KYIV -- In one of the biggest US investments in Ukraine ever, GE Transportation signed a 15-year, $1 billion diesel locomotive supply deal with Ukrzaliznytsya on Friday.
To start, GE is to supply 30 locomotives – worth about $140 million -- to Ukraine’s state railways this year. During the contract, GE is to produce up to 225 new diesel locomotives and upgrade 75 older models. The degree of localization in Ukraine is reach 40%.
“Our dynamic talks with GE lasted only five months and led to the signing of this unprecedented agreement,” Prime Minister Volodymyr Groysman said of the deal. “My government is always ready to support innovative investments that result in high value-added products and create new jobs in Ukraine.”
At the signing at Ukrzaliznytsya’s headquarters on Tverska street, Raphael Santana, President and CEO of GE Transportation, noted this is GE’s largest deal in the company’s 80-year history of working in Ukraine.
"Our cooperation can serve as a catalyst for attracting international investment and accelerating Ukraine's economic growth," Santana said, noting that the American company also has wind and biogas projects in Ukraine today. “We also are proud to take part in the modernization of Ukraine’s railway infrastructure, thereby helping to move cargo faster and more efficiently. It will strengthen Ukraine's position as a key European rail hub and operator.”
The deal was facilitated by a performance bond extended by Citibank to Ukreximbank on behalf of GE if GE does not deliver this year’s locomotives, said Steven A. Fisher, Ukraine country officer for Citi.
Marie Yovanovitch, US Ambassador to Ukraine, said: “By modernising its railroad, this project will bring more Ukrainian products to ports. Ukraine will benefit for decades to come.”
“This agreement sends a very strong message to the world that Ukraine is changing the way it is doing business,” she said, noting that the first group of locomotives will be manufactured in Texas and Pennsylvania.
UkraineInvest, the government’s investment promotion agency, pushed hard last fall to make the GE deal happen.
President Poroshenko traced the start of the deal to last July, when he visited Washington and met with President Donald Trump.
“During my visit to America, we discussed with Trump that our countries' relations should be practical,” he said Friday at the railway headquarters. “The company was in need of rolling stock, new locomotives. A $1 billion contract was signed very quickly.”
In an interview before the signing, Yevhen Kravtsov, acting CEO of Ukrzaliznytsya, said the average age of the railroad’s 300 diesel locomotives is 30 to 40 years -- at or over the end of their expected working lives.
Last August, at the start of the peak season for moving grain harvests to the ports, the railroad was short as many as 60 diesel locomotives to move freight, of 20%. An intensive repair effort helped railroad get through the harvest season.
Some of the new, US-made locomotives are to arrive here in time for this year’s harvest. In addition, Ukrzaliznytsya, may lease locomotives from Baltic countries where locomotives are idle due to drops in trade with Russia.
Due to the war, Ukrzaliznytsya lost access to Ukraine’s only locomotive manufacturing plant, located in a rebel-controlled portion of Luhansk. Unofficial reports say the plant is damaged beyond repair, with some factory equipment shipped to Russia.
Under the deal with GE, locomotive parts will be made in Ukraine to GE world standards. This way Ukraine will become part of GE’s world supply chain. Some parts are to be made at Kriukiv Railway Car Building Plant in Kremenchuk.
Daniel Bilak, director of UkraineInvest, said that the arrival of GE Transportation boosts Ukraine’s reputation as a desirable investment destination.
“We continue to target global brands for investment, in order to reach the Government’s goal of 5-7% economic growth per year by 2020,” he said.
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Posted Feb. 23, 2018