The Ministry of Finance placed UAH 9.0bn ($223m) of hryvnia-denominated bonds at a primary auction yesterday.

WSE-listed Kernel Holding, Ukraine’s largest sunflower oil producer and grain exporter, reported 3Q24FY (January-March 2024) sales of $1,005m (-4% q-o-q, +22% y-o-y), EBITDA of $160m (-22% q-o-q, +4% y-o-y) and net income of $101m (-24% q-o-q, +47% y-o-y).

Energy Minister German Galuschenko said Ukraine would increase its capacity to import power to 2.0-2.3 GW by the winter season, up 0.3-0.6 GW or 18-35% from current 1.7 GW. He added that all of Ukraine’s nine nuclear power units, with a total capacity of 7.8 GW, would be operational by winter following scheduled maintenance. On a related note, Galuschenko said the government plans to decide on increasing household power tariffs by the end of this week.

Ukraine’s direct and guaranteed public inched up by 0.3% or $0.5bn m-o-m in April, to $152bn, rising by 4.3% YTD.

An IMF mission will start discussions with Ukrainian authorities on the fourth review of the Fund’s $15.6bn 4-year EFF program on May 27, following a series of meetings between Ukrainian officials and a visiting IMF team led by European Department Director Alfred Kammer on Thursday and Friday. Discussions will focus on risks facing Ukraine and economic policy goals.

The head of parliament’s finance committee, Danylo Hetmantsev, said the government was preparing to increase the VAT and military duty rates to finance military spending. According to sources cited by Forbes.ua, the government considers increasing the 20% VAT rate by 2-3pp and hiking the military duty on personal income to 5.0% from 1.5% while concurrently expanding the tax base to include income earned by individual entrepreneurs. These changes require parliamentary approval and may take effect in September 2024 at the earliest.

DTEK CEO Maksym Timchenko said that Ukraine needs to increase its capacity to import power in view of extensive damage sustained by the domestic energy system.

The Ukrainian Economy Ministry estimated real GDP growth at 4.3% y-o-y in April, slightly below 4.6% in March and bringing the 4M24 tally to 4.4%, vs. 4.5% y-o-y in 1Q24, 3.6% in 2M24 and 3.5% in January (all estimates are +/-1pp). The Ministry said that economic activity remained supported by record high export volumes, vibrant construction activity on the back of government spending on reconstruction, improving business sentiment, and private consumption. At the same time, real GDP growth was constrained by high security risks, damage to energy infrastructure, and sizable shortages of qualified labor.

WSE-listed Ovostar Union, one of the largest shell egg producers in Ukraine, announced that its majority shareholders jointly holding 95.45% of outstanding shares (Prime One Capital Limited, controlled by Chairman of the Board Vitalii Veresenko and CEO Borys Bielikov, and Fairfax Financial Holdings Limited) have launched a voluntary tender offer to acquire all Ovostar shares listed on the Warsaw Stock Exchange (4.55% of shares issued) at PLN 70 per share. Subscription for the tender will start on May 23 and close on Jun. 24, 2024.

A number of important events related to Ukraine will take place in the coming months, spanning the economic, financial, military and corporate domains. Investors will in particular focus on the next review of the IMF program and associated moves on sovereign debt restructuring, as Ukraine’s standstill agreement expires on Aug. 1 and the IMF Board’s approval of the next program review, tentatively by end-June, will likely require at least some progress in talks with bondholders. Several international forums in June and July may offer longer-term clarity on military and economic aid for Ukraine, including through the use of frozen Russian assets, and possible near-term prospects for initial diplomacy with Russia. In the corporate space, scheduled coupon and amortization payments by DTEK Energy and Naftogaz will be in focus, along with potential further liberalization of F/X controls.

Vodafone Ukraine (VFU), Ukraine’s second largest mobile operator, reported 1Q24 revenue of $151m (-3.2% q-o-q but +8.1% y-o-y), EBITDA of $83m (-16% q-o-q, +7.3% y-o-y) and net income of $24m (-31% q-o-q, -15% y-o-y). The 1Q24 EBITDA margin declined by 8.5pp q-o-q to 55.3% (-0.4pp y-o-y), with the net margin falling by 6.3pp q-o-q to 15.9% (-4.4pp y-o-y). Quarterly CAPEX slid by 60% q-o-q and 37% y-o-y to $21m. VFU reported 1Q24 ARPU of UAH 112.2, up 0.5% q-o-q and 7.9% y-o-y. Its customer base shrank by 0.6% q-o-q to 15.8 million subscribers (+2.8% y-o-y).

The Council of the European Union, the bloc’s key legislative body, gave final approval yesterday to resolutions ordering to use profits earned on Russian assets immobilized within the EU’s central securities depositories (CSD) to finance military and economic aid for Ukraine. According to official press releases, EU CSDs holding more than EUR 1m of Russian sovereign assets will make payouts from the corresponding net profits accruing since Feb. 15, 2024. The first of biannual payouts is expected to be made in July, with 90% of it to be used for military assistance to Ukraine via the European Peace Facility and 10% for economic support via a contribution to the EU’s recently approved EUR 50bn four-year Ukraine Facility. The distribution of funds between military and economic purposes is to reviewed annually, with the first revision to be made by Jan. 1, 2025.

President Volodymyr Zelensky said in an interview with The New York Times that the upcoming Ukraine Peace Summit to be held in Switzerland on Jun. 15-16, without Russia’s participation, would focus on three major issues as an initial platform for summit participants to develop a joint position: ensuring that the Black Sea remains unblocked for Ukrainian food and other exports; nuclear and energy security; and “all for all” prisoner-of-war exchange and return of deported Ukrainian children. Zelensky said a joint plan on these three points could then be handed over to Russia, and “then we’ll see if Russia wants to end the war.”

The National Energy and Utilities Regulatory Commission (NEURC) set new price caps for the day-ahead power market (DAHD) effective May 31, increasing the nightly and evening peak hour caps by 86% and 20%, respectively, and leaving the daytime caps unchanged.

Hryvnia-denominated deposits at Ukrainian banks increased by 1.5% m-o-m and 29% y-o-y to UAH 1,658bn in April, on top of a 1.7% m-o-m increase in March. Growth in F/X deposits accelerated to 1.5% m-o-m in April from 0.4% m-o-m in March and a small decline in February, bringing the deposit volume to $19.6bn (+4.6% y-o-y). Gross UAH loans increased by 1.3% m-o-m on top of +2.0% in March, to UAH 757bn (+9.8% y-o-y), while F/X loans continued to shrink, down 0.9% m-o-m and 9.0% y-o-y to $6.3bn.

Vodafone Ukraine (VFU) CEO Olga Ustynova said the company plans to invest UAH 10bn in total over 2024-25 ($250m based on our 2024 average exchange rate estimate of UAH 40.0:USD) to develop and expand its mobile and fixed-line networks as well as enhance its energy independence.