranked 57 in the World Competitiveness Yearbook 2010 by the IMD business school of Lausanne, Switzerland, based on a study of 58 national economies.

CONSTRUCTION - Plaza Centers Ukraine (Kyiv), a subsidiary of Plaza Centers NV (the Netherlands), one of the leading developers of trade and entertainment centers in Central and Eastern Europe, is intending to construct 30 to 50 trade and entertainment centers in six cities of Ukraine. The company plans to develop a project of trade and entertainment centers under the Plaza Centers brand in Kyiv, Kharkiv, Dnipropetrovsk, Donetsk, Odesa, and Lviv. The project concerns 30 to 50 centers.

FOOD INDUSTRY - Kyiv-based MixMax Ltd., which was established in 2010 to develop the Ukrainian fast food restaurant chain, plans to open 26 restaurants in all regional centers of Ukraine during this year. The company plans to open restaurants only in leased premises. In particular, the first chain restaurant was opened on May 20, 2010 in the Global UA trade center in Zhytomyr.

AGRICULTURE - Avangard holding, one of the largest vertically integrated companies producing eggs in Ukraine, is planning by late 2011 to complete the construction of two poultry complexes in Khmelnytsky and Kherson regions. They plan to complete construction by the end of 2011 and start full operation by late 2012. a poultry complex will include a poultry factory with three million birds, a feed mill with a capacity of 40 tonnes per hour, workshops for sorting and slaughtering birds, and a biogas plant. The total cost of both projects is $450 million.

REAL ESTATE - Ukrainian Development Partners (UDP, Kyiv), which is developing the Novopecherski Lypky residential area on Pidvysotskoho Street in Pechersk district in Kyiv, held an opening ceremony of the first stage of the project worth 72M€ on May 20. The average price of apartments is 2035 -2200€ per m2, the price of penthouses is 4070€ per m2 and the price of luxury apartments is from 4070€ per m2

CONSTRUCTION - UVK (Ukrainian Cargo Couriers, Kyiv) plans to sign with a partner in the fourth quarter of 2010 an agreement on the construction of a special logistics complex in Brovary district (Kyiv region), which UVK would take on a long-term lease. Talks are being held with Ukrainian and foreign investors on raising of some 16-24M€ for the construction of the complex of 35,000 m2 on a land plot of 7.7 hectares that UVK leases.

ACCOMMODATION- A company controlled by Lviv businessman Andriy Fedorenko has signed an agreement of intent with international hotel operator Wyndham Hotel Group International on the management of a three-star hotel to be built close to Lviv's new stadium.

FOREIGN DIRECT INVESTMENTS - Polish-based alcohol holding Central European Distribution Corporation (CEDC) has set up a subsidiary in Ukraine. Ukraine is the largest potential export market for the holding. On the whole, the holding's net revenues January through March 2010 were 121M€, which was 2.1 times up on the first quarter of 2009, while its operating profit doubled to 9M€.

RETAIL - NRP (Kyiv), which is developing the chain of MOYO digital devices stores, plans in 2010 to open 20 trade outlets in Ukraine, bringing their total number to 24 stores with a total area of 3,600 m2. The company did not name a figure for investment in the project, adding that it was developing two formats of stores with areas of 150 m2and 300 m2.

March 2010

GDP DEVELOMENT - Ukraine’s economy shrank 7% last quarter, the smallest decline of the year, after a revival of exports helped boost industrial production. The annual contraction compares with a 15,9% slump in the Q3/2009, 17,8% in the Q2/2009 and 20.3% of the Q1/2009. World Bank forecasts Ukraine 2,2% growth in 2010 and 3% in 2011. The main barrier to faster economic recovery is a lack of credit.

RESCUE PACKAGE – IMF technical delegation will visit Ukraine in April to determine about the payment of a 2,7 Bn € installment in the 12 Bn € rescue package. In January Ukraine was denied of by IMF from receiving the next installment due to concerns over the intensity of the Presidential campaign and new laws on wages and pensions. At the moment Ukrainian government debt is the third-most expensive to insure in the world after Venezuela and Argentina.

PUBLIC DEBT - Ukraine’s public debt surged by 53% in 2009 to 28 Bn €, amounting to 34% of GDP.

BANKING - In 2009, six banks went bust, 14 banks remained under temporary receivership and three were nationalized. There are over 180 banks operating in Ukraine with assets worth 80 Bn €. Credit portfolios will continue to fall or remain at stable levels, as those institutions who can lend at all choose customers more carefully.

UNEMPLOYMENT - After rising sharply at the end of 2008 along with the beginning of an economic crisis, Ukraine’s unemployment rate stabilized at around 9% in the 2H/2009 in seasonally adjusted terms. Results of a recent survey of domestic enterprises shows that a vast majority of top managers did not expect the number of their employees to change in Q4/2009 and saw the number of personnel on forced leave declining. These findings suggest the period of severe cost cuts and layoffs in the private sector is close to an end.
§INFLATION – Inflation in Ukraine was 12,3% in 2009, which far exceeds the government’s original forecast of 9,5%.

EUFA 2012 – UEFA said in December 2009 that it was satisfied with the progress made by four of the country's cities selected to host matches for the 2012 football championship. The final decision of whether the country will host the championship will be made in 2011. The Ukrainian authorities said they will allocate 11 Bn € for the construction and rehabilitation of roads, as well as the construction of dozens of hotels to make up for the lack of accommodation capacity, as part of preparations for the event.

CAR SALES - Sales of new cars in Ukraine totaled a mere 7 500 vehicles in January 2010, slumping by 40% compared to December and by 64% versus the same period a year ago. The data supports earlier pessimistic projections made by some local car producers that sales of new cars in Ukraine might decline by a further 20-25 % to 120 000-130 000 vehicles in 2010.

STEEL INDUSTRY - Ukraine exported 24 million tons of steel in 2009. Although export decreased 16% from 2008, Ukraine is still the fourth largest steel exporter, behind to Japan, EU 27 bodies and Russia.

STEEL INDUSTRY - Russian-led group has bought 50,01% of ISD Corporation, Ukrainian steel group. Russian state bank, Vnesheconombank, will provide financing for the deal but will not participate in the acquisition.

INSURANCE INDUSTRY - The Ukrainian insurance market in 2009 was characterized by the absence of finalized merger and acquisition deals, as investors were not ready to buy Ukrainian companies at the prices offered. Still interest from investors is seen, and Britain's Aviva, Germany's ERGO, France's Groupama and other international groups are looking closely at Ukraine.

MEDIA - Sweden's Modern Times Group is increasing its share in Kyiv-based Vision TV Ltd., the Ukrainian operator of the international Viasat pay-to-view satellite television that belongs to MTG, to 85% via the purchase of a 35% stake from Britain's Strong Media Group.

IT RETAIL – Despite the significant write downs, analysts were pleased about Action’s, a Polish stock-listed computer hardware distributor, decision to pull out of Ukraine. Action said that it believed Ukrainian economy to be depressed for many quarters ahead, as a result of declining gross domestic product, high inflation and unemployment.

SPIRITS - Ukraine's Nemiroff vodka company, a leading global producer of spirits, is considering selling a majority stake to a strategic investor. Nemiroff, the world's third largest company in terms of vodka sales, is estimated to be worth more than 218M€. Nemiroff, which was founded in 1992, saw its net sales fall 14% in 2009 to 158M€ and net profit 50% to 28M€.

FOOD INDUSTRY - Kernel Group, one of the largest operators on the fat and oil market in Ukraine, announced that it had signed an agreement on the acquisition of a controlling stake in Allseeds Group, the largest Ukrainian operator on the vegetable oil market, for 30 M€.

LOGISTICS - Kyiv-based Danube Navigation Stevedoring Company Ltd. plans by late 2010 to launch a 21 M€ general cargo transshipment complex at Mykolaiv port. Mykolaiv port is located on a territory of 97 hectares and has a water area of 225 hectares.

TOURISM - Chornomor travel operator hopes within half a year to reach agreement with a private investor from the United States on investing 120 M€ in the construction of the Dinoland theme park near Bakhchysaray, The total investment in the creation of an theme park with the 100% use of 4D technologies is 150 M€.

HOTEL INDUSTRY - Best Western International has expanded its portfolio in Eastern Europe with its first hotel in the Ukraine, the Best Western Sevastopol Hotel in Sevastopol, located in one of the largest sea ports and cultural-historical centers.

HOTEL INDUSTRY - The Clubhouse Group Holdings hotel operator, which is developing the Seven Days three-star hotel chain in Ukraine, is planning to start construction of a 10-12-storey hotel with 200 rooms in Kyiv in Oct-Nov 2010. The cost of the project is estimated to be 14,5 M€.

HOTEL INDUSTRY - St. Sophia Homes Group resumed construction of a 24-storey hotel complex in Kyiv, The operator of the hotel is Hilton Hotels Corporation. By late November 2009 16 M€ was invested in the project, including over 9 M€ in construction and assembly work. To complete the project additional 46 M€ is needed. The construction of the building of around 58 000 m2 was started in 2007. The project foresees a 257-room hotel from the first to ninth floors, and 93 apartments.

FAST FOOD - McDonald's Ukraine is planning this year to open one fast food restaurant in Mariupol and Kharkiv and reconstruct six restaurants. The company plans to invest at least 13 M€ in its development, which is 2 M€ more than in 2009 when it opened three restaurants in Luhansk, Vinnytsia and Dnipropetrovsk and reconstructed three establishments in Kyiv.

AUTOMOTIVE - AvtoKrAZ Holding, the only heavy truck producer in Ukraine, in January 2010 produced 109 trucks, which is 76% or 41 trucks more than in December 2009. In January 111 trucks were produced in Ukraine, which is 12% up on December 2009 and 16% up on January 2009. Apart from AvtoKrAZ, Etalon Corporation assembled trucks at the Boryspil Car Plant.

January 2010

PRESIDENTIAL ELECTIONS – Ukrainian presidential elections will go to 2nd round where Viktor Yanukovych, the president thrown out of power five years ago by the Orange revolution, will be facing Julia Tymoshenko, key figure in the revolution.

INFLATION & GDP - Inflation forecast for 2009 is 13%, down from 22,3% in 2008. GDP decreased by 15,9 % in Q3/2009 y-o-y.

RECESSION - The profitability and sales revenues of companies continued to weaken during last year. Five major problems which companies have faced since the beginning of the crisis are: hryvnia devaluation, reduction in sales, delayed payments by partners/clients, lower demand for products/services, and cost cutting.

FOREIGN DIRECT INVESTMENTS - In the Global Venture Capital and Private Equity Country Attractiveness Index ranking Ukraine was placed as 63rd, down from 61st and ahead of only three countries in the survey: Kenye, Paraquay and Venezuela.

CREDIT RATING - Rating agency Fitch Ratings downgraded Ukraine’s long-term foreign and local currency ratings to B- from B but confirmed the country’s short-term foreign currency rating at B. The outlook on the ratings is negative.

REAL ESTATE - Compared to one year ago, dollar-denominated prices have dropped by 20-40 % on the primary and secondary residential property market. About 70 % of all construction projects in the capital remains frozen. Some leading developers have avoided bankruptcy narrowly. At least 15% of office space and a quarter of industrial and logistics premises are vacant.

AUTOMOTIVE INDUSTRY - Scania opened a 10 M€ head office and service workshop just outside Kyiv.

AUTOMOTIVE INDUSTRY - Zaporizhia Automobile Plant (ZAZ), Ukraine's biggest car maker, saw output plummet to 41 044 vehicles, down 82% y-o-y in 1-9/2009.

RETAIL – U.K. based Argo Real Estate Opportunities Fund and U.S. based DGL Group, invested 104 M€ into Riviera Shopping City just outside of Odesa. The shopping center will covers an area equaling to 12 football fields and has more than 100 stores, restaurants, a cinema and bowling alley.

ENERGY - Kulczyk Oil Ventures, controlled by Polish billionaire Jan Kulczyk, will acquire one of Ukraine’s largest independent gas producers for 31 M€.Two of the company’s units had signed agreements to buy a 70 % stake in KUB-Gas from a Californian-based company, Gastek.

ENERGY - The Inseco farming holding, with the assistance of the Ukrainian state agency for investment and innovation, plans to invest in the creation of a bio-gas plant worth 40 M€ in Rivne region, which would be the largest bio-gas plant in Europe.

TRANSPORTATION - Ukrzaliznytsya, Ukraine’s state railway monopoly, has missed a 76 M€ payment on a three-year 380 M€ syndicated loan, which was attracted in 2007 from British banking giant Barclays.

CONSUMER GOODS - Durex condoms and Scholl footcare products maker SSL announced that it had completed an acquisition of a Ukraine-based condom producer, Gainbridge Investments, for 21 M€.

AVIATION - Dubai-based Perla Group International, a diversified investment group, announced that it had purchased Aerocopter, a small Ukrainian helicopter factory, which produces the two-seat AK 1-3 petrol-powered chopper. The value of the deal was not revealed, but media reports dubbed it as a multi-million-dollar transaction.

September 2009

RESCUE PACKAGE – IMF may not pay the fourth tranche of the rescue package due to Ukraine not fulfilling the obligations set when agreeing to the package.

GAS DISPUTE - The gas dispute with Russia, which was last year supposed to be solved for next ten years, is raising its head again over the transit costs.

MORTGAGE LOANS – Somewhat normal mortgage crediting conditions can be expected to return at earliest in late 2011. At the moment the few banks, which are giving out mortgage credits charge 25-28% interest on hryvnia and require at least 50% own financing.

PRIVATIZATION – Privatization of Odesa Portside Plant, the largest chemicals plant in Ukraine, ended in farce as the the tender was declared invalid an hour after the winner was announced due to being too little over the starting price. The “winning” bid, made by major Ukrainian oligarch and co-owner of the country's largest bank Privat, Igor Kolomoiskii, was 400 M€, which was 80 M€ over the starting price.

RETAIL - Acteeum Ukraine is planning to start construction of a 62 500 m2 multifunctional centre with sport facilities in Odessa.

EURO 2012 IN RISK - UEFA experts report that the Euro 2012 stadium in Lviv cannot be be commissioned on time, by the summer of 2011. This casts a shadow over several other construction projects in the city.

FINANCING EURO 2012 – The government will start more treasury bonds to pay for Euro-2012 infrastructure projects. The opponents say that National Bank of Ukraine will be the only body marking the bonds, thus increasing money printing and inflation.

STEEL INDUSTRY - Ukrainian steel mills are facing stiff competition from Chinese steel exporters who continue to lower their prices amid weak demand from $530/t to $480-500/t.

LOGISTICS – Odessa based Euroterminal Ltd. will construct a 38 M$ logistics service center into Odessa maritime merchant port. EBRD will co-finance the investment.

June 2009

GDP DEVELOPMENT – Ukraine is in stagflation as the GDP is forecasted to contract by 8% in 2009 while inflation will still reach 17%.

INDUSTRIAL PRODUCTION - Ukraine Ukraine's Q1/09 industrial output has plummeted by 32% y-o-y, highlighting the devastating effect of the financial crisis on the country. The fall was largely due to a continuing decline in global demand for steel - the backbone of the Ukrainian economy.

BANKING - National Bank has abolished the moratorium on pre-term deposit withdrawals, a restriction imposed last fall in order to stop a run on banks and shore up a shaken banking sector.

ENERGY - Swedish EcoEnergy AB and the Ukrainian government have signed an agreement to begin the construction of waste incineration plants in Ukraine. Investment for the implementation of the project will likely exceed 20 bn €. The works in the first two cities are to start in 2H/09 and the budget for these two plants is 700 M€.

RETAIL - Nova Linia construction hypermarket chain will this year start the construction of three new hypermarkets in Donetsk, Sevastopol and Bila Tserkva.

RESCUE PACKAGE - Ukraine received the second tranche (worth 2,8 bn $) of the 16,4 bn $ IMF stabilization package in May and is expected to receive 3rd and 4th tranches according to schedule.

RETAIL - Nash Kray plans to expand its network of 59 supermarkets by additional 30 outlets by end of 2009. Five of the new stores will be owned by the company and 25 will be franchised.

MEDIA - Time Warner acquired 31% of Central European Media Enterprises, the largest media company in the Central and Eastern Europe giving the company interest on the Ukrainian media market as CME controls the 1+1 and Kino TV channels in Ukraine.

March 2009

CREDIT RATING - Standard & Poor’s lowered Ukraine’s credit rating to CCC+, which is the weakest in Europe and at the same level with e.g. Pakistan. It is possible that Ukraine will not be able to serve the 16,4 Bn € loan from IMF.

PRIVATIZATION – Krayan mobile crane plant is going to be privatized in 10/2009. The company has 50 000 m2 of production space and heavy structures welding capability.

ENERGY – Ukraine will pay discounted price for gas to Russia and in return give Russia discounted price for gas transit across the country. In the beginning of 2010 both parties will move to market prices.

STEEL INDUSTRY - Ukraine's biggest steel mill, owned by ArcelorMittal, reduced raw steel production to 6.2 Mt in 2008, which is 23,1% down from 2007. In country level, Ukraine, the world's eighth-largest steel maker, produced 37 Mt of crude steel in 2008 against 43 Mt in 2007.

BANKING - Deutsche Bank has announced the registration of its affiliate bank in Ukraine that will focus on corporate finance. The approval for the application is expected within a month.

FARMING - Landkom International Plc (LKI.L), a producer of agricultural feedstock, said it cut about 30% of its staff in Ukraine and planned to divest 35% of its 115 000 ha land stock to control costs. The reasons are sharp changes in the financial and agricultural markets both in Ukraine and globally.

AUTOMOTIVE - CJSC Eurocar, which belongs to the Volkswagen Group, produced in 2008 36 000 cars, which is 21,1% up y-o-y.

December 2008

ECONOMY - The Ukrainian economy is plunging: the Ukrainian stock market has plunged by nearly 80% in 2008, hryvna recently hit a seven-year low against the dollar, Prominvest - the 6th largest bank - suffered a run, rating agencies have issued downgrades, inflation is 20% and the loan interests are now back to above 20%.

IMPORT DUTIES - After gaining agreement from the World Trade Organization and the International Monetary Fund, Ukraine may increase import duties to 20% for fish, meat and furniture.

ENERGY - Gazprom will suspend gas supply to Ukraine after Dec 31 if the 2.4bn $ debt to Gazprom is not paid. The Ukrainian natural gas company Naftogaz denied being in debt directly to Gazprom but instead to an intermediary company half-owned by Gazprom and that the debt is only 1.3 bn $. Gazprom pressures Ukrainians also with a possibility to move directly to world market pricing, instead of 2011, in case the dispute is not settled.

October 2008

PARLIAMENT DISSOLVED - Ukrainian experts expect the dissolution of the Ukrainian parliament to weaken further the foreign investors' confidence on the development prospects of the country.

ECONOMY - The 1-9/08 inflation rate in Ukraine was 16.1%. The y-o-y inflation rate in September was 24.6%.

GAS PRICE - Gazprom, Russian energy giant, said that its export gas price for Europe has reached an all-time high of over $500 per 1 000 cubic meters. In the light of this Gazprom suggested that the price for Ukraine could more than double to $400 in 2009. Yulia Tymoshenko commented this by saying that this price would cause an "absolute shock" to the country's economy.

FOREIGN INVESTMENTS - The European Bank for Reconstruction and Development (EBRD) plans to invest 1 Bn EUR into projects in Ukraine by the end of 2008.

STEEL INDUSTRY - Ukraine's steel sector, the backbone of the country's economy, is in "critical" shape and urgent measures are needed to help the industry weather rapidly falling demand, major sector companies warned. A decline would have an extremely negative impact on Ukraine's economic growth prospects.

AVIATION - Several low-cost passenger airlines hope to launch flights in Ukraine during the fall offering less expensive direct flight tickets between Kyiv, European cities and Dubai.

August 2008

ECONOMY - Ukrainian economy grew by 6.4% y-o-y in Jan-May 2008. Industrial production grew by 7.5% y-o-y from Jan-Jun 2008. Manufacturing, particularly machinery and equipment, and trade were the main driving forces, whereas value-added in construction fell.

ECONOMY - Despite high inflation, real disposable income grew by 17.7% y-o-y in Jan-April - again outpacing productivity growth. Loan growth amounted to 74.8% y-o-y in April, although during 2008 banks have become much more strict in giving out loans.

RETAIL - Serbian retailer Delta has agreed to form a partnership with Russian investment group Ritzio to develop network of hypermarkets in Ukraine and Belarus with an investment size over 700 M$.

MANUFACTURING - Polish bathroom fittings manufacturer Cersanit CRSA WA is set to open a new ceramic tiles plant in Ukraine as an action to limit the negative impact of the soaring zloty.

RETAIL - British retailer Marks & Spencer opened its first store in Ukraine in May, last year and intends to open three more.

CONSTRUCTION - Germany's Knauf has decided to suspend its investment activities in Ukraine due to rising inflation and speculation on the real estate market, which have led to the stagnation of the construction sector and a slump of construction materials sales.

BROADBAND - Broadband market revenues in Ukraine jumped 65% to 73 M$ in the first quarter, versus 44 M$ in the same period last year. The total number of broadband internet subscribers in Ukraine has exceeded million residential and corporate customers in the first quarter, up from 620 000 year ago. The number of residential subscribers jumped 75% y-o-y, to 860 000. Broadband internet penetration of Ukrainian households rose year-on-year from 2.8% to 5.0%.

May 2008

ECONOMIC DEVELOPMENT - Ukrainian Real GDP grew in 2007 by 7.6% and by 6 % yoy in Q1/08. Risks have increased as inflation run at 26% in March. High inflation is caused by high food prices and the government?s largesse. The situation is being made worse by Ukraine?s currency being pegged to the US dollar. There seems to be no escape from high inflation due to the Prime Minister Tymoshenko lacking support from the Parliament to push through budgetary amendments and because of her populist policies, designed to broaden her appeal.

EURO 2012 SOCCER CHAMPIONSHIPS - The high level investment framework for the Euro 2012 event was published which divides 17 Bn EUR in the following manner:
12.4 Bn EUR for transport infrastructure
1.6 Bn EUR for sporting venues
3 Bn EUR for tourist facilities

PRIVATIZATION - The Ukrainian government will privatize Ukrtelecom, the incumbent telco, through auction in mid June with a starting price of 2.4 Bn $. The announced starting price is at the lower price range of 2.4-3 bn $ recently mentioned by the Ukrainian government. The current market value of the government owned 67.8% of the company is 2.54 bn $.

March 2008

WTO - The World Trade Organization (WTO) approved the accession terms of Ukraine, paving the way for the country's full membership. Ukraine's legislative body is set to ratify the agreement by July 4, and the country will become a full-fledged WTO member 30 days after the ratification.

PRIVATIZATION - Ukrainian government approved a list of 406 companies set to sell their state-owned shares during 2008. Some of the most significant state shares are in fixed line telephone company Ukrtelekom (68%), Odesa Portside Plant (99.6%), turbine producer Turboatom (75%) and six different energy distributors (25-27%).

BANKING - Intesa Sanpaolo, an Italian banking group, has agreed to pay EUR 504 mln for 100% of Pravex Bank, a mid-sized Ukrainian bank, marking the group's expansion in Eastern Europe. The acquisition comes almost a year after Intesa has failed to buy a bigger Ukrainian bank, UkrSotsBank, when regulators had suddenly delayed the approval of the deal.

BANKING - Russian Sberbank has bought 100% of the Ukrainian bank, NRB, for USD 150bn. The purchase comes on the back of almost two years of negotiations. The bank is to spend USD 125 mln to increase the capital of its Ukrainian operation and open additional branches in order to increase its share of the Ukrainian market to 10% by 2008.

COMMUNICATIONS - Telesystems of Ukraine (the PEOPLEnet trade mark) plans in 2008 to invest USD 90 mln in the development of the company. Recently, the company started providing services in the Dnipropetrovsk region city of Nikopol, and in two months it plans to provide services in another 11 cities: Mykolaiv, Luhansk, Kherson, Sumy, Vinnytsia, Khmelnytsky, Zhytomyr, Mariupol, Poltava, Kremenchuk and Cherkasy.

January 2008

ELECTIONS - The Ukrainian parliament voted on 18th December in favour of the appointment of Yulia Timoshenko as Prime Minister. 226 MPs of the Timoshenko Block and of Our Ukraine/Self Defence led by Viktor Yushenko, ie the strict majority of the 450 seats in Parliament supported her candidature by a show of hands against one abstention. The other parties boycotted the vote. Yulia Timoshenko has won back the place she occupied until September 2005.

BANKING - Israel?s largest bank, Hapoalim, announced the acquisition of a 75.8 percent stake of the Ukrainian Innovation Bank (Ukrinbank) for $136 million. According to Dragon Capital the sale of Ukrinbank confirms continued strong interest among foreign strategic investors toward the Ukrainian banking sector. The acquisitions of 20 Ukrainian banks have attracted $6.8 billion since 2004, according to Dragon Capital analyst Oleh Pronin. He said that a third of the banks were acquired in 2007, with UniCredit Group's recent acquisition of Ukrsotsbank for $2.2 billion and Commerzbank's takeover of a 60 percent stake in Forum Bank for $600 million representing the two largest acquisitions of the year.

ENERGY - Ukraine's state energy firm is near bankruptcy. Ukraine's state energy company Naftogaz is on the verge of bankruptcy and a special commission will be formed to try to save the group. Company's estimated losses for 2007 are 1.0 billion dollars.

LOGISTICS - Private financial - industrial group intends to build container terminal in the territory of the Odessilmash farm machine-building company in Odessa. A representative of Odessilmash says that the capacity of the terminal is TEU 2 - 2.5 million a year, and its construction will cost USD 400 - 500 million. The source specified that the high price of the project in the first place owes to the fact that the company is located beyond the borders of hydro engineering facilities of the Odessa merchant port, which will take extra costs on formation of a water basin, construction of an approach canal and a pier. "Interest in the project construction owes to the active free market demand for Ukrainian container haulage capacities. An important factor is the advantage of our company, which was formed on the basis of a big plant located in the coastal zone," the source said.