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Friday, December 18, 2009

U.S. Overseas Private Investment Corporation Reopens In Ukraine

After 10 years of being closed over an insurance claim dispute, the U.S. Overseas Private Investment Corporation (OPIC) has restored its programs in Ukraine.  The December 16 signing of an agreement between the Ukrainian government and OPIC officers will now pave the way for millions of dollars in potential U.S. private sector investment in the country.

“OPIC is pleased to once again make available its support for U.S. investment in Ukraine, a development which we anticipate will send a highly positive signal to prospective investors in the country,” said OPIC Acting President Dr. Lawrence Spinelli. “This historic occasion is indicative of Ukraine’s ongoing efforts to improve its investment climate, and we commend the Ukrainian government for its hard work in bringing about this result. We look forward to working with both U.S. and Ukrainian businesses to facilitate new levels of American investment in Ukraine.”

Vice President Joe Biden said during a prior visit to Ukraine earlier this year, “I was pleased to learn that the government has taken the final decision necessary to bring the Overseas Private Investment Corporation back to Ukraine. That will make it easier for American companies to reinvest in Ukraine, and invest in the first place, which will help both our economies in the current downturn."

OPIC is now able to provide financing and political risk insurance to American companies investing in Ukraine. OPIC has previously provided over $254 million in financing and insurance to 21 projects in Ukraine, in sectors ranging from manufacturing and construction to energy and financial services.

This landmark reopening event can be expected to significantly raise U.S. companies' investment levels and risk appetite for Ukraine, and marks a major inflection point in the investment relations between the two countries over the past decade. But due to the Ukrainian Presidential elections in January (and possible complete government turnover), American obervers remain "cautiously optimistic" about this week's progress and will withhold final celebrations until after the 2010 government is finalized and things become more clear for the December 16 agreement's long-term recognition.

Analysts predict that the agreement will survive the 2010 elections safely, and I certainly hope that this is the case. I will continue to monitor these events as they unfold and report on a rolling basis. 

Monday, December 7, 2009

Ukraine Sells 3 Million AAUs to Spain, Expects Another 100 Million in Private Sales Volume

Ukraine’s government has recently sold 3 million carbon credits, called assigned amount units (AAUs), to Spain. The deal has been confirmed by Ukraine’s National Environmental Investment Agency, however the Agency did not state the price paid for these AAUs. A government source further stated that the Agency is in final stage discussions with private institutional buyers for additional sales of undisclosed AAU volumes for delivery within the next 2 months, rumored to be as high as 100 million credits or more.

The transaction was completed under Ukraine’s green investment scheme (GIS), whereby all proceeds from the AAU sale will be invested into environmental projects that reduce the effect of climate change. Such projects include, but are not limited to, energy efficiency, fuel switching and alternative energy projects.

Last month Spain reportedly undertook another AAU transaction with Poland, supposedly worth €25 million. Spain also has previously bought AAUs from the Czech Republic, Hungary and Latvia.

Ukraine, the world’s second largest supplier of AAUs, has a vast surplus of carbon credits due to the economic restructuring during the 1990s. It has already sold over 30 million AAUs to Japan.