Category: Ukraine

Sayenko Kharenko has advised joint lead managers Raiffeisen Bank International and Renaissance Capital on the EUR 325 million Eurobond issue by DTEK Renewables, a first-ever issue of notes under the green bond framework by a business from Ukraine.

The notes issued by DTEK Renewables have a five-year tenor and bear interest at 8.5% per annum. The proceeds of the transaction will be used to sustain the group’s portfolio of renewable energy projects and its future extension

DTEK Renewables is a Ukrainian green energy producer with 950MW of installed capacity.

Sayenko Kharenko’s team was led by Counsel Igor Lozenko and included Associates Oles Trachuk, Denis Nakonechyi, and Yurii Dmytrenko and Junior Associates Vladyslava Mitsai, Oleksandra Maksymenko, and Sofia-Maria Kuzminska.

Sayenko Kharenko did not reply to our inquiry on the matter.

Editor’s Note: After this article was published Avellum announced that it had advised DTEK Renewables on the green Eurobond offering, which was structured as the issue of senior notes by DTEK Renewables Finance B.V. guaranteed by its parent DTEK Renewables B.V. as well as by Solar Farm-3 LLC and Orlovka WEP LLC — both subsidiaries of DTEK Renewables B.V.

According to Avellum, “DTEK Renewables is the first Ukrainian company to issue specialized securities for the development of renewable energy, which is a new tool for Ukrainian companies to attract investment for the development of the Ukrainian renewable energy sector. The use of green Eurobonds provides an attractive and highly effective financial mechanism to support Ukraine’s transition to a more balanced energy system with lower CO2 emissions. DTEK Renewables will use the proceeds, among other things, to finance and/or refinance its existing wind power and solar power projects as well as to finance the development of green projects which are aimed at increasing the production, connection and distribution of renewable energy and related infrastructure.”

The Avellum team was led by Senior Partner Glib Bondar with support from Associates Anastasiya Voronova, Oleg Krainskyi, Orest Franchuk, Dmytro Symbiryov, Anna Mykhalova, and Mariana Veremchuk.

In addition, CEE Legal Matters learned that Raiffeisen International and Renaissance Capital had been advised by a London-based Linklaters team led by Partners Richard O’Callaghan and Cecil Quillen and including Counsel Manoj Tulsiani and Senior Associate Yaroslav Alekseyev.

KPD Consulting has helped System Fort LLC reclaim the right to unidentified property and eliminate discrepancies between current and archived records of the State Register of Proprietary Rights to Real Property.

According to KPD Consulting, “recent changes of the State Register caused notaries not to be able to access its archived components, which led to several persons being registered as owners of the same property. These legal gaps caused the seizure of LLC System Fort’s property.”

KPD Consulting persuaded the court that the seizure was illegal. In addition the firm reports “as a result of cooperation with the Ministry of Justice of Ukraine, System Fort was able to cancel the archive record in the State Register of Proprietary Rights to Real Property and to make relevant records regarding real estate objects in name of System Fort LLC was ensured. This will allow the client to avoid further unlawful seizure and any transactions with its property.”

KPD Consulting did not reply to our inquiry on the matter.

Integrites has advised UMITLI, a Turkish developer of renewable energy facilities, on the construction of three photovoltaic plants with a total capacity of 26 MW in the Dnipropetrovsk region of Ukraine. The total investment amounts to USD 30 million.

According to Integrites, “one plant has already been commissioned, [and] two others are scheduled for commissioning by the end of 2019. Three solar photovoltaic plants in Chumaki, Novopetrovka and Katerynivka will produce clean energy for more than 18,000 households and help decrease carbon emissions by 22,000 tons per year. The projects will be implemented under Ukraine’s ten-year feed-in-tariff scheme and will produce power even afterwards.“

The Integrites team included Managing Partner Oleksiy Feliv, Partners Illya Tkachuk and Viktoriya Fomenko, Counsels Gennadii Roschepii and Vasyl Yurmanovych, and Associates Olena Zhydenko, Alina Trofimova, Kostyantyn Kharchenko, Yuliya Bleshmudt.

Aequo and Freshfields Bruckhaus Deringer have advised NJSC Naftogaz on Ukrainian law matters in connection with the company’s return to the market with EUR 500 million 7-year Eurobonds at 7.625% p.a., its second capital markets transaction in 2019. Avellum and White & Case advised lead-manager and book-runner Citibank.

The Eurobond placement was made by Naftogaz in the course of ongoing unbundling and gas transit negotiations with the Russian Federation. 

Aequo’s team advising on Ukrainian matters was led by Partner Yulia Kyrpa and included Counsels Bohdan Dmukhovskyy and Myroslava Savchuk, Of Counsel Denys Kulgavyi, Senior Associate Vasyl Mishchenko, and Associates Olesia Mashtaler, Taras Shmyh, and Anna Konovalova.

The Avellum team was led by Senior Partner Glib Bondar with support from Associates Anastasiya Voronova, Oleg Krainskyi, Orest Franchuk, Anna Mikhalova, and Mariana Veremchuk. Partner Vadim Medvedev and Associates Anton Zaderyholova and Yelyzaveta Kravtsova provided support on tax aspects of the transaction.

The same firms also advised Naftogaz on its earlier placement of EUR 600 million at 7.125% bonds and USD 335 million at 7.375% bonds, in July of this year (as reported by CEE Legal Matters on August 2, 2019).

CMS has advised a syndicate of banks led by ING and UniCredit as mandated lead arrangers on the extension and USD 100 million increase of a pre-export credit facility to Ukraine’s Kernel Group. The total available limit under the amended facility was increased to USD 390 million.

CMS describes the Kernel Group as “the world’s largest producer and exporter of sunflower oil, and a leading producer and supplier of agricultural products from the Black Sea region to world markets with a land bank of 560,000 hectares.” According to the firm, “the facility will be used to fund the working capital needs of its sunflower oil production business, including storage, transportation and trans-shipment.”

The CMS team was led by Warsaw-based Partner Mark Segall, supported by Kyiv-based Partner Ihor Olekhov, Counsel Kateryna Chechulina, Senior Associate Vyacheslav Ovechkin, and Lawyers Khrystyna Korpan and Ivan Pshyk. CMS lawyers in Zurich, Luxembourg, and Amsterdam also assisted.

CMS did not reply to our inquiry on the matter.

Everlegal has advised UDP Renewables on the launch of the Pervomajsk project, a 6.5 MW solar power plant in the Mykolaiv region of Ukraine.

According to Everlegal, “the Pervomajsk project total investment value is EUR 5 million and the project seeks to reduce CO2 emissions by up to 11 thousand tons a year. The facility covers an area of 12.3 hectares and has over 19 thousand solar panels with a capacity of 330MW.” 

UDP Renewables is a member of the UFuture Investment Group. Just last month Everlegal advised the company on the implementation of the Port-Solar SES Project in Ukraine’s Odessa region (as reported by CEE Legal Matters on October 9, 2019).

The Everlegal team included Partners Andriy Olenyuk and Yevgeniy Deyneko, Senior Associate Yuliia Kylchynska, and Associates Alina Zhuk and Kyryll Kostyria.

Marchenko Partners has acted as legal counsel to Western NIS Enterprise Fund in connection with the Impact Investing Program, which was initiated in 2016 in partnership with Oschadbank and Kredobank to provide social enterprises with access to Hryvnia-denominated low-interest loans.

WNISEF is a USD 150 million regional fund. Since its inception, WNISEF’s cumulative investments total over US 186 million to 130 companies employing around 26,000 people. According to Marchenko Partners, WNISEF’s participation has “made it possible to unlock USD 1.8 billion for companies in Ukraine and Moldova.”

Marchenko Partners helped WNISEF to launch the Impact Investing Program in 2016 and acted as legal counsel on each of the 19 loans granted under the program to social enterprises from all over Ukraine.

The Marchenko Partners’ team consisted of Partner Roman Shulyar, Associate Bogdan Burlaka, and Junior Associate Oleksandr Pozniakov.

Sayenko Kharenko acted as Ukrainian legal counsel to joint-bookrunners Deutsche Bank, Natixis and UniCredit on Metinvest’s dual-currency Eurobond issue, which consisted of a USD 500 million 7.75% tranche and EUR 300 million 5.625% tranche. Avellum advised Metinvest on the issuance.

The issue of new notes was coupled by a USD 440 million cash tender offer in relation to Metinvest’s existing USD 944 million Eurobonds due 2023. The deal marked the first dual-currency Eurobond issue by a Ukraine’s private sector corporate.

According to Avellum, “the transaction’s importance lies within the fact that the dollar-denominated tranche is Metinvest Group’s longest to date with the lowest yield ever secured by Metinvest Group. The 10-year USD financing until recently was only available to the sovereign borrower in Ukraine.”

Metinvest Group is a group of steel and mining companies in Ukraine and is one of the largest CIS producers of iron ore raw materials and steel. It has steel and mining production facilities in Ukraine, the European Union, and the United States.

Both Sayenko Kharenko and Avellum advised on last year’s Metinvest Eurobond issuance as well (as reported by CEE Legal Matters on May 14, 2018).

Sayenko Kharenko’s team was led by Counsel Igor Lozenko and included Associates Oles Trachuk, Denis Nakonechnyi, Yurii Dmytrenko and Junior Associates Vladyslava Mitsai, Oleksandra Maksymenko, and Sofiia-Mariia Kuzminska.

Avellum’s team was led by Senior Partner Glib Bondar and included Associates Anastasiya Voronova, Oleg Krainskyi, Orest Franchuk, and Anna Mikhalova. Tax support was provided by Avellum Partner Vadim Medvedev and Associates Anton Zaderyholova and Yelyzaveta Kravtsova.

Eterna Law has successfully defended the interests of PJSC “Stevedoring Company Avlita” in a complex tax dispute.

According to Eterna Law, “the court investigated the tax liability accrued to [Avlita] since the temporary occupation of the Autonomous Republic of Crimea. The supervisory authority argued that writing off the tax debt does not belong to its duties, instead is an exclusive right, and payers’ debts continue to be kept up-to-date in information bases, which does not prevent the processing of such information, but gives it irrelevant status in fulfillment, charged to the enforcement authorities.”

According to the firm, it “successfully convinced the court that change of the payer location from a temporarily occupied territory to another territory of Ukraine is sufficient basis for writing off the tax debt arising from the temporary occupation. As the result, the claim is satisfied completely and the actions on not writing off the accrued tax debt on advance contributions from income tax of the General Directorate of the State Fiscal Service in the Kyiv region were founded unlawful.”

Finally, according to Eterna Law, “the court firmly concluded that the tax authority lacked the discretionary authority to commit such an act and the need to restore the violated right of the payer by obliging the defendant to write off the tax debt.”

The Eterna Law team was led by Senior Partner Oleh Beketov and included Senior Associate Kristina Shapovalova.

“It’s not that laws don’t exist – it’s the faith in the law, courts, and lawyers that is missing,” says Zoryana Sozanska-Matviychuk, Partner at Redcliffe Partners in Kiev. “What I hope we see from the new government is not any particular legislation; it is much better implementation. This will hopefully lead to more trust in the country’s legal system as a whole.”

“Following this year’s presidential and parliamentary elections in Ukraine, there has been a big change in the political elites, and a few interesting proposals are already at the center of attention,” Sozanska-Matviychuk reports. According to her, time will tell how those proposals will turn out, and she insists that it is only tangible results, and not talk and promises, that can help build trust towards the government.

“Ukraine still offers very feed-in high tariffs on renewables, including wind and solar energy,” Sozanska-Matviychuk says. “This has led to a surge of interest in that particular area. We are seeing intense discussions around reduction of the feed-in tariff in particular and hopefully the issue will be resolved in an investor-friendly manner.”

“We are seeing lots of proposals in other areas as well,” she says, “including changes to laws.” According to Sozanska-Matviychuk, the new government seems eager to address laws affecting large investment projects that have, in the past, stalled economic growth. For instance, she says, “for years improved laws regarding concessions couldn’t pass Parliament. Now, it seems like we are close to that kind of positive change finally happening.”

Changes to Ukraine’s Corporate and Company Laws are relaxing restrictions on investment as well, Sozanska-Matviychuk says. “The land market may be opened up as soon as next year and this is generally seen as a major driver for the growth of the economy.” In addition, she says, the government has promised a number of new infrastructure projects as well, including new airports and private toll roads.

“In terms of the economy,” she adds, “recent privatization efforts are among the greatest disappointments. There simply has not been much investor interest, which could be partly due to poor management of the privatization process.” She refers to recent announcements by the new government that the near future will see many more successful privatizations, but is reluctant to give them too much credulity. “As I said,” she adds, “now the market will only believe in real, measurable, and tangible results.”

Still, Sozanska-Matviychuk says she is optimistic about the economy and the market, with more investors expressing confidence in its prospects.

Turning to M&A, she says that while there have been few big deals in recent months, there have been a large number of deals overall. “As corporate and business laws are changed,” she says, “it is expected that this will lead to easier and more frequent M&A. What that will look like, only time will tell.”

Ultimately, Sozanska-Matviychuk says that she doesn’t expect to see much new significant legislation in the next few months. Instead, she hopes to see better implementation of existing laws. “Laws are fine,” she says, “but they don’t really prove to be useful. That’s why we need a system that actually works – which will hopefully lead to people having a greater trust in the legal system. “

“We can’t really know what the future holds,” Sozanska-Matviychuk concludes. “Given a few years of downturn, we hope that the tide is about to change”.