American Ukrainian Chamber of Commerce and Industry and its partners have created news updates on the leading topics of interest for individuals and companies pursuing trade and investment in the Ukraine.
July 26th, 2010
July News Updates
EBRD CONTINUES SUPPORT TO NOBLE RESOURCES UKRAINE
Long-term loan for investments in grain infrastructure and processing facilities
Anton Usov, EBRD, Kyiv, Ukraine, Thursday, 15 July 2010
KYIV - The European Bank for Reconstruction and Development (EBRD) is providing a $24 million loan to Noble Resources Ukraine LLC, a wholly-owned subsidiary of Noble Group Limited – a leading global supply chain manager operating in agricultural and other commodities and listed on the Singapore Stock Exchange. The financing is a continuation of the Bank’s support for the Noble Group’s strategy to develop and strengthen its operations in the Black Sea region.
The EBRD financing will be provided in the form of a long-term loan to be used by Noble Resources Ukraine LLC for investments in grain infrastructure and processing facilities in Ukraine. Noble Resources Ukraine LLC, in particular, is focused on sourcing and storage of commodities, such as grains and oilseeds, and their further export mostly to Europe.
The company is planning to work with third-party silo operators to encourage improvements at their facilities and operations in order to bring them in line with best international practices.
The loan will complement the $50 million revolving working capital facility, which the Bank provided to Noble Resources Ukraine LLC in October 2009. It also forms part of a larger financing package for Noble Group approved by the EBRD Board of Directors in May 2009 and which includes a $30 million syndicated working capital facility to a Turkish subsidiary of Noble Group, Noble Hammade Ticaret A.S, signed in March 2010.
Gilles Mettetal, EBRD Director for Agribusiness, said: “The project promotes further efficiency improvements in the grain infrastructure sector and fully fits into the Bank’s agribusiness strategy for Ukraine. We are pleased to work with a committed long-term sponsor willing to invest in the agricultural sector, which is very important for the revival of the Ukrainian economy”.
In the agribusiness sector alone, the EBRD has directly committed more than ˆ5.5 billion in over 380 projects across central and eastern Europe and the Commonwealth of Independent States since 1991. The European Bank for Reconstruction and Development is the largest financial investor in Ukraine. As of 1 May 2010, it had committed over ˆ5.0 billion through 197 projects.
LINK: http://www.ebrd.com/pages/news/press/2010/100715a.shtml
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EBRD INVESTS IN ENERGY EFFICIENCY AT LARGE UKRAINIAN AGRIBUSINESS
Astarta, large sugar producer, receives ˆ10 million loan to increase productivity and storage capacity
Anton Usov, EBRD, Kyiv, Ukraine, Monday, 12 July 2010
KYIV - Ukraine’s major agribusiness operator, Astarta, will receive a ˆ10 million loan from the EBRD, which is continuing to lend actively to this key sector of the Ukrainian economy. Astarta is planning to use loans proceeds for purchase of equipment, which will bring significant energy efficiency improvements at the company’s sugar production plants, as well as to construct two sugar storage facilities.
Astarta is the leader of sugar production and agriculture in Ukraine. The Company’s main activity is production of sugar and sugar by-products (molasses and dry granulated pulp), growing and sales of grains and oilseeds, and also meat and milk. Implementing its strategy of vertical integration, the Group operates about 180 thousand hectares of land under long-term lease.
EBRD COMMITMENTS TO COMPANY NOW OVER 40 MILLION EURO
This is the third transaction between the Bank and Astarta, which brings total EBRD commitments to the company to over ˆ40 million since May 2008. The project is part of the Bank’s work towards reducing the cost of food by helping boost agricultural output and support high-performing agricultural companies in the region.
The project is expected to result in further energy savings which will help ASTARTA lower its production costs, improve competitiveness and reduce the carbon footprint of its operations. The loan is a is a continuation of ASTARTA’s energy efficiency programme initiated in 2008 and supported by the first EBRD loan.
Gilles Mettetal, EBRD Director for Agribusiness said, “The Bank is once again demonstrating its commitment to the sustainable development of local agriculture. By supporting companies like ASTARTA, we promote energy efficiency, reduction of carbon emissions and modern farming methods. All these aspects are crucial in Ukraine’s bid to become the breadbasket of Europe once again.”
Victor Ivanchyk, CEO of ASTARTA Holding N.V. said: “We are proud with our impressive track record in cooperation with the EBRD. We consider the next loan as the recognition of ASTARTA’s efforts in investing into sustainable development and environment protection, as well as introducing the Best
Available Techniques. The new facility will help us further to increase efficiency of our key production assets and to strengthen the leading position of ASTARTA on the Ukrainian agrimarket.”
In the agribusiness sector alone, the EBRD has directly committed around ˆ6 billion in 400 projects across Central and Eastern Europe and the Commonwealth of Independent States since 1991. The European Bank for Reconstruction and Development is the largest financial investor in Ukraine. As of 1 May 2010, it had committed over ˆ5.0 billion through 197 projects.
LINK: http://www.ebrd.com/pages/news/press/2010/100712a.shtml
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EBRD IN $50 MILLION LOAN TO LARGE UKRAINIAN AGRICULTURAL PRODUCER
JSC Myronivsky Hliboproduct (MHP), production of poultry and grain
Anton Usov, EBRD, Kyiv, Ukraine, 15 July 2010
KYIV - The EBRD is providing a $50 million loan to one of Ukraine’s largest agro-industrial companies, focusing on the production of poultry and the cultivation of grain, with an investment that will boost demand for products from the local market and also make the company more energy efficient.
The financing for JSC Myronivsky Hliboproduct (MHP) consists of a $35 million working capital loan that will be used to purchase sunflower seeds and other raw materials that will be further processed and could also be used in the production of poultry meat. A further $15 million will be channelled to energy efficiency improvements.
As a result of this project, MHP, wholly owned by a Luxembourg holding company MHP S.A, is expected to produce volumes of sunflower seeds and other grains.
The increased procurement will stimulate demand for company products and guarantee stable prices. Energy efficiency improvements envisage, in particular, the installation of a biomass boiler, the modernisation of the existing storage and the construction of new cold storage units at MHP’s meat processing plant. MHP is also planning to replace the existing energy intensive cooling equipment as part of the project.
Gilles Mettetal, EBRD Director for Agribusiness, said: “By supporting MHP, the Bank maintains its focus on financing strong local companies and brands.
The project also underscores the EBRD’s commitment to supporting energy efficiency initiatives across all the projects that it finances.”
Yuriy Kosyuk, CEO of MHP, said: \\\"This transaction will serve to strengthen and support our expansion further. It will enable us to continue implementing our vertical integration strategy by expanding our operations to deliver high-quality products for the domestic market and run our business efficiently.”
In the agribusiness sector alone, the EBRD has directly committed more than ˆ6 billion in over 400 projects across central and eastern Europe and the Commonwealth of Independent States since 1991. The European Bank for Reconstruction and Development is the largest financial investor in Ukraine. As of 1 May 2010, it had committed over ˆ5.0 billion through 197 projects.
LINK: http://www.ebrd.com/pages/news/press/2010/100715b.shtml
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RAIFFEISEN BANK AVAL AGAIN NAMED BEST BANK IN UKRAINE BY EUROMONEY MAGAZINE
ENP Newswire, London, UK, Thursday, July 15, 2010
KYIV - On July 8 at a gala dinner in London, the esteemed British financial Euromoney magazine announced the winners of its Awards for Excellence - the most prestigious awards in the global banking industry. The dinner was attended by 450 of the leading bankers and investment bankers from around the world.
Raiffeisen Bank Aval was awarded the title of Best Bank in Ukraine. ‘When the going gets tough, the tough get going. That’s the message behind Raiffeisen Bank Aval’s approach over the 2009/10 period when Ukraine was hit by the twin evils of a sharp economic contraction and a currency devaluation, which wreaked havoc on many of its rivals’, reported the July issue of Euromoney.
It is a very prestigious award for Raiffeisen Bank Aval, especially in view of the difficult economic environment it had to operate in during the past year. Thanks to its prudent approach to investing, its financial strength and a renewed focus on efficiency, Raiffeisen Bank Aval maintained its position on Ukraine’s banking market as the largest foreign bank and fourth among commercial banks in terms of total assets.
‘In 2009 Raiffeisen Bank Aval confirmed its reputation as a solid and reliable financial institution, in particular thanks to implementation of strict limits on lending in foreign currency even before the National Bank of Ukraine imposed the relevant prohibition’, said Euromoney.
Euromoney also recognized Raiffeisen Zentralbank Osterreich AG (RZB) as Best Bank in Austria and Raiffeisen Bank in Albania won the award of Best Bank at the local market.
Since 1992 Euromoney, the world’s leading financial markets magazine, has singled out the outstanding institutions in finance. Over the years, the Awards for Excellence have evolved with the markets they cover. They now incorporate 25 global awards for banking and capital markets; and awards for the best banks and securities houses in almost 100 countries around the world.
All the awards have one central theme - they recognise institutions and individuals that demonstrate leadership, innovation, and momentum in the markets in which they excel. Banks are invited to submit their credentials for the awards which, after analysis and interview, are decided by a committee of senior Euromoney journalists chaired by the magazine’s editor, Clive Horwood.
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SWISSOTEL WILL MANAGE A LUXURY HOTEL IN KYIV, ADVISED BY DLA PIPER ON MANAGEMENT AGREEMENT WITH KDD GROUP
DLA Piper, Kyiv, Ukraine, Monday, July 12, 2010
MOSCOW, KYIV - DLA Piper has advised Swissotel, the leading luxury hotel brand owned by Fairmont Raffles Hotels International, on its management agreement with KDD Group, one of the leading property and investment companies in Ukraine, who are developing a deluxe hotel in Kyiv.
DLA Piper advised Swissotel on all aspects of the agreement to ensure that it complied with Ukrainian law, including real estate, IP, tax contract law and negotiated the terms of the contract with KDD. The agreement will see Swissotel manage a luxury hotel in Peremogy Avenue, located close to Kyiv\\\'s city centre, which is due to open in 2012.
Scott Antel, partner and Head of Hospitality for DLA Piper in the CIS, was the lead partner on the deal and commented: \\\"After some delays, it is promising that international hotel brands and standards are being established in Kyiv and Ukraine. This can only improve the City\\\'s hospitality profile, standards of training and services provided.
\\\"DLA Piper is pleased to have been involved with the majority of the large international hotel projects in Kyiv to date and we look forward to leveraging our experience on future projects in Kyiv and the regional cities.\\\"
The DLA Piper team also included: Natalia Kochergina, partner and Head of Real Estate (Kyiv), Svitlana Musienko, legal director and Head of Tax (Kyiv), as well as Natalia Pakhomovska, Illya Sverdlov, Alla Gavrushko, senior associates, Dmytro Pikalov, associate (Kyiv) and Adam Rogowski, associate (London/ Moscow).
DLA Piper Ukraine LLC is part of DLA Piper, an international legal practice. The Kyiv team comprises more than 30 lawyers and is headed by Managing Partner Margarita Karpenko.
INFORMATION: For further information: Nataliya Tkachenko, Marketing Manager, DLA Piper Ukraine LLC, Tel: +380 44 490 9579 or Email: nataliya.tkachenko (AT)dlapiper.com. For further information about our organisation and services, please visit our website: www.dlapiper.com.
UKRAINE: TAX AND LEGAL NEWSLETTER
Ernst & Young Ukraine, Kyiv, Ukraine, Thu, 15 July 2010
KYIV - Ernst & Young Tax and Legal Newsletter July 15, 2010: Contents:
[1] Order of operations with special payment instruments changes
[2] New requirement for minimum bank regulatory capital takes force
Order of operations with special payment instruments changes
On 6 July 2010 the Ministry of Justice of Ukraine registered Regulation of the National Bank of Ukraine \\\"On Conducting of Operations with Special Payment Instruments\\\" No 223 of 30 April 2010. The Regulation approves changes to the \\\"Order of Issuance of Special Payment Instruments and Conducting of Operations with Them.\\\"
Regulation No 223, except for certain of its articles, will come into force when it is published.
The Regulation modifies the current order of use of special payment instruments, which in Ukraine are mostly represented by credit or debit cards.
These provisions will take force after publication:
[1] The list of conditions that must be included in agreements between a cardholder and an issuer bank will become longer;
[2] Banks will be obliged to provide clients with free of charge monthly account statements;
[3] Issuers will be obliged to refund immediately to clients any non-authorized transactions if the clients inform them about the transactions without delay. Issuers will also be liable for returning clients’ accounts to the initial amounts;
[4] The permissible cash withdrawal limit in UAH that an issuer bank is allowed to set up must not be less than two minimum salaries. At present it is UAH 1,776. A cardholder has the right to change the limit, except if the National Bank of Ukraine has established the limit;
[5] Customers are not responsible for any transactions made without the direct provision of the payment instrument or made in the absence of electronic verification of the instrument and its holder. (Exceptions may apply if there is evidence that cardholder sustained the transaction by an direct or indirect action on his or her part, including disclosing the PIN or any other important information.);
[6] Issuer banks that participate in payment systems and that issue or/and acquire special payment instruments, except for payment cards, should provide the National Bank of Ukraine with Reports on Bank Activity by 1 August 2010. The Regulation also stipulates the form that the report must take.
In addition, Regulation No 223 includes articles that will take force in 2011-2012.
These requirements will become effective on 1 January 2011:
[1] The maximum foreign currency cash withdrawal via ATMs will be limited to the equivalent of UAH 5,000;
[2] The maximum value of prepaid special payment instruments will be limited to the equivalent of UAH 5,000 and UAH 2,000 for domestic and international instruments, respectively;
[3] Any payment system service fees or charges related to domestic settlements involving special payment instruments issued by resident banks of Ukraine must be paid in Ukrainian currency only and via a Ukrainian bank;
[4] According to the Regulation, a resident bank is the only place where a security deposit (or other guarantee of that payment system members o participants will fulfill their obligations) can be retained. This provision applies only to security deposits or guaranties related to transactions within the territory of Ukraine.
On 1 January 2012 there will take force the requirement that issuers (or acquirers) must inform customers about the exact cash withdrawal fee prior to the initiation of a transaction. Customers will also be able to decline the transaction.
New requirement for bank minimum regulatory capital takes force
On 17 July 2010 the Regulation \\\"On Amending Changes to Several Normative Acts of the National Bank of Ukraine\\\" No 273 of 9 June 2010 will take force. The Regulation raises requirements for minimal bank regulatory capital. Now it will be UAH 120 million.
Any bank that on that date lacks sufficient regulatory capital will be:
[1] Obliged to increase its regulatory capital to the minimum level by 1 January 2012;
[2] Until the requirements are met, banks may attract cash deposits from individual persons or open/add banking accounts for them; but the total attracted
funds must not exceed the amount that the bank had in fact attracted as of the date the Regulation became effective.
UKRAINE: ASTERS SUCCESSFULLY PUSHES FOR INVESTOR-FRIENDLY CHANGES IN STATE SECURITIES AND STOCK MARKET COMMISSION\\\'S DOCUMENTS
Asters supported work of the Expert Council for Corporate Governance
Asters law firm, Kyiv, Ukraine, July 15, 2010
KYIV -- In the first half of 2010 the State Securities and Stock Market Commission of Ukraine (the \\\"Commission\\\") approved a number of clarifications (the \\\"Clarification\\\") of important provisions of the Joint-Stock Companies Law (the \\\"Law\\\").
The main goal of the Clarifications is to iron out some drawbacks and inconsistencies in the new Law by explaining how certain key norms can be applied in practice.
The business-friendly position of the Commission which underlies the Clarifications was formed under the influence and with the assistance of the Expert Council for Corporate Governance (the \\\"Council\\\"). Asters partner Vadym Samoilenko and associate Oles Kvyat took active part in the Council\\\'s work on draft Clarifications.
All joint-stock companies (the \\\"JSCs\\\"), both public and private, stand to benefit from these efforts to rationalize and simplify Ukrainian corporate law in which Asters takes active part.
Simplified Notification about General Meetings of Shareholders (the \\\"GMS\\\")
The Law is rather inconsistent when it comes to regulating the notification of shareholders about the GMS, its agenda and changes thereto. For instance, the Law states that shareholders must be notified by registered mail with delivery receipt. In the JSCs with a large number of shareholders this could lead to very high postal costs. Also, some post offices refused to process great volumes of such complicated mail.
The Commission clarified that way in which shareholders are notified about the GMS, its agenda and the changes to the agenda must be specified in the company\\\'s charter. This procedure established by charter must be identical for all shareholders. The notices must be sent using general mail without the need to use registered mail and to request delivery receipts.
This clarification is designed to reduce the costs associated with organization of the GMS, and simplify the notification process.
Cumulative Voting Procedure in Supervisory Board (the \\\"Board\\\") Elections Clarified
One of the main novel institutions introduced by the Law was cumulative voting for the Board and auditing commission of a public JSC. The cumulative voting procedure is intended to protect the interest of minority shareholders because it gives them an opportunity to have their representatives elected to the Boards and auditing commissions.
Although the Law introduced the possibility of the cumulative voting, it failed to specify the procedure and special characteristics of this voting method which is absolutely new for Ukraine.
This problem is likely to become critical when the Boards and auditing commissions are elected under the new Law. To address the problem the Commission clarified the cumulative voting procedure for the Board elections. The clarification is based on the definition of the cumulative voting in Article 2 of the Law, as well as on international practice of the cumulative voting which was first used in the United States in the 19th century.
The most important recommendations of the Commission can be summarized as follows:
[1] The number of the Board members is approved by the GMS and can also be indicated in the JSC\\\'s charter and/or the by-laws approved by the GMS.
[2] The candidates who during the cumulative voting received the greatest number of votes compared to other candidates, are considered elected to the Board.
[3] When the cumulative voting is used, the Board will be considered elected only when the full number of its members established by the GMS, by the company\\\'s charter or its bylaws, is elected.
[4] If the Law or the charter requires the cumulative voting for the Board election and one or more Board members are terminated for any reason without resolution of the GMS, the election of a new member or members is only possible through new election of the entire Board using the cumulative voting.
[5] Should the GMS resolve on setting up the Board and on election of its members, any shareholder can introduce an unlimited number of candidates for the Board.
[6] In a public JSC the cumulative voting can only be conducted using ballot papers.
Main ideas of this clarification on the cumulative voting were also reflected in the draft law aimed at improving the regulation of the JSCs introduced by the People\\\'s Deputy Yuri Voropaev. The bill passed the first reading in the Parliament on 6 July 2010 receiving broad political support.
Replacement of the Chairman of the Board
As a general rule under the Law the election and re-election of the Chairman of the Board is part of the Board\\\'s own competence. However, the Law allows companies in their charters to grant the right to elect the Chairman of the Board to their GMS. However, the Law fails to explicitly specify that in the latter case the right to re-elect the Chairman of the Board is also vested in the GMS.
This creates a situation where the practical exercise of the right of the GMS to elect the Chairman can be easily undermined in practice by the Board which would retain the right to re-elect the Chairman elected by the GMS and to appoint a new one.
This inconsistency in the Law could have potentially dangerous consequences for JSCs and their shareholders. To prevent this, the Commission clarified that the Board can re-elect its Chairman only when the company\\\'s charter does not grant the exclusive right to elect and re-elect the Chairman to the GMS.
Who Can Cancel Shares Redeemed by the JSC
Under the Law cancellation of the shares redeemed by the JSC simultaneously falls within the exclusive competence of the GMS and the Board. To address this diversity the Commission explained that the decision to annul redeemed shares can be made by either the GMS or the Board.
The Commission further clarified that the GMS can make this decision independently and without Board decision. Finally, the Commission makes it clear that the shares annulment decision made by the Board has to be followed by the GMS decision to amend the company\\\'s charter.
New Developments
In 2010 the Council and our experts will continue their work on clarifications and regulations implementing the Law and on amendments to the Law. We will continue keeping you updated about the most important of these developments.
INFORMATION: For further information please contact Vadym Samoilenko, Partner, vadym.samoilenko (at) asterslaw.com; Oles Kvyat, Associate, oles.kvyat (at) asterslaw.com. LINK: http://www.asterslaw.com
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GROUPE ADEO (FRANCE) AND LEROY MERLIN UKRAINE ADVISED ON ACQUISITION
OF DIY STORE DEVELOPMENT PROJECT IN KYIV BY VASIL KISIL & PARTNERS
Vasil Kisil & Partners, Kyiv, Ukraine, Tues, July 13, 2010
KYIV - On 08 July 2010 GROUPE ADEO (France), a leading international operator of DIY construction materials stores and Leroy Merlin Ukraine LLC, a fully owned Ukrainian subsidiary of GROUPE ADEO acquired Solteks-Group LLC holding lease rights to ca. 4 ha land plot in Desnianskyi district of Kyiv.
The transaction was structured by means of acquiring shares in Solteks-Group LLC and was split into several stages, each followed by a financial closing. The transfer of shares in Solteks-Group LLC was a logical consequence of fulfilling a number of agreements between the investor and local developer, and at the same time opened a series of new project-related agreements, including project management and others.
Vasil Kisil & Partners act as legal advisors on the project and advise Leroy Merlin and GROUPE ADEO on all matters, including comprehensive due diligence of the target, structuring the transaction, drafting the agreements, securing the payments, merger clearance, conducting negotiations in order to advance the transaction, and advising on various corporate, land, real estate, investment and compliance matters and regulatory procedures, etc.
The project is supported by the real estate and construction practice of Vasil Kisil & Partners, namely Alexander Borodkin, counsellor, and Victoriya Balyuk, associate, acting under the supervision of firm’s a partner Oleg Alyoshin.
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ARCELORMITTAL UKRAINE JUNE STEEL OUTPUT UP, ORDERS STAGNATE
By Devon Maylie, Dow Jones Newswires, London, UK, Jul 06, 2010
LONDON - The Ukrainian arm of ArcelorMittal, the world\\\'s largest steelmaker, said late Monday that while orders for its products aren\\\'t increasing and market conditions remain \\\"difficult\\\" steel output in June is still up from the same period last year.
\\\"Market conditions continue to be difficult, [the] number of orders is not increasing,\\\" said V. Vaideeswaran, acting chief executive of ArcelorMittal Kryviy Rih. Three out of five of its blast furnaces are running. Vaideeswaran also said that the non-refund of VAT continues to hamper the company\\\'s competitiveness.
\\\"We hope that [an] improved relationship with Russia will also open [the] steel market for Ukrainian exports and that technical barriers in [the] form of quotas will be lifted,\\\" Vaideeswaran said.
Steel production in June totaled 487,700 metric tons, up from 399,400 tons in June last year but down from 541,900 tons produced in May. Pig iron output totaled 419,800 tons in June, up 22% on the year but down 9% on the month. June rolled products output totaled 410,100 tons, up 16.5% on the year.
In the first six months of 2010, pig iron output totaled 2.664 million tons, up 31% on the year. Steel output totaled 3.066 million tons, a rise of 34% on the year. Rolled products totaled 2.633 million tons, up 24% on the year.
LINK: http://www.tradingmarkets.com/news/stock-alert/mt_dj-arcelormittal-ukraine-june-steel-output-up-orders-stagnate-1022990.html
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HOUSTON TOPS IN ENTREPRENEURIAL ACTIVITY
According to monthly economic report by SigmaBleyzer
Casey Wooten, Reporter, Houston Business Journal, Houston, TX, Fri, July 16, 2010
HOUSTON - Despite the U.S. economic recovery slowing in June, Texas businesses continued growing and Houston reigned supreme in terms of entreprenual activity, according to a monthly economic report by SigmaBleyzer.
On a positive note, June was the 11th straight month of output expansion in manufacturing and the 14th consecutive month of growth in the overall economy.
May’s level of industrial production in the Lone Star State was 5.1 percent higher than a year ago, the third straight month of gains, and the mining industry reported a 20 percent increase in output.
Meanwhile, Houston has the highest level of entrepreneurial activity out of the 15 largest U.S. cities, according to the latest Kauffman Index of Entrepreneurial Activity.
“Larger Texas metros, which entered this recession with more stable housing markets, a relatively higher concentration of commodity producers, and a greater exposure to government, education and export-oriented manufacturing, appear to be more resilient; and are emerging faster from the economic downturn,” the SigmaBleyzer report said.
Texas’ unemployment rate was 8.3 percent in May when Texas saw the first annual gain in jobs in May since the end of 2008. In June, the rate dipped slightly to 8.2 percent compared with 9.6 percent nationally.
That may increase, though, as the moratorium on deepwater offshore drilling puts “at serious risk the long-term oil production prospects of the Gulf of Mexico” and may have a significant impact on the Texas economy, the report added.
LINK: http://www.bizjournals.com/houston/stories/2010/07/12/daily45.html
