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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

UKRAINE AND EBRD TO SIGN THREE NEW LOAN AGREEMENTS

24 February, 1998 - 00:00

As stated at a February 18 press conference in Kyiv held by Yuri Polunyeev, EBRD Director in Ukraine, agreements are expected to be signed in 1998 between the government of Ukraine and the European Bank for Reconstruction and Development (EBRD) loans to Ukraine for projects to create the Energy Saving Investment and Service Company (Ukresco), modernizing the company Ukrzaliznytsia (Ukrainian Railroad) and modernizing the air navigation servicing system. With regard to the latter project, the loan agreement has been signed already and the guarantee agreement is ready for signing.

The state-run Aerorukh (Air Flight) Co. is to receive the an EBRD loan worth $25.4 million for air flight control modernization. The money will be used to buy new equipment to replace the obsolete navigation aids still in operation at Ukrainian airports. The EBRD and Ukrainian government regard this project as the first stage of a program to modernize the system of air navigation in Ukraine aimed to improve its most critical sectors.

The EBRD will loan $30 million to set up the Ukresco company. The final signing of the agreements is scheduled for the first quarter of 1998. The new company will provide services to customers in power saving. Part of the customers’ savings on energy will then be used to pay for the firm's services. The Ukrainian side is expected to contribute to this company’s ownership fund a 25% shares of the energy company Cherkasyoblenerho (of the 51% of its shares that will remain state-owned) with a total value of Hr 43.78 million.

Documents on the modernization of Ukrzaliznytsia are expected to be signed in May 1998. The project consists of two parts: reconstruction of the Lviv-Kyiv line (part of the Trans-European corridor) and laying a fiber optic communications line between Chop, Lviv, Kyiv, Donetsk, and Luhansk reaching Russian digital telecommunication networks. Total project cost is ECU 200 million, of which the EBRD loans ECU 150 million. As Ukrzaliznytsia itself will use only 20% of the capacity of the fiber optic cable, the remaining capacity is expected to be given to commercial companies.

The EBRD will agree to finance the former part of the project only after receiving government guarantees and the latter after attracting a strategic investor. The commercialization of Ukrzaliznytsia, which is currently a state-owned, is another prerequisite for the loan.

Two contracts, each worth $125,000, have been signed, paid for by grants of the US AID with the consulting companies Clell Harrel and J. H. Winner to prepare the necessary documentation. Ukrzaliznytsia has already received applications from twenty foreign companies requesting to participate in upcoming tenders to deliver the necessary materials, equipment, and to do work within the framework of the future project.

At the same time another transport project of Ukraine and the EBRD, reconstruction of Kyiv-Chop highway, is delayed because Verkhovna Rada has not considered the Bank’s proposals concerning the law on the sources of financing road maintenance. The fulfillment of this project was supposed to be started in 1998. The EBRD’s proposals included: lowering of road charges from 1.2% to 1% of industrial companies’ turnover; raising the tax on fuel production from 7% to 15%; taxing of imported fuel (when brought into Ukraine) at 25% of its customs value; abolishing all privileges in paying the tax on fuel production and charges for owners of vehicles. The total value of the project of highway Kyiv-Chop reconstruction is an estimated ECU 60 million, of which one third is supposed to be covered by state-run corporation Ukravtodor’s (Ukrainian Highways) own funds and the rest by the EBRD loan. The total length of the part of the road to be reconstructed is nearly 150 km.

In addition, other projects are also being considered by the EBRD. They are a project to develop water supply and purification facilities in Zaporizhzhia (worth $46.31 million, the EBRD loan is $31.397 million), improving the heating system in Lviv ($45 million and $38.8 million respectively) and Dnipropetrovsk (value yet to be fixed) as well as projects for the reconstruction of the five-story apartment blocks built before 1980 and the development of viniculture in the Crimea.


INFOBANK

 

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