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Extracts from Ukraine Business Journal

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  • Ukraine now has 2 gigawatts capacity of renewable energy in place, about 40% more than last year. About 60 foreign and national companies have proposed a total of another 2 gigawatts for the Chernobyl exclusion zone alone, an official of the Ecology and Natural Resources Ministry told the EU-Ukraine Renewable Energy Investment Forum. Sergiy Savchuk, head of the State Agency on Energy Savings, said: Prospects for renewables are very good, very shining.
    Germanys switch to auctions cut investment in renewables in half, Hans-Josef Fell, a former member of the Bundestag for the Green Party, warned the investment forum. Noting that auctions require expensive business plans by participants, he said: My fear is that Ukraine will only see big investments from oligarchs. Michael Yurkovich, CEO of TIU Canada, owner of a solar power plant in Nikopol, Mykolaiv region, writes in the Kyiv Post: Auctions are no panaceathe country needs to be confident that the supply of potential projects exceeds demand, a pre-requisite for an effective auction.
    To lower investor risk, the government is using a Finnish grant to prepare a Green Investment Fund for Ukraine. Through this mechanism, the Fund would finance 30% of renewable energy investment projects, said Savchuk of the Energy Savings Agency.
    Germany has agreed to provide EUR 35 million to Ukraine for the promotion of biomass energy,reports Ostap Semerak, minister of Ecology and Natural Resources. Ukraines massive farm sector accounts for 17% of Ukraines GDP. But biomass burning agricultural waste for electricity -- only account for 2% of energy produced from renewables.
    Next year, $500 million could be invested in winterizing Ukraines energy inefficient houses and apartments, Prime Minister Groysman said Tuesday. To date, government-issued warm loans have financed the insulation of about 500,000 apartments. Ukraines new Energy Efficiency Fund has received about $120 million from the EU and Germany. On Tuesday, Andrzej Rajkevich, of Poland, was elected Board Chairman of the Fund.
    Highlighting investment opportunities, four Ukrainian cities Chorkiv, Kamianets-Podilskyi, Lviv, and Zhytomyr have set a goal of shifting to 100% renewable energy by 2050, Reuters reports. Zhytomyr plans to build three biofuel co-generation plants, four small hydro plants and 40 MW of solar, including a 10 MW plant next year. To cut energy consumption by 20% in a city of 250,000, Zhytomyr plans to retrofit schools and city buildings, buy electric trolley buses, and use LED street lights. Serhiy Sukhomlyn, mayor of this city 140 km west of Kyiv, tells Reuters the project is eased by Ukraines moves to decentralize energy production.
    Ukraines production of grain and oilseeds has doubled in less than two decades, Nikolai Gorbachev, president of the Ukrainian Grain Association, tells reporters in Kyiv. By July 1, the end of the marketing year, Ukraine should harvest 92 million tons of grain and oilseeds, compared to 42 million tons in 2001. The 50 million increase comes, he says, despite the fact that we practically did not expand sown areas.
    Through November, farm production was up 8.2%, compared to the first 11 months of last year, the State Statistics Service reports. Crop production was up 11.2%. But animal husbandry barely budged, rising by 0.4%. The number of cows dropped by 4% and the number of pigs fell by 3.2%. Chickens were up 4.1%.Dragon writes: We expect stronger harvesting results to remain the main sector driver, eclipsing tiny growth in animal farming.

    UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief
    For comments and story tips, Brooke is reachable at:
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      With IMF and EU money arriving this week in Kyiv, Ukraines central bank reserves should hit $20 billion by the end of December, for the first time since the economic crisis hit five years ago. Dragon Capital writes: We estimate central bank reserves may surge by 15% m-o-m in December, to $20.5 billion.
      Ukraine plans to leverage the $750 million in World Bank guarantees to raise $1 billion of foreign borrowings in two tranches - $400 million in the next 10 days and $600 million next month, Finance Minister Oksana Markarova tells Interfax-Ukraine. On Tuesday, Cabinet of Ministers capped the annual interest rate at 4.9%. Deutsche Bank AG and TMF Global Service (UK) Ltd are to syndicate the loans, earning a commission of 0.8% of the totals, Interfax-Ukraine reports.
      The first tranche of IMF money -- $1.38 billion is to be disbursed immediately. But the next two tranches probably of $1.24 billion each depend on Ukraine passing two semi-annual reviews, the first after the expected April 21 presidential runoff election, and the second after the fall parliamentary elections. For this program, the 10th in Ukraines history, the IMF lists key markers: reducing the public debt, reducing inflation at a flexible exchange rate regime, strengthening the financial sector and real improvements in tax administration, privatization, governance, and anti-corruption.
      Noting that the next two tranches are not secured, Concorde Capitals Alexander Paraschiy writes: Their provision will depend on Ukraines willingness to continue cooperation with the Fund, which will depend upon the result of this spring's presidential elections, in our view. In particular, it will be important for the Fund that power brokers protect the institutional independence of Ukraines central bankmaintaining IMF cooperation will be important for the country to get smoothly through 2020 when repayments of international debt are not much smaller than in 2019.
      Dragon writes of the IMF program, which is to last through February 2020: Continued cooperation with the Fund would also anchor domestic economic policies and help preserve macroeconomic stability during the turbulent election period and amid rising external pressures.
      Following one IMF recommendation, the government is dividing the State Fiscal Service into the State Tax Service and the State Customs Service, the Finance Ministry reports. Deputy Finance Minister Serhiy Verlanov says the division will create the basis for the demilitarization of tax authorities, improve the quality of services provided to taxpayers, increase the transparency and accountability of work of tax and customs authorities.
      GDP growth in July-September was 2.8% compared to the same third quarter of 2017, reports the State Statistics Service. The IMF forecasts Ukraine's GDP will grow this year by 3.3%, near the National Bank of Ukraines forecast of 3.4%. Ukraines state budgets for 2018 and 2019 are based on GDP growth forecasts of 3% annually.
      The Deposit Guarantee Fund has started to liquidate VTB Bank, the Ukraine unit of Moscows VTB, a state-owned bank. Liquidation started after the National Bank of Ukraine blocked the banks sale, alleging procedural violations by Ukrainian banks interested in buying what once was one of the top 20 banks here.
      Under liquidation, depositors have until the end of January to apply to the Fund to get their money back. Deposits up to the insured limit -- $7,150 -- are to be paid in full. This will cover 97% of depositors or 59,108 people, the Fund calculates. But this will cover only a quarter of the total $131 million on deposit. The other depositors are not to be paid more than the insured limit. Alexander Shevchenko was appointed a liquidator of the bank, a process expected to take two years.
      Russias two other big banks here, Sberbank and VEB, are winding down their business, in Ukraine, Yakiv Smoliy, governor of the central bank, told Reuters in an interview two weeks ago. Until Russias military attacks on Ukraine in 2014, the three banks were among the top 15 lenders in Ukraine.
      After a record grain harvest of 70 million tons, traders predict record exports 50 million tons,Maxim Martynyuk, the new Minister of Agrarian Policy and Food, tells reporters. Confounding a slow start with irregular spring rains, Ukraines farmers set three production records this year:

      Corn -- 35.5 million tons of corn, or 15% more than the previous record of 30.9 million tons, set in 2013;

      Sunflower seeds 13.7 million tons, just above the previous record of 13.6 million tons, set in 2016.

      Soybeans 4.4 million tons, 5% above the previous record of 4.2 million tons, set in 2016.
      To relieve Russias maritime blockade of Mariupol, Ukraines main Azov seaport, Ukrzaliznytsia has increased its freight trains by 50%, to 24 trains a day, the state railroad reports. With freight trains running hourly along the 300 km route between Mariupol and Zaporizhia, the steel exports of Mariupols main employer, Metinvest, are reaching the Black Sea ports of Kherson and Mykolaiv. Concorde Capitals Dmytro Khoroshun writes: The increase of throughput to 24-28 trains per day should allow Metinvest to redirect its entire product volume currently being transported through the Azov Sea to Black Sea ports in case of an escalation of the Azov Sea blockage by Russia.
      FMO, Hollands development bank, is lending $10 million to Nibulon, the grain trader, to improve its use of river barges and ports. By 2021, Nibulon, the largest user of river transport in Ukraine, wants to move 4 million tons of grain by river the equivalent of 100,000 truck trips. Dutch companies want to participate in the rebuilding Soviet-era river locks on the Dnipro, once the Mississippi of Ukraine.
      Belarus and Ukraine are taking steps to restore river navigation on their shared river, the Dnipro. On Monday, Ukraines Sea Ports Administration signed an agreement with Beltopenergo, a Belarus oil trading company involved in constructing a commercial port at Nizhnia Zharia, a Belarusian village10 kilometers north of the confluence of the Dnipro and the Pripyat. Beltopenergo is to report on potential cargo flows and vessel sizes. The Ukrainian side is to study needed dredging depths. The entire 700 km length of the Dnipro in eastern Belarus is navigable. From Belarus, the river runs 1,100 km south through Ukraine to the Black Sea.

      UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief
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      For comments and story tips, Brooke is reachable at:
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        Tenders for 12 oil and gas production sharing agreements are to draw up to $2 billion in investment for exploration and production, predicts Igor Nasalik, Minister of Energy and Coal Industry. The tenders are to held in the first half of 2019 for fields in Chernihiv, Ivano-Frankivsk, Kharkiv, Lviv, Poltava, and Sumy regions. Nasalik estimated total deposits at 800 million barrels of oil. By 2022, he predicts, 40 million barrels could be produced.
        The long-awaited decision to re-start production sharing agreements is a huge winreally big time for Ukraine, international investors says Morgan Williams, director of government affairs of SigmaBleyzer, the Houston-based private equity group. Earlier this year, Michael Bleyzer, company president, said: We are interested in areas over 500 square kilometers within the PSA conditions. At the first stage, we are ready to invest 100 million.
        Also in energy, the Cabinet of Ministers approved Tuesday the transfer of 90% of rights and obligations of the old Royal Dutch Shell gas concession in Kharkiv and Donetsk regions to Yuzgaz BV, a Ukrainian-controlled Dutch company. Yuzgaz has contracted with Slovakias NAFTA to develop the Yuzivska field, reports Interfax-Ukraine.
        Details of Ukraines first 10 oil and gas leases up for electronic auction are now on the ProZorro platform. Auctions are to be held in the first quarter of 2019, says Stepan Kubiv, Minister of Economic Development and Trade. Nine licenses are for exploration and production over 20 years. One license is for exploration over five years. Covering a total area of 1,810 square kilometers, the lots potentially hold 86 billion cubic meters gas and 115 million barrels of oil. Oleg Kirilyuk, head of the State Geological Service, says that later in the year, 20 more leases, covering a total of 3,200 square kilometers, will be auctioned through ProZorro.
        Big privatizations are a condition for Ukraine to receive more money from the IMF under the new 14-month standby program, according to UNIAN. By July 1, these state companies should be sold off: electricity supplier Centrenergo, coal miner Krasnolimanskaya, insulin maker Indar, and Kyivs hilltop President Hotel. With the privatization mechanism in place, the 2019 budget allows for $600 million in revenue from sales. The IMF also says Ukraine should carry out 500 small privatizations state properties assessed at under $9 million.
        Running through February 2020, the IMF program also stipulates that Ukraine raise household gas prices to market levels by Jan. 1, 2020. Also, before this springs presidential election is over, the current government should appoint at least 35 anti-corruption judges with an impeccable reputation and relevant professional skills, according to the IMF agreement letter obtained by Ekonomicheskaya Pravda.
        By the end of March, the IMF wants to see a final Rada vote to abolish the National Financial Services and to split its powers between the National Bank of Ukraine and the National Commission on Securities and Stock Market. The central bank is to regulate and supervise insurance companies, leasing and factoring companies, credit unions, credit bureaus, pawnshops, and other financial companies. The Securities Commission is to regulate private pension funds, building funds, and real estate funds.
        A bill to cut green tariffs and to start auctions for wind and solar power energy passed its first reading Thursday in the Rada by a narrow margin -- two votes. Under the bill, a consensus of seven drafts, solar tariffs would fall by 25% in 2020, followed by annual decreases of 2.5%. The wind tariff would fall by 10% in 2020, following by annual decreases of 1.5%. Stating in 2020, auctions would be mandatory for wind projects over 20 MW and for all other renewable energy projects over 10 MW. The bill faces a second vote.
        Ukraines ban on sales of farmland was extended for one more year. With the Rada vote on Thursday, the ban will complete two decades. But the new law gives the Cabinet of Ministers two months to come up with a land sale bill. The governments leading version provides for a cautious exit from the freeze: land sales allowed only to Ukrainian citizens, with no buyer allowed to amass a holding larger than 200 hectares. The World Bank estimates that a free market for farmland would generate $1 billion a year in rural investment.
        Ukraine is launching a national website to help farmers determine market values of land leases.Maintained by the Agrarian Policy and Food Ministry, the portal draws on a nationwide database of soil quality and known auction prices. Last year, 1,837 lease rights to a total area of 42,500 hectares of farmland were publicly auctions, UNIAN reports. With farmers becoming more aware of market prices, the average rental rate in the first half of this year was 19% higher than in the first half of last year.
        To set a market for freight car rentals, Ukrzaliznytsya has put its first cars 50-grain hoppers up for leasing through ProZorro. Bids are accepted through Dec. 26 and the auctions will be held the next day. Last month, in a move highly unpopular with farmers and steelmakers, the state railroad raised its freight rates by an average of 41%.
        As of Thursday morning, 41 US Senators out of 100 backed a resolution urging President Trump to work with United States allies to promptly lead a robust multinational freedom of navigation operation in the Black Sea to help demonstrate support for internationally recognized borders, bilateral agreements, and safe passage through the Kerch Strait and Sea of Azov and to push back against excessive Russian Federation claims of sovereignty.
        The resolution also calls on EU ports to stop refueling Russian Navy ships and for the cancellation of the Nord Stream 2 gas pipeline. Senator Ron Johnson (R-Wis.), a co-sponsor, cites Russias attack on the Ukrainian Navy ships at the Kerch Strait, a new hot button issue in Washington: revelations about [Russias] extensive cyber disinformation campaigns in the U.S.
        Starting Monday, Boryspil airport will restrict air cargo imports for 10 days, reports the website for Kyivs main airport. With Boryspil, Ukraines busiest airport stretched for space and personnel, the Infrastructure Ministry seeks a foreign or national company to invest up to $10 million to double the existing cargo terminal by building a 10,000 square meter expansion.

        UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief
        For comments and story tips, Brooke is reachable at:
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          President Poroshenko lifted martial law Thursday from the 10 border regions where it was imposed one month ago. Poroshenko said presidential elections will take place as scheduled. We will protect democracy, he told the National Security and Defense Council Thursday. We precisely guarantee that the presidential election will take place on March 31, 2019.
          Martial law had no direct impact on Kyiv, the nations business capital, but it dented the nations image overseas. Several investment roadshows to foreign financial capitals were cancelled. Some foreign executives, following company security guidelines, postponed trips to Kyiv.
          Moodys, the international rating agency, has upgraded Ukraines sovereign rating one notch -- from Caa2 to Caa1. The rating outlook changed from positive to stable. In a 2,500-word explanatory note posted, the agency gave Ukraine a mixed report card: Our credit view of Ukraine highlights a stabilized low-growth economy, gradual reform progress, large FX debt burden and dependence on official funding to cope with external vulnerabilities. Corruption was cited as the most credit-negative institutional weakness.
          Concorde Capitals Alexander Paraschiy writes Wednesday: It was not the best time for a rating upgrade in our viewwe agree with Moodys that the institutional independence of Ukraines central bank is key for its future financial stability. So far, it looks like a possible victory of Yulia Tymoshenko, or any other populist candidate, in the spring presidential elections, will be a key risk for Ukraines sovereign rating.
          Dragon writes: The positive rating action from Moodys added to a raft of positive sovereign-related news over the past few weeksof the big three global credit rating agencies, Moodys has been the most conservative on Ukraine for the past several years, pioneering rating downgrades in 2013-2015 and being slower with post-debt restructuring upgrades. The new rating from Moodys remains one notch below those from S&P and Fitch (both at B-) and two notches below its pre-crisis high in 2010-2012.
          China starts importing Ukrainian poultry meat this week, the latest of 14 new countries outside the EU to do so, Ukraines Food and Consumer Service tells Interfax-Ukraine. Through 2020, 24 additional countries are expected to approve the imports of Ukrainian poultry, Volodymyr Lapa, head of the Service, recently told Ukraine Poultry Farmers Association.
          Ukraines top meat export, poultry exports were up 29% in dollar terms through September yoy, to $381 million. The third largest supplier of chicken meat to the EU, Ukraine exported 67,000 tons of poultry meat last year to Europe. In recent weeks, the countries approving imports of poultry meat from Ukraine include: Albania, Ghana, Hong Kong, Morocco, Tajikistan, and Tunisia.
          The Nord Stream 2 pipeline has reached Swedens economic zone, Sveriges Radio reports. With pipe laid for one-third of the 1,200 km Russia-to-Germany gas line, pipes now are stocked in Karlshamn, a Swedish port 250 km across the Baltic from the pipeline terminus, Greifswald, eastern Germany. Since Denmark has not approved Nord Stream 2, Gazprom may bypass waters near Denmarks Bornholm Island. The US Congress and the European Parliament recently passed resolutions demanding a stop to the project, saying the pipeline will strip Ukraine of crucial geostrategic leverage with Russia. Barring a stop work order, the pipeline is to be completed one year from now.
          Ukraines brains, hands, and grains," will be on display next month at the Ukraine House at the Davos billionaires club, the World Economic Forum. Ukraine: Creativity, Innovation, Opportunity will be the theme of the second Ukraine House, organized this time by Horizon Capital and Victor Pinchuk Foundation. From Jan. 21-25, the House will be at Promenade 62, about a 15-minute walk from the Congress Center, a gathering point for 5,000 investors, CEOs, political leaders, and media influencers. Alexa Chopivsky, Executive Director of Ukraine House Davos, says: "We are delighted to amplify Ukraine's voice on the global stage and substantial progress made, resulting in a paradigm shift in investors' perception of Ukraine and its talented people."
          In a reversal, Russias Rosccongress Foundation now is preparing a Russia House for Davos. Last month, Russian President Dmitry Medvedev announced that Russian state companies might boycott the World Economic Forum after organizers said that Russian businessmen under US Treasury sanctions would not be welcome. On Thursday, Roscongress announced the schedule of Russia House Davos. The schedule does not list the three Davos regulars now under sanctions: Renova Group owner Viktor Vekselberg, former Rusal Director Oleg Deripaska, and VTB Bank President Andrey Kostin. Last year, Russia House was across the Promenade from Ukraine House. This year it is to be in a different location.
          Russia added seven Ukrainian businesses and 245 people to a blacklist first announced two months ago. The sanctioned companies are: Ukreximbank, IG TAS, Centrenergo, Ukroboronproms Ukrspetsexport, TAS Insurance Group, First Logistics Company and TEP Vertical, a transport forwarding company. In a reflection of Ukraines growing economic autonomy after five years of war with Russia, five of the companies -- First Logistics, TAS, TEP and Ukreximbank, and Ukrspetsexport said Russian sanctions will not affect their business. Concorde Capitals Zenon Zawada writes: As with the first sanctions published on Nov. 1, we view this latest round as being mostly politically motivated.
          A Nova Posta unit has signed an agreement to deliver goods for IKEA after the Swedish furniture retailer opens in Kyiv, probably late next year. IKEA plans to open a 5,000 square city store in Ocean Mall, now under construction. About 20% the size of IKEAs traditional suburban stores, the Kyiv IKEA will be a series of furniture showrooms. Without an adjacent warehouse, the store will encourage online shopping, instead of cash and carry. In this format, NP Logistic, the Nova Poshta unit, will play a core role: delivering goods from a Kyiv region warehouse.
          For the first time since spring 2013, scheduled air service returned to Mykolayiv Thursday with a Dream Wind flight from Kyiv Sikorsky (Zhuliany). The flight is to be twice a week through the winter. In 2019, this new Ukrainian airlines plans to add scheduled flights on its Boeing 737s from Kyiv to Kharkiv, Odesa, and Zaporizhia. Until Dream Wind, only Yanair used the airports 2.5 km runway for charter flights, to Antalya, Turkey. Mykolayiv, Kherson, and Odesa airports are competing to become Ryanairs Southern Ukraine airport in 2019.
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          Starting Tuesday, Ukraine stops issuing visas at its international airports. This year, 35,000 visitors got their visas at Ukrainian airports, largely Boryspil. Now, citizens from 52 countries need to get their 30-day non-immigrant visas online. This process costs $85 and takes two weeks. The 52-country list includes Australia, Cambodia, China, Indonesia, Malaysia, Mexico, New Zealand, Saudi Arabia, Singapore, and Thailand. Citizens of 69 other countries do not need visas to visit Ukraine. This list includes all EU nations and five former Soviet republics: Armenia, Azerbaijan, Georgia, Moldova, and Uzbekistan. Since November, Russian men between 16 and 60 years of age are not allowed to enter visa-free.

          UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief
          For comments and story tips, Brooke is reachable at:
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            In Ukraines largest coal energy project since independence, Chinas Dongfang Electric International Corporation has signed a 5-year, $684 million contract with Donbasenergo to build two coal-fired power generating units at Sloviansk, 15 km north of Kramatorsk, the provisional capital of Donetsk region. With a Chinese bank funding 70% of the project, the units are to provide a total of 660 MW of capacity by 2023. Almost five years ago, Donbasenergo lost half of its power capacity after Russia-armed separatists seized its other power plant, at Starobesheve, 25 km from Russias border.
            At the signing ceremony in Kyiv, Luo Zhigang, chairman of Donfang, praised the tender procedure, by ProZorro, calling it the open, fair and the equal way of selecting the contractor for this project." Using fluidized bed combustion technology to burn steam coal, the new technology will cut production costs, maintenance costs and air pollution. Construction is to create 3,000 jobs. Concorde Capitals Alexander Paraschiy writes: It will be the biggest [project] in Ukraine's coal-fired power generation in the last three decades.
            Capital investment increased by 20% during the first half of 2018, compared to the first half of 2017, Stepan Kubiv, Minister of Economic Development and Trade, told the Cabinet of Ministers on Thursday. Of the $12 billion invested, he said, almost half was invested in new equipment, machinery, and equipment.
            Prime Minister Groysman predicts Ukraines economy will grow next year by 3.5%. He told the Cabinet of Ministers Thursday: The consensus forecast that we have for December speaks of growth of 3.5%. I emphasize that we can grow more. Stepan Kubiv, his first deputy prime minister, said this forecast is built on exports growing by 13% in 2019, and on industry starting to recover, registering 4% growth next year.

            This year, GDP growth will be more than 3%, said Kubiv. Leading forecasts for 2018 are: 3.2% -- Economic and Trade; 3.3% -- IMF; 3.4% -- National Bank of Ukraine; and 3.5% -- World Bank.
            Ukraine received Thursday an EUR349.3 million ($400 million) loan from Deutsche Bank, lent against the $750 million World Bank guarantee extended to Ukraine 10 days ago. The World Bank calculates Ukraine could raise $1 billion against the guarantee. The Finance Ministry says that in early 2019 it will take out another loan against the unused portion of the World Bank guarantee.
            With the new money from Deutsche Bank, Ukraines reserves rose Thursday to a five year high: $20.7 billion. The last time, Ukraines reserves were at this level was in October 2013, the month before the start of the Revolution of Dignity.
            Matching last weeks ratings upgrade to the sovereign, Moody's also has upgraded the ratings of Kyiv, Kharkiv, and PrivatBank from Caa2 to Caa1.
            During the first four months of small privatization auctions by ProZorro.Sales, the government has sold 471 state properties, netting a total of $21 million. Slated to accelerate in 2019, the program has the goal of unlocking the economic potential of thousands of dead state properties scattered across the nation.
            The Soviet-era industrial junk that rail passengers ponder from train windows may soon start disappearing as Ukrzaliznytsya starts selling scrap through ProZorro.Sales. The electronic platform has put up for auction the first four lots of railroad scrap, with a total asking price of $9.3 million. Yevhen Kravtsov, the acting CEO of the state railroad, writes: The sale of railroad scrap metal is our way of helping the domestic metallurgical industry.
            Tender offers submitted by 12 international auditing companies are being evaluated for the audit of Urkoboronprom, the state defense manufacturing conglomerate. The tender on ProZorro closed Dec. 11
            In an easing of Russias control of the Azov Sea, 11 ships docked Dec. 22-26 at Mariupol,Ukraines main port on the binational sea. As of Thursday morning, two ships were awaiting passage through the Kerch Strait and three more were expected for Friday, reports the ports Facebook page. In the last 10 days of December, the port is to handle 200,000 tons of cargo, compared to 400,000 for all of November.
            Contradicting promises by German politicians, Russian Energy Minister Alexander Novak tells Moscows Kommersant newspaper that Gazprom is capable of fulfilling its long-term [gas] contracts, even if the gas transit contract wont be signed [between Ukraine and Russia]. In reality, Nord Stream 2, with a design capacity of 55 billion cubic meters, cannot replace Ukraine, which last year moved 94 bcm of Russian gas to Europe. Russian pipelines advancing through Turkey are years from reaching such key markets as Austria and Hungary. The EU is pressuring Russia and Ukraine to negotiate a new gas transit contract to replace the one that expires one year from now, on Dec. 31, 2019.
            Teslas Supercharger stations will stretch from Ireland to Kiev next year, tweets Elon Musk, founder and CEO of the electric car manufacturer. Promising that Supercharger coverage will extend to 100% of Europe next year, he posts a company map showing existing electric vehicle stations stretching as far east as Katowice, Poland, and central Slovakia. Stations in Ukraines Rivne and Zhytomyr regions are labeled as coming soon.
            As Ukrainians head off for their New Years / Christmas holidays, Infrastructure Minister Volodymyr Omelyan says the nation recorded last week the 20 millionth passenger of 2018. By contrast, he notes, air traffic in 2015 was only 10 million half todays level. He said: The number of people who fly is growing rapidly. Regional airports resume their work. And more and more new airlines enter Ukraine. Aviation growth is 30% for the third year in a row.
            Turkish Airlines is increasing its direct flights between Istanbul and Kyiv by 50%, to two flights a day starting Feb. 18. In the spring, Turkeys flag carrier airline also will offer its first flight from Ukraine to a Turkish airport other than Istanbul. On April 6, Turkish starts regular flights between Kyiv Boryspil and Bodrum, the Aegean resort town. Currently, Azur Air, UIA and Windrose fly seasonal charters from Boryspil to Bodrum. In October, Andrei Sibiga, Ukraines ambassador to Turkey, announced that regular flights would start in 2019 from Ukraine to four new Turkish cities Bodrum, Bursa, Dalaman, and Izmir.

            UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief
            For comments and story tips, Brooke is reachable at:
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              Gazprom has started decommissioning Russian compressor stations on gas pipelines leading to Ukraine, Alexander Babakov, Director General of Gazprom Transgaz Moscow, tells Russian media. Three have been closed since 2017. In the next two years we plan to decommission four more, Babakov said of pumping stations that compress gas to push it through pipelines. Ukraine inherited 38,550 km of pipelines from the Soviet Union. The main function is to send Russian gas to Europe. This job that could be largely superseded by the commissioning of Nord Stream 2, a doubling of an existing Russia-Germany pipeline. On Sunday, Interfax-Ukraine quoted Babakovs boss, Alexey Miller, Gazprom CEO, saying of Nord Stream 2: The plan for the start of gas supplies is January 1, 2020.
              Phasing out deliveries to Ukraines pipelines will leave Europes dangerously dependent on Russia-Germany pipelines, Andriy Kobolyev, CEO of Naftogaz, tells Interfax-Ukraine. He notes that in recent years, Ukraine pipelines compensated for Russian delivery gaps caused by accidents or pipeline maintenance. He said Gazprom suffered eight major pipeline accidents in 2018, while there were none in Ukraine. In a warning to the EU, Kobolyev said: "Accident statistics on gas pipelines of Russia and their actions to reduce the gas infrastructure in the Ukrainian direction are eloquent." Kobolyev says Ukraine derives up to 3% of its GDP from gas transit fees.
              German leaders say some Russian gas must continue to go through Ukraine. Russians officials refuse to make a commitment. The EU is pressuring Russia and Ukraine to negotiate a new gas transit contract to replace one that expires Dec. 31, 2019. Tomorrow, to make Ukraines pipeline system competitive with Nord Stream 2, Naftogaz cuts in half the tariffs at all pipeline entry points, to $6.28 per 1,000 cubic meters. Through Oct. 1, the volume of Russian gas shipped through Ukraines pipelines, dropped by 7% compared to the same period last year, to 65.4 billion cubic meters. The drop cost Naftogaz $89 million in lost revenues.
              Under strong EU pressure, Ukraine will split up natural gas production and transportation operations, promising to adopt the legal framework in the first few months of 2019, S&P Global Platts reports from Kyiv. Janez Kopa, the Energy Community Secretariat director, says: "Unbundling should be designed in a way that the transmission system operator can be certified before the end of next year." Failure to unbundle according to EU rules, will give an advantage to the Nord Stream 2 Russia-Germany gas line if it is commissioned on schedule, one year from now.

              With the clock ticking toward unbundling, Prime Minister Groysman says his government is keen on finding a serious authoritative European or U.S. partner for joint management of the GTS. Referring to the Gas Transmission System, he tells Interfax-Ukraine: Our European partners are interested in receiving gas, and we are interested in ensuring transportation volumes, so we are both interested in joint management." To comply with the EUs Third Energy Package, Ukraine is to hand gas transmission over to a new operator company -- Mahistralny Gazoprovody Ukrainy, or Ukrainian Main Gas Pipelines.
              Russia expanded its ban on imports from Ukraine Saturday, saying it would halt $510 million worth of annual imports of food, raw materials and industrial and farm products. The wide ranging list includes wines, candy tractors, transformers, gas turbine, paper, wallpaper, gravel, crushed stone, and sunflower oil.
              Highlighting Russias unreliability as a trading partner for Ukrainian exporters, the ban is expected to spur further market diversification. With China-Ukraine trade growing by 20% a year, China may displace Russia as Ukraines largest national trading partner by 2020. Already, the EU as a group is Ukraines largest bloc trading partner, accounting for 40% of Ukraines foreign trade. Last year, Russia exported to Ukraine $7.2 billion worth of goods almost double the amount of Ukrainian goods bought by Russia -- $3.9 billion.
              About 3.2 million Ukrainians work abroad on a permanent basis, calculates the Ministry of Social Policy. With 16 million Ukrainians working inside Ukraine, this would mean that 17% of the total workforce is abroad, largely in the EU. The ministry reports that 7 to 9 million people a year participate in the migration process. Many work part time in the EU under the new 90-day visa free tourism rules.
              ZPP, Polands Union of Entrepreneurs and Employers, fears that 500,000 Ukrainians working in Poland would migrate to Germany if the Bundestag passes a liberalized immigration bill in 2019.According to our moderate scenario, which we consider realistic, 500,000 Ukrainians will leave the Polish labor market, Jakub Binkowski, ZPP spokesman, tells Germanys Die Welt news site. According to our negative scenario, it would be twice as many. There are about 2 million Ukrainians working in Poland.
              Under a draft bill passed Dec. 19 by Germanys Federal Cabinet, a minimal knowledge of German language would be a requirement for non-EU citizens to work in Germany. In Ukraine, German is the second most popular foreign language of study, after English. Germany is home to the worlds fifth largest population of people studying German as a foreign language.
              In Poland, to provide consular services to all Ukrainians within 2-hour drives of their homes,Ukraine plans to open a third consulate general, in Wroclaw, and to expand the number of honorary consulates to nine, adding Katowice and Kielce, Ukraines ambassador to Poland, Andriy Deshchytsia, tells Ukrinform. Today, in addition to the embassy in Warsaw, Ukraine has consulate generals in Gdansk and Krakow.
              Ukrlandfarming believes it can fill its 2019 labor needs 2,000 workers by courting graduating high school students and offering them training with the farm group, Nataliya Romanenko, HR director, tells Business news site. She complains that Ukraines ratio of university students to vocational students is 70/30 the reverse of the EU. Lack of work is becoming less and less a determining factor for migration, she says. There are vacancies, even a decent salarybut hiring staff, especially in Western Ukraine, is very not easy."
              In real terms, Ukraines average monthly wage in November was 11.4% higher than one year earlier, reports the State Statistics Service. Prime Minister Groysman predicts that the wage will end 2018 at 10,000 hryvnia or $357.
              As many as 2,500 IT specialists returned to Ukraine in 2018, says Dmitry Ovcharenko, acting executive director of the Ukraine IT Association. Similarly, the percentage of IT workers emigrating has dropped from 10% in 2015 to less than 4% in 2018, reports the IT Association of the Better Regulation Delivery Office. As Ukraine recruits IT workers from Belarus and Moldova, salaries here rise. With most IT workers paying only 5% in income taxes, post-tax salaries in Ukraine are comparable to post-tax salaries in Poland.

              UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief
              For comments and story tips, Brooke is reachable at:
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                Grain exports could rise by 20% for the marketing year, which ends June 30. There were up 9% for the first half of the marketing year, compared to same period in 2017. They While Corn shipments are up 64%, while wheat shipments are down 9%, compared to the same July-December period in 2017, according to Food Safety and Consumer Protection Service. Underscoring Ukraines role as a world food power, grain exports are to hit 47 million tons by the end of the marketing year, predicts the Agrarian Policy and Food Ministry.
                Although Ukraine attracted about $836 million in foreign agricultural investment last year, the real growth driver was Ukrainian investment, Maxim Martynyuk, acting Minister of Agrarian Policy and Food writes in the Mirror of the Week. Referring to Ukraines bumper grain crop of 70 million tons last year, he says this harvest is worth $15 billion, or 12% of the nations GDP or almost 80% of the nations foreign exchange reserves. Asserting that food accounts for 40% of Ukraines exports, he says: This is the stability of the national currency.
                To turn around a shrinking cow herd, Ukraine gave farmers $3.7 million in subsidies last year to maintain 176,765 calves, Martynyuk writes. But, he adds, farmers failed to use all credits available, partly because many prefer to keep their bookkeeping in the black. This reluctance to take farms out of the shadows also hinders farmers abilities to get loans from banks.
                Electronic auctions of leases of 179 lots of state-owned farm land have raised $521,000, double the expected amount. The government calculates local revenues could increase by $1 billion through expansion of what is now a pilot auction system. Ukrinform reports the system runs on state-of-the-art Blockchain technology, which eliminates any manipulations and corruption risks. Another 8,000 lots with a total area of 150,000 hectares are ready for sale. Martynyuk writes: The first results of electronic trading fully justified the efforts made: yearly rental rates soared up to 70%.

                Through Dec. 1, Ukrainian banks made $715 million in profits 11 times more than in the same period of last year, Kateryna Rozhkova, first deputy governor of the National Bank of Ukraine, reports on Facebook. "Of course, the year is not over yet, she wrote, awaiting full year numbers. But, she said, the banking sector is gradually, but surely recovering.
                The central bank has posted a schedule of inspections of 51 banks in 2019. In addition, the bank plans to carry out unscheduled inspections. In 2018, the National Bank of Ukraine carried out 25 planned and 21 unscheduled bank inspections. Since 2014, the bank has closed about half of Ukraines banks, leaving the country today with 90 banks, still a high number for Ukraines $126 billion economy.
                Moody's raised the ratings of seven Ukrainian banks by one notch, generally to Caa1, Moodys new rating for Ukraine. Upgrades were given to three state-owned banks -- PrivatBank, Oschadbank, Ukreximbank -- and to four commercial banks -- Pivdenny, Prominvest, Raiffeisen Bank Aval, and Sberbank Ukraine. In addition, Moodys upgraded the corporate ratings of Ferrexpo, Metinvest and MHP, from Caa1 to B3.
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                Regional airports are taking off, Alexander Kunitsky writes in UNIAN in an overview of Ukraines ongoing aviation boom. Idled after the collapse of the Soviet Union, Ukraines regional airports once again see jets -- this time Airbuses and Boeings. Of the 51 airports that operated in Soviet Ukraine, 12 now are active. The governments goal is quadruple that number to 50 in 2030. This would be two airports for each of Ukraines 24 regions.


                • Beyond the big five Kyivs two airports, Lviv, Kharkiv and Odesa -- here are the rising regional airports to watch:
                  Pridniprovye -- $7 million is budgeted to start construction of Ukraines first new airport since independence, on the border of Zaporizhia and Dnipropetrovsk regions.
                  Zaporizhia, Ukraines main international airport for the southeast, is not giving up. After recording about 400,000 passengers in 2018, Zaporizhia, Ukraines seventh busiest airport, inaugurates a new terminal this year. Served by 11 airlines, Zaporizhia offers scheduled service to: Istanbuls two airports, Kyivs two airports, Minsk-Chopin, Tel Aviv and Warsaw. It also offers charters to Bulgaria, Egypt, Georgia, Montenegro, Spain, and Turkish resorts.
                  Poltava completes repairs this year on its terminal, taxiways and runway. With the upgrades, air service is expected to expand beyond a lone Yanair charter flight to Antalya, Turkey. The airport is located in the center of a triangle created by the airports of Dnipropetrovsk, Kharkiv, and Kyiv Boryspil.
                  Zhytomyr has a brand new terminal, aircraft hangars and fire service. Currently, the maintenance hub for Yanairs fleet of four Airbus and five Boeings, Zhytomyr is to gain international status this year. City Mayor Sergey Sukhomlin tells UNIAN that its passenger catchment area for charter flights should reach into southern Belarus, where Pinsk and Mazyr do not have airports.
                  Vinnytsia handled over 60,000 passengers in 2018, joining the ranks of Ukraines 10 busiest airports. Last March, UIA started a daily, early morning hop to Kyiv Boryspil. Flying 55 minutes in a 50-seat Embraer commuter jet, passengers skip the 4-hour, 300 km drive to UIAs air hub. In addition to charter flights to Egypt, Montenegro, and Turkey, Vinnytia has charter flights every September from Israel for Orthodox Jews celebrating Rosh Hashana at Uman, the pilgrimage city a 2.5 hour drive to the east. Helping the airports fortunes, Vinnytsia is the political base of President Poroshenko and Prime Minister Groysman.
                  Mykolaiv emerged last week from repairs to welcome its first scheduled flights in years:DreamWind Airlines started flying a twice a week Boeing flight to Kyiv. This winter, the airline starts a weekly charter to Egypts resort Sharm el-Sheikh. Yanair already flies charters from Mykolaiv to Antalya. Located a two-hour drive east of Odesa, Mykolaiv Airport seeks to cash in on Ukraines growing, post-Crimea tourism to mainland Black Sea resorts.
                  Kherson Airport is to become Ryanairs destination this year for southern Ukraine, Infrastructure Ministry officials say. Already handling 100,000 passengers a year, Kherson has direct flights to Istanbuls new airport, Kyiv Boryspil and Lublin, Poland. Mainland Ukraines closest airport to Crimea, Kherson hopes to win passengers from the Russian-occupied peninsula, where sanctions restrict flights to Russian cities.
                  Uzhgorod, Ukraines westernmost airport, is to receive scheduled flights again this summer,ending a three-year break. In November, the European Aviation Safety Agency certified the airport, which requires airplanes to take off and land in Slovak airspace. Without a 90-minute flight to Kyiv, Uzhgorod remains Ukraines Amaon, cut off from the national capital by 10 hours by car, or 12-14 hours by train.

                  UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief
                  For comments and story tips, Brooke is reachable at:
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                  • UKRAINE BUSINESS NEWS
                    After a year of worry, Ukraines hryvnia actually strengthened against the dollar and the euro during 2018. The hryvnia increased by 1.3% against the dollar and by 5.6% against euro, according to the National Bank of Ukraine. On Tuesday, the exchange rate for the dollar was UAH 27.69. One year earlier, it was UAH 28.06. Similarly, the hryvnia was UAH 31.71 to the euro, compared to one year when it was UAH 33.49.
                    Ukraine cut imports of gas for domestic consumption by one quarter in 2018, to 3.5 billion cubic meters, the Interfax-Ukraine calculates, drawing on figures from Ukrtransgaz. For the last three years, Ukraine has only bought gas from its western neighbors Slovakia, Hungary and Poland. Much of this gas originates in Russia. Higher gas prices, investment in conservation, and shifts to alternatives energy sources have cut gas imports. On Tuesday, heating rates went up by 4-24%, according to rates set by the National Commission for State Regulation of Energy and Utilities.
                    Russian gas flowing through Ukraine to Europe fell by 7% in 2018, to 86.8 billion cubic meters, according to Ukrtransgaz, the national pipeline operator. In 2017, transit increased by 14% over 2016, largely to Gazproms repairs on Nord Stream 1 pipeline. This time next year, Gazprom plans to commission Nord Stream 2, doubling Russias Baltic pipeline capacity to 110 billion cubic meters. This could cut the flow of Russian gas through Ukraine by at least one half in 2020.
                    Hot Stocks: Ukrainian oil and gas. In London on Monday, Regal Petroleum (RPT LN) surged 10%, making for a 23% gain since Dec. 26, and reaching its highest price since April 2010. Similarly, JKX Oil & Gas (JKX LN) climbed 13% since Friday. In the background, Ukraines natural gas production is stagnant, increasing by 0.3% in 2018, to 21 billion cubic meters. With a possible Russian gas cutoff looming in the early 2020s, Ukraine launches in the first half of this year a series of electronic tenders for production sharing agreements and exploration and production permits.

                    Through November, Ukraines exports were up 9.6%, while imports were up 15.5%, year over year. The current account deficit for the first 11 months of 2018 was $4.4 billion, compared to $1.7 billion for the same period in 2017. Concorde Capital believes Ukraine ended 2018 with a current account deficit around $5 billion.
                    New car sales were flat in 2018, growing by 0.6%, or 453 cars, over 2017 levels, reports Ukravtoprom, the industry trade association. Holding new car sales to 81,800, sales of used imports overtake sales of new cars. Pushing used car sales, import duties dropped, an amnesty was negotiated for illegally imported used cars and several German cities passed restrictions on diesel cars, pushing some German owners to sell. For new cars, the top three brands in 2018 were: Toyota, Renault and Volkswagen.
                    A list of 792 small state properties has been approved for auction this year by the State Property Fund. Each property is valued at less than $9 million. About three quarters appear to be real estate. Vitaly Trubarov, head of the Fund, writes on Facebook that 10 belong to UkrOboronProm. These include: the Sudmash plant in Kherson, the Vinnytsia Aviation Plant, or VIAZ, the Zaporizhia Automobile Repair Plant, and the Nezhinsky Repair Plant for engineering equipment. Also up for sale are: Kievmashservis, Golovinski open-cast mine, properties of Dneprovski Electric Locomotive Plant, and the Pervomaisk hydroelectric power station in northern Mikolaiv.
                    Ukraine recorded 20 million air passengers in 2018, 43% above 2017 levels and one third higher than the historical record of 15 million in 2013. Alexander Kunitsky writes i Ukraine Rises on the Wing, a 2,500-word analysis of the aviation boom for UNIAN: Ukrainian airports showed record passenger traffic. The emergence of new low-cost airlines lowered the prices of air tickets, and the government seriously aimed at the revival of regional airports. Fueling a price war he writes, was the reduction in ticket prices and the emergence of new airlines in the domestic market, which increased the intensity of the struggle for passengers.
                    Lower aviation fuel prices and UIAs hub strategy increased passenger through to Kyiv Boryspil, the nations busiest airport, to 1 million passengers a month last year
                    Looking ahead, Ukraines air traffic should continue to enjoy double digit annual growth, compared to 3-5% a year for EU countries, according to forecasts by the Montreal-based International Air Transport Association. By 2045, Kyiv Borsypil could more than quadruple its passenger flow, to 54 million, according to Airport Consulting Vienna, the Austrian company that prepared Boryspils Strategic Development Plan. Volodymyr Omelyan, an advocate of airline competition and regional airports, notes that only 7% of Ukraines population flies today. He says: But at least 50% can -- and should -- fly.
                    With 20 new flights scheduled for EU cities during the first half of this year, Ukraines aviation boom shows no signs of flagging. Here is the lineup:
                    Aiming to become Ukraines discount carrier to the Mediterranean, SkyUp starts regular flightswith its new Boeing 737-800s from Kyiv Sikorsky to: Lanarca, Cyprus on March 31; Naples, Italy on April 26; Faro, Portugal and Rimini, Italy on June 1; and Alicante, Spain and Catania, Sicily on June 2. To Black Sea cities, SkyUp starts flights to: Batumi, Georgia on May 25; from Kyiv and Kharkiv to Odesa on June 2; and adds more flights to Burgas, Bulgaria. Further afield, SkyUp starts flights on April 26 to Tenerife-South, in Spains Canary Islands.
                    Starting March 31, SkyUp has permission to fly from Sikorsky to two new destinations for Kyiv residents: Podgorica, Montenegro and Karlovy Vary, the western Czech resort town. In addition, the airline has permission to open Lvivs first flight to Prague. Lviv residents get two other new destinations: Copenhagen on Wizz Air on March 3 and Riga on airBaltic on April 1.
                    Looking at northern Europe, Wizz Air starts flights from Kyiv Sikorsky to: Riga on March 1; Bremen, Germany and Billund, Denmark on March 2; and Krakow on April 5. Austrias Laudamotion, starts flights Feb. 1 from Kyiv Boryspil to Vienna. Jonic Airlines has won permission to fly two times a week between Kyiv and Cologne, Germany.
                    Ryan Air adds five new EU cities from Boryspil this spring, inaugurating flights to: Manchester on April 1; Athens on April 2; Sofia, Bulgaria and Paphos, Cyprus on April 3 and Dublin on May 2. On March 23, Earnest Airlines starts flying from Sikorsky to Genoa, its sixth Italian city served from Kyiv.

                    UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief
                    For comments and story tips, Brooke is reachable at:
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                    • UKRAINE BUSINESS NEWS
                      Ukraines installed renewable energy capacity jumped by 54% last year, hitting 2,117 MW,according to the Commission for State Regulation of Energy and Utilities. Of the 742 MW of new installed capacity, 98% was for solar and wind. Solar, the leader, nearly doubled in capacity last year, hitting 1,388 MW. Wind grew by 12%, to 533 MW. Biomass grew by 31% to 51 MW, and biogas by 35% to 46 MW.
                      In 2018, the Commission set "green" tariffs for 202 renewable energy facilities -- 163 solar stations, 16 biogas and biomass stations, 12 small hydropower plants, and 11 wind farms. One third were in Kherson, southern Ukraines region with the highest rate of solar radiation, after occupied Crimea. In addition, about 3,000 households installed rooftop solar panels in 2018, equal to half the total for the previous four years, reports the State Agency for Energy Efficiency and Energy Saving.
                      By 2035, renewables will account for 25% of Ukraines energy production, largely displacing coal, which will drop to 13%, predicts Kyivs Razumkov Center. Shares of gas and nuclear will remain virtually the same 30% for gas and 25% for nuclear. Not counting large scale hydro projects, renewables account for 2% of energy production.
                      With green tariffs expected to end Dec. 31, the race is on to commission new projects this year.Funded by foreign and national capital, here is a sampling of $2 billion worth of projects under construction in eight regions:

                      Norways Scatec Solar starts building this spring a 35 million, 30 MW capacity solar station in Kamyanka, Cherkasy region about 250 km south of Kyiv. About 70% of the financing comes from the EBRD and FMO, the Dutch development bank.
                      On the Black Sea, in Mikolayiv region, Scatec and Kyivs Rengy Development will build this year three solar stations with a total capacity of 47 MW. Funding for 65% of the 55 million project comes from the Black Sea Trade and Development Bank and from the EBRDs new, 250 million Ukraine Sustainable Energy Lending Facility III, or USELF III.
                      Ukraines first 100% Nordic-funded solar project is under construction in Berdychiv, Zhytomir region, about 180km west Kyiv. The 19 MW project is being funded by Denmarks Better Energy A/S, the Danish Sustainable Development Goals Development Fund (IFU) and the Nordic Environment Finance Corporation, or NEFCO. The Danish partners will own the 22 million project.
                      Irelands Altostrata plans to build a 60 million, 62 MW solar power station in the Luhynsky district,near Zhytomyrs border with Belarus. Since 2011, an Altostrata unit has built 51 MW of solar projects in Belarus. At a recent meeting, Torsten Merkel, a German partner of Altostrata, said the plant would be ready in September and he asked for a reduced land rent for the solar project. According to Zhytomyr Journal, Igor Gunditsch, head of the Zhytomyr Regional Administration, replied that he would cut the rent to 1% -- if Altostrata meets the Dec. 31 deadline for commissioning and winning a green tariff.
                      Ten kilometers north of Crimea, work is to start this spring on a 163 MW windpower farm designed to supply the power needs of Ukraies border area, Khersons Kalanchak district. In 2014, the district lost power when an explosion cut the line from the Dnipro Kakhovka hydro dam to Crimean Titan, the titanium dioxide plant in Armyansk, just south of the Russia-Ukraine control line. Windcart-Kalanchak has started preparatory work at the Kairka power substation, 10 km east of the windfarm site, at Myrne, according to Khersonski Fakti website.
                      A Franco-Belgian project to build a 110MW wind power farm on Khersons Black Sea coast is expected to win credit support in March, when the EBRD Board reviews the project. Project backers are: Frances Akuo Energy SAS, and Belgiums Saffelberg Investment NV and Aeolus Invest NV. The Dnipro-Buzka wind power plant is to be in Oleksandrivka, a coastal village midway between Kherson and Mykolaiv cities. Nibulon, the grain trader, plans to build a port there in 2019.
                      Kherson Polytechnic College has started a vocational program to train local high school graduates the skills of installing and servicing solar and wind power plants. With the help of Ukrenergo, the state power company, the first 50 students are enrolled. The college hopes to win full Education Ministry certification for the program by September.
                      DTEK, Ukraines largest private energy company, is building Ukraines largest wind power capacity on a 30 km stretch of Zaporizhias Sea of Azov coastline. This month, construction starts in Orlivka, 65 km west of Berdyansk, on Oryol, 135 million, 100 MW plant, powered by Vestas wind trubines from Denmark. Nearby, work is progressing on Primorska, a 200 MW project powered by GE turbines.
                      In 2018, we launched a construction of 500 MW of new solar and wind power plants, Maxim Timchenko, CEO of DTEK, said last month. This spring, China Machinery Engineering Corporation plans to complete DTEKs 200 million, 200 MW solar farm at Nikopol, Dnipetrovsk region. The investments made by the company in the industry over the past two years amounted to about 700 million euros. In 2019, we plan to increase the portfolio of renewables to 1,000 MW.
                      Largely with World Bank funding, a 10MW, $13 million solar plant is to be built later this year on a former clay quarry in Zarvantsi, about 10 km west of Vinnytsia city, in central Ukraine. Vasyl Romanyuk, head of Yakushinetsky united territorial community, tells City Over the Bug news site that construction will create 50 jobs.
                      Yavoriv, the western Lviv district better known for hosting American and Canadian military trainers, is also emerging at Lviv regions center for wind and solar energy investment. This spring, Greenville Energy starts work on a $100 million, 50 MW project involving a total of 20 turbines erected in Ternovytsya and Zaluzhzhya. Also in Ternovytsya, Greenville plans to double this year an existing solar farm, bringing total capacity to 110 MW. According to, the EBRD is loaning 25 million for the second phase, located on the site of an abandoned chemical plant 30 km east of Poland.
                      Reflecting investors rush to commission solar projects before the curtain falls Dec. 31 on the green tariff, Cherkasy region, 200 km southeast of Kyiv, has received applications for construction this year of 400 MW of solar power stations. Eco Town news site notes that Cherkasy regions current renewable power sources are: 12 small hydroelectric power stations with a total capacity of 6.4 MW, and seven solar power plants with a total capacity of half a megawatt.
                      The green rush is a gold rush this year. The Rada is reviewing for a second vote a bill that would lower tariffs for solar and wind and adopt auctions. Highlighting profits to be made by renewable projects commissioned beforeDec. 31, Oksana Kryvenko, chair of the State Regulation Commission tells Business Censor news site that renewables will account for 2.5% of Ukraines electric production this year, but account for 7.5% of consumers electricity bills. She says: Ultimately, the consumer pays."

                      UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief
                      For comments and story tips, Brooke is reachable at:
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                      • UKRAINE BUSINESS NEWS
                        Ukraines main stock index, the PFTS, rose 80.4% last year comfortably becoming the top performer worldwide, CNBC reports. With the 25% increase in 2017, the PFTS index has doubled in two years, reaching its highest level since Jan. 2012.
                        Drawing on data from Thompson Reuters Refinitv, CNBC names the other winners of 2018:Macedonia +30.41%; Qatar +20.87%; and UAE +11.9%. The top five losers were: Venezuela -95%; Argentina -50%; Turkey -43.4%; China -28.7%; and Pakistan -28.1%. For contrast, the US markets in 2018: the Dow fell 5.6%; the S&P 500 fell 6.2%; and the Nasdaq fell 4%.
                        New foreign aid projects increased 50% last year, hitting almost $1 billion, reports the Economic Development Ministry. The Ministry registered 264 new projects of international technical assistance with a total funding of more than $953 millionoverall, 486 technical assistance projects are currently being implemented in Ukraine for a total of $6.1 billion.
                        One month from today, banks in Ukraine are allowed to dispense dollars and euros through ATMs. It is unclear which banks have installed the software for handling foreign currency and if there will be last minute legal or bureaucratic challenges. Last July 4, President Poroshenko signed a new foreign exchange law, giving banks six months to conform.

                        Starting Feb. 7, individuals are allowed to exchange every day UAH 150,000 currently $5,357 into foreign currency, with no questions asked. The new law abolishes the need for people buying less than UAH 150,000 to fill out and sign forms. Replacing the 1993 foreign currency law, the new law takes a libertarian approach: Everything is allowed that is not directly prohibited by law.
                        Moving beyond cash registers, the nations 107,000 small businesses are now allowed to register payments with smartphones, tablets or laptops, according to new government decision. The move should save businessmen $70 million a year for cash register purchases and monthly rentals, Prime Minister Groysman estimates. He says: Now our system makes it possible to abandon cash registers. This is exemption from cash register slavery.
                        Starting in April Ukrainian banks will start identifying accounts with IBAN numbers, the National Bank of Ukraine reports. Started two decades ago and now used by over 70 countries, the International Bank Account Number is an internationally agreed system for identifying bank accounts across national borders, easing processing of international transactions. An IBAN consists of up to 34 alphanumeric characters comprising: a country code, two check digits, a domestic bank account number, bank branch identifier, and routing information.
                        First time sales of used imported cars doubled in 2018, to 116,800, Ukravtoprom, reports the car industry trade association. With this growth leap, used imports accounted for 59% of the 198, 600 first time sales recorded last year in Ukraine. With Europe the source of almost all imports, European manufacturers dominated sales of used cars: Volkswagen, Renault, Skoda and Ford.
                        Electric car registrations in Ukraine doubled in 2018 to 12,333 cars. Puhing 2018 sales to 6,740 cars was a combination of tax exemptions that cut sale prices by 17%, Infrastructure Minister Volodymyr Omelyan writes on Facebook. The ministrys goal is to install 1,000 chargers this year, prioritizing parking lots. Working with the European Investment Bank, the government plans to install a network of fast-charging stations, focusing on Lviv-Kyiv-Kharkiv and Kyiv-Odesa. With Europes largest known deposits of lithium, Omelyan hopes the Rada will pass legislation in coming weeks to give tax breaks to lithium-ion battery manufacturers.
                        NATO has extended for three years its cargo contract with Antonov Airlines, the airlift arm of Antonov aircraft producer. Under the deal, Antonov has two AN-124-100 Ruslan planes on permanent standby to carry cargo for 10 EU nation members of NATOs Strategic Airlift Interim Solution, or SALIS. Antonovs Kyiv-based fleet includes seven An-124-100 aircraft, each with a carrying capacity of 150 tons.Russias Volga-Dnepr, which also flies AN-124 cargo jets, dropped out of the program after the latest three-year contract expired on Tuesday.
                        Air travel boomed in Ukraine in 2018: Kyiv Boryspil added 2 million passengers, traffic at Kyiv Sikorsky was up 52%, traffic at Lviv was up 48% and Kharkiv was up 19%.
                        Boryspil, the nations busiest airport, increased traffic by 19%, to 12.6 million passengers.Aiming to add another 1.5 million passengers this year, Boryspil plans to reopen this spring Terminal F for passengers, probably for Ryanair. Europes largest airline, Ryanair joined nine other new airlines flying to Boryspil in 2018: Brussels Airlines, Iraqi Airways, MyWay Airlines, Ellinair, Air Malta, Sky Up, SWISS, Flydubai, and Air Moldova.
                        Next year, the new Boryspil Express train to Kyiv will be enhanced with a Metro rail connection at the Vidubychi green line Metro station. Vidubychi will be rebuilt as a transit hub for bus, Metro and the Boryspil Express.
                        Ukraines second busiest airport, Kyiv Sikorsky handled 2.8 million passengers last year, 1 million more than last year. With discount carriers Wizz Air and SkyUp using Sikorsky as their hub, 97% of the passengers at Sikorsky flew international last year.
                        Regional airports revived in 2018. Lvivs traffic hit 1.6 million, almost triple the level of 2012, the year of the UEFA Euro cup. On Sunday morning, several flights in and out of Lviv airport were delayed after a Turkish Airlines jet skidded off the snowy runway before takeoff. No one was hurt and there was no significant damage to the plane.
                        Kharkivs passenger count reached 962,000, almost double the 2012 football cup year. More growth is to come this year, with new flights from Kharkiv to Rome, Milan, Odesa and Krakow.
                        Odesas new runway is to be completed next summer, drawing Ryanair and Wizz Air, predicts Infrastructure Minister Omelyan. Zaporizhia, Ukraines 6th busiest airport, handled 400,326 passengers last year, a 15% rise. Ivano-Frankivsk, the 8th busiest, saw a 2% rise, handling 112,607 passengers. Chernivstsi, the 10th busiest, saw a 51.5% jump, to 73,075 passengers.
                        Torben Majgaard, founder of Ciklum, a top Ukraine IT company, died Thursday inMarbella, Spain at the age of 48. A heavy drinker, he suffered from cirrhosis of the liver. After moving from his native Denmark to Ukraine two decades ago, Majgaard first sold used computers, then founded Ciklum. Today, Ciklum has 3,000 employees and offices in Ukraine and nine other nations. In Kyiv, its engineering workforce of several hundred is split between two business centers -- Gulliver and Horizon Park. Ciklum often does work for Fortune 500 companies.
                        Under Majgaard, the company founded the BrainBasket Foundation to further IT education across Ukraine. Ciklum also supported Ukraine House in Davos and Ukrainian Venture Capital and Private Equity Association. In 2015, George Soros invested in Ciklum. At Majgaards death, he owned the company 50-50 with Soros, Karl Robb, a longtime friend, tells the Kyiv Post. Eighteen months ago, Majgaard ceded the Ciklum CEO role to Michael Boustridge. On Friday, Boustridge emailed employees: Torben was incredibly proud of what we achieved, and, personally, I will miss working with him.

                        UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief
                        For comments and story tips, Brooke is reachable at:
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                        • UKRAINE BUSINESS NEWS
                          Metinvest, Ukraines largest private company, is investing to expand its Mariupol steel production by 14% this year. At Illich Steel, the nations second largest metallurgical company, Metinvest plans to expand slab casting capacity to 4 million tons a year. At Azovstal, one of Ukraines biggest steel rolling companies, Metinvest aims to produce 4.3 million tons this year. This combined production of 8.3 million tons would be 14% higher than the 2018 total of 7.3 million tons.
                          At Mariupol port, shipping volumes fell last year to 5.3 million tons, or 10% below 2017 levels. With the 2014 loss of most production from the Donbas, this 22-berth port operated last year at 28% of capacity. A second blow came in spring 2018 with Russias opening of the Kerch Strait Bridge. Built with a 35-meter high central arch -- half the height of the Suez Canal Bridge -- the bridge is too low for 30% of the cargo ships that historically served Mariupol.
                          Despite these setbacks, the port administration plans $18.5 million in capital investment for Mariupol port, largely for dredging. On Monday, an international ProZorro tender closes for $32 million of dredging work on Ukraines two Azov ports, Donetsk regions Mariupol and, 85 km to the west, Zaporizhia regions Berdyansk. Last year, three tenders for this dredging failed to draw the minimum of two applicants, apparently due to company fears that Russia could impound dredging vessels in the Kerch.
                          After dredging two Black Sea ports, China Harbor Engineering Company Ltd. may be best positioned to handle the geopolitical risk of the Azov. One year ago, it completed dredging a major section of Yuzhne port. Two weeks ago, China Harbor completed the first phase of dredging at Chornomorsk, the ports first dredging in 20 years. Now it is working on a second phase, designed to make Chornomorsk Ukraines deepest Black Sea port. With this dredging, Ukraine Sea Ports Authority Chairman Rajvis Veckagans says: The port will be able to receive large-tonnage vessels with a draft of up to 14.5 meters, such as Panamax and post-Panamax.
                          In addition to steel, the Azov is Ukraines largest source of fish. Through November, the State Fisheries Agency reports, the Azov had twice the fish catch of the Black Sea: 16,100 tons from the Azov versus 8,300 tons from the far larger Black Sea. The Black Sea catch was up 64% over 2017 levels, possibly because Ukrainian fishing companies are shifting from the Azov. Maksym Martiniuk, who as Agriculture Minister oversees the Fisheries Agency, warns: These successes were tarnished by the aggressive policy of the Russian Federation, which casts doubt on the continued unobstructed possibility of fishing in the Sea of Azov.
                          In one new Black Sea fishing investment, Nibulon, the grain trader, recently bought at auction a Black Sea fish canning factory in Ochakiv, Mykolayiv region. Nibulon plans to restore and reopen the factory, and probably build a small fishing fleet at its Mykolayiv shipyard, 60 km away.
                          To raise Ukraines naval presence on the Azov and the Black Seas, the Interior Ministry is negotiating with a French company to build about 20 coast guard cutters at a Ukrainian shipyard,Interior Minister Arsen Avakov writes on Facebook. Two weeks ago, the Interior Minister received the first two H225 French-made Airbus Helicopters from an order of 55 made last summer. The Ukrainian Sea Guard has about 40 cutters in the 30 to 35-meter range. Last week, the Sea Guard unit at Mariupol received an upgraded high-speed interceptor craft, a Project UMS-1000 PC 12 M-2, according to Janes 360 news site.
                          Next summer, Ukraines Navy is to receive two refitted Island-class patrol boats from the United Staes, says Ihor Voronchenko, commander of the Ukrainian Naval Forces. Also during this year, the Navy is to receive four Centaur-class and Gyurza M-class combat vessels, all built in Kyiv at the Kuznya na Rybalskomu shipyard.
                          To reassert Ukraines right to free shipping on the Azov, a binational sea, the Poroshenko administration plans to send another Ukrainian Navy flotilla through the Kerch Strait this time with international observers on board. On Nov. 25, Russian border service ships fired on three Ukrainian Navy boats south of the Strait. Ukraines ships were impounded in Crimea and 24 crew members were sent to a Moscow jail where they await trial. Presidential advisor Yuriy Biriukov said last week: Yes, our boats will continue [to go through the Strait]. We cant simply say: They intimidated us. We wont go there anymore.
                          To check the Kremlins aggression in the region, John Herbst, former ambassador to Ukraine, suggests the US supply Ukraine with Harpoon anti-ship missiles. Launched from land or sea platforms, these sea-skimming, radar-controlled cruise missiles travel at almost 900 km an hour and carry 221 kilo warheads. McDonnell Douglas built 7,500 Harpoons over the last 40 years. Now, the US has excess stocks. Herbst, director of the Atlantic Councils Eurasia Center, tells RFE/RL that the U.S. has enough Harpoon missiles systems.
                          New US lethal aid to Ukraine will decided by March, predicts Herbst, who is based in Washington.Similary, Valeriy Chaly, Ukraine's Ambassador to the US, told Voice of America last week: "We expect further assistance in boosting our defense capabilities. These are arms supplies, including lethal weapons.
                          Freedom of commerce in the Azov and Black Seas may only be enforceable by the US Navy,which has defended freedom of shipping in the region since 1801-1805, when it defeated Barbary pirates off the coast of North Africa. On Sunday, the USS Fort McHenry, a US Navy landing ship with several hundred US Marines aboard, moved through Turkeys Dardanelles Strait into the Black Sea. From the Naples, Italy headquarters of the Sixth Fleet, Vice Adm. Lisa Franchetti, fleet commander, said USS Fort McHenrys transit reaffirms our collective resolve to Black Sea security. Time will tell if President Trump has the same commitment to defend freedom of shipping shown two centuries ago by President Thomas Jefferson.

                          UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief
                          For comments and story tips, Brooke is reachable at:
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                          • UKRAINE BUSINESS NEWS
                            Ukraines foreign trade grew by 12% last year, hitting $104 billion, reports the State Fiscal Service. Exports were up 9% to $47.3 billion. Imports were up 15% to $56.8 billion. Among exports, the leaders were: food 39%; metals 25%; and equipment 11.6%. Wage remittances from overseas labor about $11 billion was not counted as an export.
                            The top three import categories were: machinery 31%; energy 24%; chemicals 19%. Reflecting Ukraines trade diversification, the portion of trade with CIS countries fell by one third -- to 15% in 2018, from 23% in 2017.
                            Ukraines exports to Canada were up 48.5% yoy through September, Andriy Shevchenko, Ukraines ambassador to Canada, tells Ukrinform. Canada lifted 98% of customs duties on Ukrainian goods on Aug. 1, 2017, the start of the Canada-Ukraine Free Trade Agreement. One surprising growth export was apple juice. The ambassador said: I deliberately cite this example to encourage Ukrainian look for new areas of growth. Although the two populations are roughly the same about 37 million Canadas economy is five times larger, when measured in purchasing parity terms.
                            Ukraines inflation fell to 9.8% in 2018, an almost one third drop from the 13.7% recorded in 2017, reports the State Statistics Service. Prices increased the most for: road passenger transport +30%; vegetables +28%; maintenance of houses +24%; natural gas +23%; and bread +21%. The biggest declines were for: fruits -17%; eggs - 9.5%; and sugar -9%.

                            A Reuters forecast of analysts pegs economic growth this year at 2.9%, down from 3.2% expected for 2018. Growth was 2.5% in 2017. The median forecast for inflation this year is 8.5%, down from 9.8% in 2018, and 13.7% in 2017.
                            Reserves are up 11% yoy to $20.8 billion the highest level since Oct. 2013, reports the National Bank of Ukraine. High agricultural export prices and large amounts of multilateral aid boosted the level to a five year high.
                            Dragon Capital writes: We expect NBU reserves to remain mostly flat in 2019, reaching $21 billion by year-end, as inflows of external financing from official creditors and new domestic and external market financing will be offset by sizable external debt repayments -- $8.6 billion scheduled for 2019.
                            Concorde Capitals Evgeniya Akhtyrko writes: Ukraine will need to raise around $10 billion in new foreign currency debt in order to keep its reserves at a decent level when payments are due in 2019, according to our estimate. This goal is not likely to be achieved without securing another tranche of the IMF stand-by loan.
                            Qatar, the worlds largest natural gas exporter, is laying the groundwork for a strong food for gas trade relationship with Ukraine, a major food exporter, according to a the newly formed Qatar-Ukraine Business Forum. With the largest gas storage reservoirs in Eastern Europe, about 20 billion cubic meters, Ukraine is studying importing Qatari LNG gas through Adria LNG, a floating terminal planned for offshore Croatia. On the Qatari end, $275 million is being invested in Hamad Port on the Persian Gulf to build food warehouses sufficient to store enough foodfor Qatars 2.7 million people for two years. Eighteen months ago, Saudi Arabia started a regional boycott of Qatar.
                            Longterm, Ukraine wants direct deliveries of Qatar LNG to a Black Sea port, about a 3-week voyage. Turkey does not allow LNG shipments through the Bosphorus, citing safety concerns. But Turkey is digging Kanal stanbul, a 45-km waterway that is to be one third deeper and twice as wide as the Suez Canal, the main route for Qatari gas to the Mediterranean. In 2023, this new canal is to open the Black Sea to Persian Gulf gas. Last March, President Poroshenko visited Doha with six ministers. Two months ago, Stepan Kobiv, minister of economic development and trade, followed up with a visit to Doha, taking advantage of the new daily Qatar Airways flight from Boryspil.
                            After a six-month break, Russia-Ukraine-EU talks on gas transit resume Jan. 21 in Brussels, tweets Maro efovi, European Commissioner for the Energy Union. Gazproms gas transit contract with Ukraine expires this Dec. 31.
                            Ukraines top 100 state-owned companies saw their net profits drop by 42% during the first half of 2018, compared to the same period one year earlier, UNIAN reports. The entire drop can be blamed on Ukrtransgaz, the gas line operator, which saw its profits drop to 9% of the H1 2017 level. The top 100 state companies have assets totaling $50 billion, accounting for 93% of the value of Ukraines 3,364 state companies. Of this group, 1,594 or 47% -- actually function.
                            Ukroboronprom is moving to ProZorro for all sales and leases, reports the press office of the state defense conglomerate. In a first step last month, the Iskra radar research and production company auctioned 40 tons of scrap metal through ProZorro.Sale, earning 16% more than the expected price. For procurement, Ukroboronprom started last fall to use SmartTender, an electronic trading platform
                            Ukrenergo also is moving to ProZorro. The national power company earned $6 million last year by selling excess inventory. Everything that was written off and accumulated in electric power systems for years -- from car tires and used transformer oil to large-sized scrap metal, equipment and old cars -- was put up for sale, the company reports. On the purchasing side, Ukrenergo says it saved 5% -- or $7 million -- on 2,400 ProZorro tenders for a total of $143 million purchases last year.
                            Ukraines steel crude production stabilized at 21 million tons in 2018, down 1.4% from 21.3 million tons in 2017. Finished steel production was flat last year, reaching 18.4 million, reports Interfax-Ukraine.
                            To modernize Ukraines largest titanium ore miner, $11 million worth of American-made Bell dump trucks and British-made JCB loaders have been acquired by United Mining-Chemical Company. The company owns and operates Vilnohirsk state mining and metallurgical plant in Dnipopetrovsk, and Irshansk state mining and processing plant in Zhytomyr. Ukraine has Europes largest titanium deposits.
                            Milk production profitability, as measured by the Ukrainian Dairy Index, decreased by 14% last year, Andriy Yarmak, FAO economist, writes on Facebook. The main culprit was concentrated feed which jumped in price by 22%. In addition, world prices for dairy products are down protein by 4%, cheese by 6%, and milk fat by 8%. Despite government incentives, Ukraines national dairy herd is gradually shrinking.

                            UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief
                            For comments and story tips, Brooke is reachable at:
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                            • UKRAINE BUSINESS NEWS
                              As of yesterday, Ukraine exported 25 million tons of grain, up 14% over the same date last year. Dragon Capital predicts this growth rate will hold up for the second half of the marketing year, with Ukraine selling a record 45-46 million tons by the end of June.
                              With corn accounting for half of Ukraines record harvest last year, corn sales to the EU have quadrupled and to Libya and Turkey have doubled, reports Ukragroconsult. Of Ukraines record 70.1 million harvest, records were also hit by sunflower seeds up 12% -- and by soybeans up 13%.
                              Ukraine ties with Argentina as the EUs fourth largest source of imported food. In the 12 months through October, each sold 5.1 billion to the EU, according to a new report by the European Commission. The top three food exporters to the EU are: Brazil - 12 billion; US - 11.5 billion; and China - 5.5 billion.
                              Faced with rivers of grain, storage silos and railroad wagons literally were bursting at the seams last fall, warns Serhiy Feofilov, CEO of UkrAgroConsult. Barring weather setbacks, Ukrainian farmers will continue their four year winning streak and produced ever growing harvests in the 2020s. In this environment, he says, investment is urgently needed in storage, transportation and ports.

                              Despite a 20% cut in port dues one year ago, Ukraines seaports handled only 1.8% more cargo last year than in 2017, the Infrastructure Ministry reports. Reaffirming Ukraines ports as export oriented, the Black Sea and Azov ports handled four times as much exports 99 million tons as imports 24 million tons. One high growth area was container handling, up 11% yoy, to 11 million tons. Taking some pressure off roads and rails, ship journeys on the Dnipro River were up 11%, moving 10 million tons.
                              Opening up a $1 billion opportunity for foreign rail equipment manufacturers, Yevhen Kravtsov, chairman of Ukrzaliznytsia, told the Cabinet of Ministers Thursday that the state railroad will focus this year on the renewal of electric locomotives. Already, Frances Alstom, Germanys Siemens, Canadas Bombardier, Chinas CRC and Czechs koda are talking to UZ about building electric locomotives in Ukraine. About two thirds of the railroads 2,700 locomotives are electric.
                              Asserting that the shortage of freight cars has been overcome, Kravtsov says that in 2018, private companies built 10,000 cars and the state railroad built 3,500 more -- a record for the company over the past 25 years. This year, Ukrzaliznytsia plans to use a new $150 million loan from the EBRD to buy up to 6,500 gondola wagons suitable for moving coal or steel. The railroad carries 82% of the nations freight and about 50% of passenger traffic.
                              The railroads ambitious $875 million spending plan for this year includes money for electrifying several hundred kilometers of track. One project is to electrify an 80 km section from the Polish border to Kovel, the northwest hub for Ukraines rail system. With five rail lines radiating out Kovel, lines go north to Brest, west to Lublin and Warsaw, south to Lviv, southeast to Vinnytsia and east to Kyiv.
                              With 20 new trains to the EU,krzaliznytsia nearly doubled its passenger traffic last year to Europe. This international traffic growth helped boost Ukrzaliznytsias long distance passenger counts by 7%, to 55.9 million last year, Kravtsov says.
                              Looking east, the railroad also is improving service to the government-controlled portions of Donetsk and Luhank regions, Kravtsov says. Last month, Ukrzaliznytsia started service from Kyiv to Lysychansk, Luhansk and extended a Lviv-Kyiv train to Bakhmut, Donetsk. Next Friday, the railroad starts a new train from Kharkiv to one city in Luhansk and three in Donetsk.
                              With SkyUp Airlines poised to boost domestic air travel this summer, trains can only compete by moving faster on the ground, says Infrastructure Minister Volodomyr Omelyan. Looking five years ahead, he tells the Cabinet: "On the main transport corridors -- Kyiv-Odesa, Kyiv-Lviv, Kyiv-Dnipo, and Kyiv-Kharkiv -- the speeds of passenger trains must be at least 200-250 km / h, and freight - 100-120 km / h."
                              The new Boryspil Express train from the airport to central Kyivs railroad station is winning riders, averaging 1,500-2,000 passengers daily 10 weeks after launch, reports Kravtsov. With 27 departures daily from Boryspil, this means 27-38 passengers per train, or guaranteed seats for everyone on the 81-seat trains. With service around the clock, the 40-minute ride costs UAH 80 or $2.85.
                              The enormous purchasing power of the dollar in Ukraine is confirmed by The Economists latest Big Mac Index. In a survey of 50 major economies, plus the Euro zone, Ukraine has the second most undervalued currency, bested only by Russia. In a gauge of purchasing power parity, the hryvnia is 65% below where the dollar exchange rate should be. Instead of 28 hryvnia to the dollar, the Index says the hryvnia exchange rate should should be about 10 to the dollar. By comparison, the Russian ruble is 70% undervalued, the Turkish lira is 64% undervalued, and the Moldovan leu is 59% undervalued.
                              On Ukraines 12 oil and gas fields open for production sharing agreements: readers at Asters law firm point out that tender packages have yet to be prepared and announced. Only on the day of the tender announcements, will the 3-month clock start running for interested companies to buy the packages and make bids.
                              With unprecedented opportunities opening up in Ukraines upstream hydrocarbon sector, the Ukrainian Gas E&P Forum will be held Jan. 29 in London at the Geological Society. Speakers will discuss the 12 new production sharing agreements, the March 6 auctions of 10 oil and gas blocks, and the governments invitation to foreign companies to work with state oil and gas companies under production enhancement contracts to boost production from depleted brownfields. Speakers will include: Oleh Kyryliuk, acting head of the State Geological Service, and Olga Bielkova, deputy head of the Radas Fuel and Energy Committee.
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                              UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief
                              For comments and story tips, Brooke is reachable at:
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                              • UKRAINE BUSINESS NEWS
                                Metal exports grew 15% yoy to $10 billion, reports the State Fiscal Service,The share of ferrous metals in export income inched up, to 21%, from 20%.
                                Ukraine, Europes largest producer of titanium ore, earned 20% more from exports last year. In the second year of growth, exports hits $126 million. Volumes increased by only 2.7%, to 600,000 tons, reports the State Fiscal Service. Top buyers were: Czech 19%; Turkey -- 18%; and Russia 16%. Commonly used as an alloy, titanium is used in cars, jet engines, spacecraft, medical prostheses, dental implants, sporting goods, jewelry and cell phones.
                                US Ambassador to Germany Richard Grenell is warning German companies that they risk sanctions from Washington if they support construction of the Nord Stream 2 gas pipeline. Germanys Bild newspaper printed a text of a letter sent to Germany companies where the Ambassador warns if European gas supplies through Ukraine become redundant due to the launch of Nord Stream 2 and the Turkish stream, Kyiv will lose its importance in the field of security policy, which will increase the risk of intervention by Russia. Nord Stream 2 A.G. says one third of the 1,200 km pipeline has been laid.
                                Ukraines dependence on oil and coal supplies from Russia are highlighted by new year end statistics from the State Fiscal Service. Last year 75% of Ukraines imports of petroleum products came from Russia and from Belarus, which transships Russian oil. Due to higher oil prices, overall imports hit $5.5 billion, up 31%. Volume imports were up only 3%, to 8 million tons.

                                Similarly, Russia provided 60% of Ukraines coal imports in 2018. Overall, coal imports increased by 8%, to 21.4 million tons. Ukraine paid $3 billion for imported coal, 11% more than in 2017. After Russia, the largest sources were the US 30% ($907 million); and Canada 5% ($163 million).
                                Russias latest ban on food imports from Ukraine will have minimal impact on Ukraine because imports have already dropped by 95% from 2012 levels, the Ministry of Agrarian Policy and Food tells Interfax-Ukraine. From $2.1 billion in 2012 to about $110 million last year, Russias share of Ukraines overall food exports has fallen from 11.5% in 2012 to about half of one percent last year. Through November, Ukraines top three food export markets were: India -- $1.7 billion; China -- $1 billion; and the Netherlands --$1 billion.
                                About 360 cyber incidents almost one a day were identified and blocked in 2018, reports Ukraines Security Service, or SBU. Incidents included hacker attacks, illegal interference in automated systems and databases, and anti-Ukrainian propaganda in social media, the SBU. Officials expect an upsurge in cyber interference from Russia in the weeks leading up to the March 31 presidential election and the expected April 21 runoff vote.
                                In the two weeks after martial law ended Dec. 26, more than 800 Russians mostly men were not allowed into Ukraine,Ukraines Border Guard Service report. Earlier, during the one-month martial law 1,650 Russians were turned away at Ukraines border checkpoints. On Dec. 27, Ukraines National Security and Defense Council extended for an indefinite period the general ban on the entry of Russian men aged 16 to 60. On Tuesday, Foreign Minister Pavlo Klimkin told TV show Snidanok z 1+1 that he backs making the ban permanent.
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