WSE-listed Kernel Holding, Ukraine’s largest sunflower oil producer and grain exporter, held an EGM on Mar. 21, approving the cancelation of 6,602,000 treasury shares.

Ukraine received c. $6.4bn of foreign aid yesterday, including EUR 4.5bn of bridge financing from the EU, being the first tranche of a EUR 6bn bridge financing package and part of the recently approved EUR 50bn 4-year Ukraine Facility program, and a CAD 2.0bn ($1.5bn) loan from Canada. On a related note, the Ukrainian government submitted to the European Commission a proposed list of reforms it undertakes to implement to qualify for Ukraine Facility tranches. The EU is expected to give its final approval to the reform plan in April, unlocking regular disbursements from the Ukraine Facility pending the fulfillment of attached conditions. The entire conditionality comprises 69 reforms across 15 sectors along with 151 quarterly implementation indicators (primarily in the areas of energy, human capital development, judiciary, and fight against corruption) and 16 investment indicators. A detailed timeline of reforms and associated disbursements will be approved at a later stage.

Hryvnia-denominated deposits at Ukrainian banks increased by 2.1% m-o-m to UAH 1,609bn in February after declining by 3.2% in January, posting y-o-y growth of 32%. F/X deposits dipped by 1.1% m-o-m to $19.2bn (+5.3% y-o-y) after rising by 0.7% m-o-m in January. Gross UAH loans increased by 0.6% m-o-m and 3.8% y-o-y to UAH 733bn in February, while F/X loans dropped by 1.9% m-o-m and 8.6% y-o-y to $6.4bn.

The Ministry of Finance placed UAH 10.2bn ($263m) of hryvnia-denominated bonds and $147m of USD paper at a primary auction yesterday.

The Ukrainian Energy Ministry reported growth in industrial power consumption during the 2023-2024 heating season of 23% y-o-y to 7.6 TWh, while residential power consumption rose by 12% y-o-y to 11.3 TWh. Power production rose by 16% y-o-y to 41.5 TWh over the period, with nuclear, thermal, hydro and renewable power plants generating 22.2 TWh (54% of total), 13 TWh (31%), 4.2 TWh (10%) and 2.0 TWh (4.8%) respectively.

EU foreign ministers agreed yesterday additional military aid for Ukraine through increasing the financial ceiling of the European Peace Facility (EPF) by EUR 5bn and setting aside this amount for Ukraine by establishing a dedicated Ukraine Assistance Fund. The meeting of the Council of the European Union, one of the bloc’s legislative and policy-coordinating bodies, also modified EPF weapons procurement rules to allow, alongside “the joint procurement of the required defense equipment from the European defense industry and Norway … flexibility in supply chains which may include operators established or with production facilities outside the EU.”

Metinvest reported 2023 sales of $7.4bn (-11% y-o-y), including metallurgical segment revenue of $4.8bn (-15% y-o-y) and mining segment revenue of $2.6bn (-1% y-o-y). EBITDA fell by 54% y-o-y to $861m, with metallurgical EBITDA shrinking by 40% y-o-y to $159m and mining EBITDA halving y-o-y to $770m.

Ukrainian Finance Minister Serhiy Marchenko said the IMF Board could approve the third review of its $15.6bn 4-year EFF program for Ukraine on Mar. 21, to be followed by quick disbursement of the program’s fourth loan tranche of $0.9bn.

The Ukrainian Economy Ministry estimated real GDP growth at 3.6% y-o-y in 2M24 after reporting an estimated 3.5% GDP increase for January.

Russian offensives remain limited to narrow Donetsk region sector and keep slowing, possibly reflecting manpower problems; however, Russian forces retain battlefield initiative

The NBU expects foreign aid inflows to hit $10bn in March-April, rebounding from $1.8bn in 2M24 and including $8.9bn in March. In particular, the Bank expects EUR 6bn of bridge financing from the EU, part of the recently approved EUR 50bn Ukraine Facility (incl. EUR 4.5bn in March and EUR 1.5bn in April); a $0.9bn fourth tranche of the IMF’s $15.9bn EFF program following the IMF Board’s approval of the third program review (expected next week); and $1.5bn from the World Bank and $1.5bn from Canada, both expected in March.

The NBU resumed its rate-cutting cycle after taking a short pause in January 2023, making the move much earlier than the mid-year time frame indicated by its latest forward guidance. The Bank cut its key rate by 50bp to 14.5% p.a., on top of 1,000bp of cuts in 2023, justifying the decision by the continued deceleration in headline inflation, F/X market stability, and improved inflationary expectations. In addition, the central bank modified its operational design by narrowing the interest rate corridor by 100bp as it cut the rate on refinancing loans by 150bp to 19.5%. The Bank left the rate on overnight certificates of deposit (CD) equaling the key rate but slashed that on 3-month CDs by 150bp to 17.5%. It also narrowed the base for calculating the limit on banks’ investments into this instrument to 12 preceding months from the period since Apr. 4, 2023 (this amendment will take effect on Apr. 19).

The European Parliament approved amendments to the European Commission’s proposal to extend the suspension of import duties and quotas on Ukrainian exports to the EU for another year, from July 2024 to June 2025. According to media reports, the proposed amendments would expand the EU’s safeguard mechanism to imports of Ukrainian grains and honey on top of poultry, eggs and sugar (as initially proposed) and change reference duty-free import volumes to the respective average volumes imported during 2021-23, replacing the originally proposed 2022-23 period.

According to the latest monthly survey conducted by the Ukrainian Institute for Economic Research (IER), the share of manufacturing enterprises operating at a capacity load of 75% or higher (measured against the pre-war level) stood at 58% in February, flat m-o-m. The share of idle firms was also unchanged m-o-m at 4%. Rising input costs remained the major obstacle cited by businesses, mentioned by 49% of respondents (vs. 46% in January). Labor deficit moved to second place with 46% (vs. 41% in January), overtaking security risks on 45%. Other business hurdles included supply chain disruptions, demand weakness, complicated logistics, and power outages.

Kernel Holding CEO Yevgen Osypov said during an online interview with a local media outlet yesterday that the company was planning to repay its $300m 2024 Eurobond at maturity provided that no major risks materialized by that time. He also highlighted the importance of liberalizing the central bank’s F/X restrictions as that would enable Kernel to use its local F/X liquidity to service its Eurobonds and other external debt, especially after the company allocated much of its offshore liquidity to repay bank loans.

The European Commission, the EU’s executive body, approved yesterday the final draft of negotiating frameworks underpinning future accession talks with Ukraine and Moldova. The documents are now to be discussed by all EU member countries and ultimately considered by the European Council, the top EU institution composed of the bloc’s 27 country leaders. Following approval by the European Council, the EU will convene an inaugural “inter-governmental” conference with Ukraine, marking the formal start of accession negotiations.