Ukraine is seeing investment activity develop across reconstruction, defense, and energy, as businesses continue to adapt to the practical constraints caused by the war, according to Redcliffe Partners Managing Partner Olexiy Soshenko.
“The US-Ukraine Reconstruction Investment Fund was established last year, but what is important this year is that its first project has now been selected for investment,” Soshenko begins. “The Fund covers not only minerals, but also infrastructure, energy, information technology, and other innovative technologies.”
According to Soshenko, interest from Ukrainian businesses has been substantial. “Up to 300 projects have been submitted for screening, which puts a very positive spin on the Ukrainian economy and businesses,” he reports. The first selected investment is in the dual-use sector, while several additional transactions are expected to be announced before the end of the year. “We expect more deals, most likely in energy and minerals, and that is very positive news for the market.”
Defense is another area developing rapidly. Soshenko highlights the recent introduction of a fast-track procedure for certain exports of Ukrainian defense products and technologies. “I would not call this full liberalization of defense exports,” he stresses. “It is more of a controlled opening, primarily intended to facilitate the so-called drone deals between Ukraine and countries cooperating with it in the defense sector.”
While implementation remains to be tested, Soshenko believes the change could have broader transactional consequences. “If this procedure works in practice, it should activate more M&A and joint-venture activity both in Ukraine and abroad,” he explains. “Importantly, it concerns not only defense products but also technology that could potentially be contributed to joint ventures in cooperating jurisdictions.”
Energy investment is also accelerating as Ukraine works to strengthen and diversify generation capacity ahead of another winter. “The government has eased the legislative framework for renewable-energy projects, while businesses are actively investing in new generation,” Soshenko notes. “One particularly visible trend is the combination of wind and, especially, solar projects with battery energy storage systems.”
“We are working on several transactions where both Ukrainian investors and financial institutions, including IFIs, are supporting these projects,” he reports. “The appetite is clearly there. Businesses are not simply retreating because of the current environment – they are adapting to it.” With the regulatory framework improving and the project pipeline deepening, Soshenko believes the sector is becoming increasingly investable.
Agriculture, meanwhile, “illustrates the resilience of more established parts of the Ukrainian economy. Continued attacks have made the Black Sea maritime corridor considerably more difficult and dangerous to use, requiring agricultural producers to redirect some shipments through alternative routes, including the Danube and rail connections through neighboring countries.”
“Despite these difficulties, financing activity continues,” Soshenko concludes. “We still see significant pre-export financing transactions involving major Ukrainian agricultural producers. The work has not stopped; it continues despite the logistical challenges.”
This interview was first published on the CEE Legal Matters website