Category: Ukraine

Asters has advised VR Capital Group on the acquisition of 50% of Matlomenius Holdings Ltd (Cyprus) from ICU. The seller was represented by Avellum.

Matlomenius Holdings Ltd is the owner of PodilskEnergo, which is now building a 60 MW solar power plant near Kamianets-Podilskyi. The power plant is scheduled to be commissioned by the end of 2018.

ICU is an independent asset management, private equity, and investment advisory firm specializing in the emerging markets of Central and Eastern Europe

Asters’ team advised VR Capital Group on all the major aspects of the deal. In particular, they conducted legal due diligence of PodilskEnergo, participated in negotiation of transactional documentation, and obtained merger clearance from the Antimonopoly Committee of Ukraine.  

Asters’ project team included Partner Yaroslav Petrov, Senior Associates Marta Halabala and Oleh Furmanchuk, Associates Diana Kondratieva, Olena Nikolenko, Olena Sichkovska (all advising on corporate and regulatory aspects) Counsel Tetiana Vovk and Associate Pavlo Verbolyuk (advising on antitrust aspects), and Senior Associate Roman Drobotskiy (on real estate matters). 

Avellum’s team advising ICU included Partner Yuriy Nechayev and Associate Dmytro Symbiryov. 

Avellum has advised Horizon Capital and other individuals on the disposal of a 90% stake in Ergopack Group in favor of Sarantis Group.

According to Avellum, “Ergopack Group is a leading player in the growing Ukrainian household market with an increasing market share through the years. Annual sales of Ergopack Group during 2017 amounted to approximately USD 29 million.”

Horizon Capital is an equity firm in Ukraine backed by over 40 institutional investors, managing four funds with assets under management of over USD 750 million. 

Sarantis Group is a consumer product companies and has operating subsidiaries in nine European countries – Poland, Romania, Bulgaria, Serbia, Czech Republic, Hungary, Macedonia, Bosnia, and Portugal. The Group also has a distribution network that exports products to more than 35 countries.

Besides helping its client obtain clearance from the Antimonopoly Committee of Ukraine for this transaction, Avellum also advised them on various aspects of the deal structuring, drafted and negotiated the transaction documents, and coordinated their signing process.

The Avellum team was led by Partner Yuriy Nechayev, with support from Senior Associate Andriy Romanchuk and Associates Dmytro Symbiryov and Oleksandr Kulykovskyi. Managing Partner Mykola Stetsenko, Senior Associate Yaroslav Medvediev, and Associates Andrii Gumenchuk and Anton Arkhypov advised on antitrust matters.

Image source: ergopack.de

Integrites has announced that Dmytro Marchukov, Partner and Head of Cross-Border Litigation, has been selected to the arbitrators list of the Shanghai International Economic and Trade Arbitration Commission, a Shanghai-based independent arbitration institute, established in 1988.

The new SHIAC panel of arbitrators was approved on May 1, 2018 and includes arbitrators from over 74 countries. According to Integrites, the newly selected panel will provide more choices for parties and will be better adapted to the development trend of SHIAC’s international and professional arbitration practice.

“I am glad and honored to be selected to the SHIAC Panel of Arbitrators,” said Marchukov. “It is an occasion — one of many — that demonstrates the strength of the international arbitration team of the firm. It is also a personal privilege to be included into the list that features Gary Born, Gabrielle Kaufmann-Kohler, Emmanuel Gaillard, and many other recognized arbitration practitioners. SHIAC has been doing a great job to promote arbitration in Shanghai, China, as well as the wider region, which is why I am happy to join such a big and international fellowship.” 

Sayenko Kharenko and Linklaters have advised Deutsche Bank, ING, Natixis, and UniCredit, the joint bookrunners of Metinvest’s USD 1.592 million Eurobond issue. Metinvest was represented by Allen & Overy and Avellum on the issue, while Redcliffe Partners and Clifford Chance advised the coordinating mandated lead arrangers, with Clifford Chance also advising on the bank debt. 

The issue of Eurobonds was divided into two tranches: USD 944.5 million bonds due 2023 and USD 647.7 million bonds due 2026. The issue was coupled with the cash tender offer and consent solicitation in relation to the Metinvest existing USD 1.2 billion Eurobonds due 2021 of which USD 117 million remain outstanding following the tender offer.

As part of the refinancing, Linklaters acted for the bookrunners on the issuance of USD 1.592 million of new bonds and a liability management exercise in respect of existing bonds due 2021.

Metinvest Group is a vertically integrated group of steel and mining companies. It has steel and mining production facilities in Ukraine, the EU, and the US, as well as a sales network covering all major global markets.

Last year, Clifford Chance advised the coordinating committee for pre-export finance banks in connection with a USD 2.3 billion debt restructuring for Metinvest, with Redcliffe Partners providing Ukrainian law advice to the committee, and with Baker McKenzie and Allen & Overy advising Metinvest on the restructuring as reported by CEE Legal Matters on April 3, 2017.

According to a Metinvest press release on the subject of its 2018 Eurobond issue, “the transaction was market-driven and had the aim of effectively managing and extending Metinvest Group’s debt maturity profile. It also sought to take advantage of favorable conditions to refinance bonds to decrease total funding costs and provide for a longer-term capital structure, while untying the bonds and PXF facility, lowering refinancing risks. Further, the contractual terms of the bond financing have been aligned with standard market terms for comparably-rated issuers.”

Commenting on the deal, Metinvest Group CEO Yuriy Ryzhenkov  said: “We are very pleased with the result of the refinancing, which has been the product of dedicated work by our entire team as well as our advisers. Equally, I would like to thank all of our lenders and investors for demonstrating their steadfast belief in Metinvest Group’s story. With this landmark transaction completed, we can focus on growing our business through the implementation of our Technological Strategy to 2030, which we believe will make us even more resilient and competitive.”

According to Sayenko Kharenko, “for Metinvest, it was the largest bond issue with the most favorable parameters, as the new bonds have the lowest coupon and the longest maturity. With the approximately USD 1.6 billion total volume of the new bonds, it is the most sizable Eurobond issuance for a privately-owned Ukrainian corporate.”

Their Sayenko Kharenko team was led by Counsel Igor Lozenko and included Associates Dmytro Vasylyna, Denis Nakonechnyi, Yurii Dmytrenko, and Junior Associate Oles Trachuk, all working under the supervision of Partner Nazar Chernyavsky.

The Linklaters team was led by Capital Markets Partners Cecil Quillen and Richard O’Callaghan and Senior Associate Yaroslav Alekseyev. The team also included Managing Associates Olga Fedosova and Amrita Ahluwalia and Associate Katie Ahern.

The Avellum team was led by Senior Partner Glib Bondar, with support from Counsel Taras Dmukhovskyy, Senior Associate Anna Melnychuk, Associates Tetiana Mykhailenko, Orest Franchuk, Anastasiya Voronova, Oleg Krainskyi, Anna Mykhalova. Tax support was provided by Counsel Vadim Medvedev, working with Associates Vladyslav Aleksandrov and Ihor Monastyrskyi.

The Clifford Chance team included Partners Alistair McGillivray, Paul Deakins, Jelle Hofland, and Ilse van Gasteren, Counsel Adam Fadian, Senior Associate Natalia Veryasova, Associates Loes de Visser and Nicole Mazurek, and Trainee Marco Wong.

Allen & Overy did not reply to our inquiries on the matter. 

Editor’s Note: After the article was published, Redcliffe Partners announced that its team was led by Managing Partner Olexiy Soshenko, supported by Associate Olesia Mykhailenko and Junior Associate Eduard Olentsevych. 

In April 2018 Vasil Kisil & Partners advised Lekhim JSC on the acquisition of a production and warehouse complex in Kyiv Region with a total area of 5,208.2 square meters on a plot of 1.45 hectares, both located in Obukhiv city.

The complex consists of a production site and a warehouse for industrial products owned by the unidentified seller. The transaction price exceeded USD 1 million. VKP reported that the sellers and their counsel asked to stay confidential.

The VKP team included Partner Alexander Borodkin and Junior Associate Maksym Reshtakov.

Vasil Kisil & Partners has represented Piraeus Bank ICB JSC, a Ukrainian bank with foreign capital, in a bankruptcy case brought against Ukoinvestbud, a member of the group of companies owned by developer Anatolii Voitsekhovskyi.

VKP’s lawyers were able to establish that the debtor’s UAH 800 million surety agreement was invalid and protected the interests of the bank. The court granted the bank’s petition and invalidated the UAH 800 million surety agreement.

The VKP team included Partner Oleg Kachmar, Senior Associate Yuriy Kolos, and Associate Oleksandra Bortman. 

For various reasons, 2017 was a remarkable year for the electricity sector in Ukraine. Chief among them, no doubt, was the long-awaited adoption of the new law on the electricity market. Ukraine’s electricity market has been liberalized not only because of the country’s commitments under the EU Third Energy Package, but also as the benefits of competition became evident in the wholesale gas market. This liberalization started almost three years ago and is still on-going, though admittedly not without challenges.

The case with electricity is no less complicated. To begin with, Ukraine effectively remains cut off from the power grid of continental Europe, except for Burshtyn Island – three power plants in Western Ukraine that are synchronized with the European Network of Transmission System Operators for Electricity (ENTSO-E). It is quite well understood that Ukraine’s full integration into the European system is crucial both for energy security and for opening the market. In particular, integration is expected to increase Ukraine’s power exchange with the EU from the current 885 MW to 4,000 MW in ten years. 

To this end, in June 2017 Ukraine signed an agreement to merge its power system with the energy system of continental Europe. The agreement contains a list of requirements and a road map of actions for the next five years that are necessary to achieve EU synchronization by 2025. 

In technical terms, integration is not possible without an upgrade of the grid – particularly the construction and reconstruction of the networks and high-voltage substations – which requires significant investments in the infrastructure in the next few years. 

Investors see these opportunities, but they also want to have more clarity and predictability in the rules of the game. Accordingly, they have welcomed the new law on the electricity market, which was adopted after nearly a year in parliament, and which came into effect in early June 2017.

Based on the new law, Ukraine has to reformat its single-buyer model, which does not comply with the EU Third Energy Package, into a competitive market with direct contracts between suppliers and consumers and other essential elements of free trade (e.g., balancing, day-ahead, and intraday markets). Opening the market should attract new entrants – for instance, foreign traders – who were not allowed to do business in Ukraine under the previous rules. 

The liberalized model has to come into full operation by July 1, 2019. Market participants will have to adapt not only to completely revised regulations, many of which are currently in the process of being drafted, but to a new economic reality; one that is loaded with additional competitors and different priorities, such as environmental sustainability.

Apart from developing the market in general, Ukraine has to speed up to reach its targets on power generation from renewable sources. While Ukraine has committed to reaching a 11% renewable energy share in its gross final energy consumption by 2020, at the moment – only three years prior to that deadline – it is not yet 2%. Therefore Ukraine is looking to attract more investments in the construction of renewable energy generation facilities. The government continues to offer producers of green energy one of the highest levels of feed-in tariffs fixed until 2030 in EUR equivalent and guarantees that the state off-taker will purchase all produced power (except for the portion used for own needs of the generation facility) at the feed-in tariff rate. With significant input from the international financing institutions – who are very active investors in the sector – the model Power Purchase Agreement (PPA) for energy produced from renewable energy sources is being gradually aligned with investors’ expectations. For instance, currently, the PPA provides for effective mechanisms of redress, including international arbitration and step-in rights for creditors.

The Ukrainian electricity market and regulations are undergoing significant changes, which are expected to result in a completely new market set-up by 2020. Although the reformation is not expected to be smooth, these changes will bring many opportunities to various stakeholders.  

By Olena Kuchynska, Partner, Kinstellar Ukraine 

This Article was originally published in Issue 5.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.